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SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
by and among
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VENTURE CAPITAL FUND II ANNEX, L.P.
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VENTURE INVESTORS ANNEX, L.P.
Dated as of March 9, 1999
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LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
Senior Subordinated Note Purchase Agreement
Dated as of March 9, 1999
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............................................................................................................... 1
1.01. Definitions........................................................................... 1
ARTICLE II
PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS............................................................................... 8
2.01. The Notes............................................................................. 8
2.02. Purchase and Sale of the Notes and the Warrants....................................... 8
2.03. Issue Price; Original Issue Discount.................................................. 9
2.04. Use of Proceeds....................................................................... 9
2.05. Payments and Endorsements............................................................. 9
2.06. Redemptions........................................................................... 9
2.07. Default Rate of Interest.............................................................. 10
2.08. Maximum Legal Rate of Interest........................................................ 10
2.09. Payment on Non-Business Days.......................................................... 10
2.10. Transfer and Exchange of Notes........................................................ 10
2.11. Replacement of Notes.................................................................. 11
ARTICLE III
PURCHASE, SALE AND TERMS OF WARRANTS...................................................................................... 11
3.01. The Warrants.......................................................................... 11
3.02. Purchase and Sale of Warrants......................................................... 11
3.03. Right to Purchase New Subordinated Debt............................................... 11
ARTICLE IV
CONDITIONS TO PURCHASER'S OBLIGATION...................................................................................... 12
4.01. Representations and Warranties........................................................ 12
4.02. Documentation at Closing.............................................................. 12
4.03 Closing of LTHBV Note Purchase Agreement.............................................. 13
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4.04. No Default............................................................................ 14
4.05. Waivers and Consents.................................................................. 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........................................................................... 14
5.01. Representations and Warranties of the Purchaser....................................... 14
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................................. 15
6.01. Organization and Standing of the Company and Subsidiaries; Ownership.................. 15
6.02. Corporate Action...................................................................... 16
6.03. Governmental Approvals................................................................ 16
6.04. Litigation............................................................................ 16
6.05. Compliance with Law................................................................... 17
6.06. Federal Reserve Regulations........................................................... 17
6.07. Title to Assets, Patents.............................................................. 17
6.08. Financial Information................................................................. 17
6.09. Taxes................................................................................. 18
6.10. ERISA................................................................................. 18
6.11. Transactions with Affiliates.......................................................... 19
6.12. Assumptions or Guaranties of Indebtedness of Other Persons............................ 19
6.13. Loans to Other Persons................................................................ 19
6.14. Securities Act........................................................................ 19
6.15. Disclosure............................................................................ 19
6.16. No Brokers or Finders................................................................. 20
6.17. Other Agreements of Officers.......................................................... 20
6.18. Capitalization of the Company; Status of Capital Stock................................ 20
6.19. Capital Stock of Subsidiaries......................................................... 20
6.20. Labor Relations....................................................................... 20
6.21. Insurance............................................................................. 21
6.22. Books and Records..................................................................... 21
6.23. Hazardous and Toxic Materials......................................................... 21
6.24. Registration Rights................................................................... 21
6.25. Other Agreements...................................................................... 21
6.26. Customers, Vendors and Suppliers...................................................... 22
6.27. No Violations......................................................................... 23
ARTICLE VII
COVENANTS OF THE COMPANY.................................................................................................. 23
7.01. Affirmative Covenants of the Company Other Than Reporting Requirements................ 23
7.02. Negative Covenants of the Company..................................................... 26
7.03. Reporting Requirements................................................................ 30
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ARTICLE VIII
EVENTS OF DEFAULT......................................................................................................... 31
8.01. Events of Default..................................................................... 31
8.02. Annulment of Defaults................................................................. 34
ARTICLE IX
MISCELLANEOUS............................................................................................................. 34
9.01. No Waiver; Cumulative Remedies........................................................ 34
9.02. Amendments, Waivers and Consents...................................................... 34
9.03. Addresses for Notices, Etc............................................................ 34
9.04. Costs, Expenses and Taxes............................................................. 36
9.05. Binding Effect; Assignment............................................................ 36
9.06. Payments in Respect of Notes.......................................................... 36
9.07. Payments in Respect of Warrants....................................................... 36
9.08. Indemnification....................................................................... 37
9.09. Survival of Representations and Warranties............................................ 37
9.10. Intentionally Omitted................................................................. 37
9.11. Severability.......................................................................... 37
9.12. Governing Law......................................................................... 37
9.13. Waiver of Right to Jury Trial......................................................... 37
9.14. Headings.............................................................................. 37
9.15. Sealed Instrument..................................................................... 37
9.16. Counterparts.......................................................................... 37
9.17. Further Assurances.................................................................... 37
9.18. Consent to Jurisdiction............................................................... 38
9.19. Effect of Judgment.................................................................... 38
9.20. Service of Process.................................................................... 38
9.21. No Limitation......................................................................... 38
9.22. Specific Performance.................................................................. 38
9.23. Actions by Purchaser.................................................................. 38
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EXHIBITS
2.01 Form of Initial Notes
2.04 Use of Proceeds
3.01 Warrants
4.029(c) JLSI Guaranty
4.02(d) LTCI Guaranty
4.02(e) LTI Guaranty
4.02(f) VTI Guaranty
4.02(h) Opinion of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
6.01 Schedule of Subsidiaries
6.04 Schedule of Litigation
6.07 Schedule of Title Exceptions
6.08(a) Financial Statements
6.08(c) Liabilities; Guaranties; Etc.
6.08(d) Schedule of Indebtedness
6.09 Schedule of Taxes
6.11 Transactions with Affiliates
6.13 Investments in Other Persons
6.17 Schedule of Other Agreements of Officers and Key Employees
6.18 Schedule of Capital Stock, Options and Other Rights
6.19 Schedule of Capital Stock of Subsidiaries
6.21 Schedule of Insurance to be Obtained
6.23 Hazardous or Toxic Materials
6.25 Contracts, etc.
7.02(b) Indebtedness
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Lionbridge Technologies Holdings, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
As of March 9, 1999
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Capital Fund II Annex, ▇.▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Investors Annex, L.P.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: 12% SENIOR SUBORDINATED NOTES DUE MARCH 9, 2006
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Ladies and Gentlemen:
Whereas Lionbridge Technologies Holdings, Inc., a Delaware corporation
(together with its successors and assigns, the "Company"), has requested ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Venture Capital Fund II Annex, L.P., a Delaware limited partnership
("MSC") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Investors Annex, L.P., a Delaware limited
partnership ("MSI") to purchase from the Company a 12% Senior Subordinated Note
due March 9, 2006 in the original principal amount of $1,055,638 and a 12%
Senior Subordinated Note due March 9, 2006 in the original principal amount of
$144,362, respectively. The Company is issuing such 12% Senior Subordinated
Notes as part of a Two Million Dollar ($2,000,000) financing of the Company and
the other members of the Consolidated Group (as defined below), which financing
also includes the issuance to MSC and MSI by Lionbridge Technologies Holdings
B.V., a company with limited liability incorporated in the Netherlands (together
with its successors and assigns, "LTHBV"), of its 12% Senior Subordinated Note
due March 9, 2006 in the original principal amount of $703,758 and 12% Senior
Subordinated Note due March 9, 2006, in the original principal amount of
$96,242, respectively, pursuant to a Senior Subordinated Note Purchase Agreement
dated as of the date hereof by and among LTHBV, MSC and MSI (as from time to
time amended and in effect, the "LTHBV Note Purchase Agreement").
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. As used herein, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"AFFILIATE" means, as to any specified Person, any other Person
controlling, controlled by or under common control with such specified Person.
"AGREEMENT" means this Senior Subordinated Note Purchase Agreement as
from time to time amended and in effect between the parties.
"APPLICABLE LAWS" shall have the meaning assigned to that term in
Section 6.05.
"BANK" means and shall include Silicon Valley Bank, a
California-chartered bank, and its successors and assigns, or such other bank or
institutional lender which may from time to time be the primary lender to the
Company and/or other members of the Consolidated Group.
"BUDGET" shall have the meaning assigned to that term in Section
7.03(b).
"BUSINESS DAY" means any day other than a Saturday, Sunday or public
holiday or the equivalent for banks under the laws of the Commonwealth of
Massachusetts.
"CHANGE OF CONTROL" means, with respect to any member of the
Consolidated Group, any transaction, series of related transactions or event as
a result of which any one or more Persons (other than the Purchaser, any other
member of the Consolidated Group, or other holders of the capital stock of the
Company or securities convertible into or exercisable for such capital stock as
of the date hereof) acquires or for the first time controls or is able to vote
(directly or through nominees or beneficial ownership) fifty percent (50%) or
more of the outstanding equity securities of such member.
"CLOSING" shall have the meaning assigned to that term in Section
2.02.
"CLOSING DATE" shall have the meaning assigned to that term in Section
2.02.
"CODE" shall have the meaning assigned to that term in Section 2.03.
"COMMISSION" means the United States Securities and Exchange
Commission (or any other federal agency at that time administering the
Securities Act).
"COMMON STOCK" includes (a) the Company's common stock, $.01 par
value, as authorized on the date of this Agreement, and (b) any other capital
stock of any class or classes (however designated) of the Company, authorized on
or after the date hereof, the holders of which shall have the right, without
limitation as to amount per share, either to all or to a share of the balance of
current dividends and liquidating distributions after the payment of dividends
and distributions on any shares entitled to preference in the payment thereof,
and the holders of which shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors of the Company
(even though the right so to vote may have been suspended by the happening of
such a contingency), and (c) any other securities into which or for which any of
the securities described in (a) or (b) above may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
"COMPANY" shall have the meaning assigned to that term in the Preamble
hereof.
"CONSOLIDATED GROUP" means the Company, JLSI, LJKK, LTCI, LTI, VTI,
LTBV, LTHBV, LT Ireland and LTF, together with their respective successors,
assigns and Subsidiaries, existing from time to time.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of
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credit or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted or
sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect to
undrawn letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; PROVIDED, HOWEVER,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business.
"CONVERTIBLE PREFERRED STOCK" shall mean the outstanding shares of the
Series A Convertible Preferred Stock, $.01 par value of the Company, the Series
C Convertible Preferred Stock, $.01 par value of the Company and Series D
Nonvoting Convertible Preferred Stock, $.01 par value of the Company.
"CRL" means Capital Resource Lenders III, L.P.
"CRL INDEBTEDNESS" means the Indebtedness of the Company to CRL.
"CURRENT LIABILITIES" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of the Company and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding advances made
under the Loan Agreement, including all Indebtedness that is payable upon demand
or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of the Company or any
Subsidiary to a date more than one year from the date of determination, but
excluding any Indebtedness incurred by the Company or any Subsidiary that is
subordinated to debt owing by the Company or any Subsidiary to the Bank on terms
acceptable to the Bank and is identified as such by the Bank.
"DISTRIBUTION" shall have the meaning assigned to that term in Section
7.02(g).
"EBITDA" means, for any applicable fiscal period, consolidated net
income (or loss) after taxes for such period of the Company and its Subsidiaries
as determined in accordance with GAAP, plus the following to the extent deducted
in computing the foregoing: (i) Interest Expense; (ii) taxes; (iii)
depreciation; and (iv) amortization of goodwill and other intangibles.
"ENVIRONMENTAL LAWS" shall have the meaning assigned to that term in
Section 6.23.
"EQUITY SECURITY" shall have the meaning assigned to that term in the
Exchange Act.
"ERISA" shall have the meaning assigned to that term in Section 6.10.
"EVENTS OF DEFAULT" shall have the meaning assigned to that term in
Section 8.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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"FINANCIAL STATEMENTS" shall have the meaning assigned to that term in
Section 6.08.
"FOREIGN GUARANTIES" means the those certain guaranties executed by
LJKK, LT Ireland, LTBV and LTF in favor of MSC and MSI in connection with the
LTHBV Financing.
"FOREIGN SUBSIDIARIES" shall have the meaning assigned to that term in
Section 7.01(g).
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time, provided, however, the Purchaser
acknowledges that with respect to the financial statements to be delivered to
Purchaser pursuant to Section 7.03(b), there may be inconsistencies with GAAP
which in the aggregate shall not be material. Unless otherwise specifically
stated herein, use of the term "GAAP" means that such principles are applied and
maintained on a consistent basis for the Company and its Subsidiaries throughout
the period indicated and consistent with the prior financial practices of the
Company and its Subsidiaries as reflected on the Financial Statements so as to
properly reflect the financial condition, and the results of operations and cash
flow of the Company and its Subsidiaries.
"GUARANTIES" means the JLSI Guaranty, the LTCI Guaranty, the LTI
Guaranty and the VTI Guaranty.
"GUARANTORS" means the Subsidiary Guarantors, including, without
limitation, JLSI, LTCI, LTI and VTI.
"HAZARDOUS DISCHARGE" shall have the meaning assigned to that term in
Section 6.23.
"HAZARDOUS MATERIALS" shall have the meaning assigned to that term in
Section 6.23.
"INDEBTEDNESS" means all (i) indebtedness for borrowed money or the
deferred purchase price of property or services, including, without limitation,
reimbursement and other obligations with respect to surety bonds, letters of
credit and similar instruments, (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, (iii) all capital lease obligations, and (iv)
Contingent Obligations.
"INITIAL NOTE" AND "INITIAL NOTES" shall have the meanings assigned to
those terms in Section 2.01.
"INTEREST EXPENSE" means, for any applicable fiscal period, the sum of
(i) the aggregate amount of interest required to be paid in cash during such
period on Indebtedness of the Company and its Subsidiaries (on a consolidated
basis), and (ii) any original issue discount resulting from the issuance of the
Notes, the LTHBV Notes and the Warrants which has accrued during such fiscal
period.
"JLSI" means Japanese Language Services, Inc., a Massachusetts
corporation, and its successors and assigns.
"JLSI GUARANTY" shall have the meaning assigned to that term in
Section 4.02(d).
"JUNIOR SUBORDINATED DEBT" means all Indebtedness of the Company and
its Subsidiaries, whether outstanding on the date hereof or hereafter created or
incurred, which is by its terms subordinate and junior to the Notes on terms
acceptable to the holders of the Notes and which is permitted by this
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Agreement at the time it is created or incurred, and shall include all
Indebtedness between the Company or any Subsidiary and any other Subsidiary.
"LIQUIDITY IPO" means a firm commitment underwritten public offering
of securities on a major exchange pursuant to a registration statement filed
with the Commission under the Securities Act in which the aggregate proceeds to
the Company, any Subsidiary or the Consolidated Group are at least $25 million.
"LOAN AGREEMENT" means that certain Loan Agreement, dated September
26, 1997, by and among the LTHBV, LTBV and the Bank, as amended by Amendment
No.1, dated as of May 28, 1998, as it may be further amended from time to time.
"LJKK" means Lionbridge Japan K.K., a Japanese corporation, and its
successors and assigns.
"LTBV" means Lionbridge Technologies B.V., a company with limited
liability incorporated in the Netherlands, and its successors and assigns.
"LTCI" means Lionbridge Technologies California, Inc., a Delaware
corporation, and its successors and assigns.
"LTCI GUARANTY" shall have the meaning assigned to that term in
Section 4.02(e).
"LTF" means Lionbridge Technologies (France), a French company, and
its successors and assigns.
"LTHBV" shall have the meaning assigned to that term in the Preamble
hereof.
"LTHBV FINANCING" means the issuance and sale to MSC and MSI of the
LTHBV Notes pursuant to the LTHBV Note Purchase Agreement.
"LTHBV NOTES" means collectively (i) the 12% Senior Subordinated Note
due March 9, 2006 in the original principal amount of $703,758 issued by LTHBV
to MSC, as from time to time amended and in effect, (ii) the 12% Senior
Subordinated Note due March 9, 2006 in the original principal amount of $96,242
issued by LTHBV to MSI, as from time to time amended and in effect, and (iii)
any note or notes delivered in substitution, replacement or exchange for the
notes described in the foregoing clauses (i) and (ii), as such notes from time
to time are amended and in effect.
"LTHBV NOTE PURCHASE AGREEMENT" shall have the meaning assigned to
that term in the Preamble hereof.
"LTI" means Lionbridge Technologies, Inc., a Delaware corporation, and
its successors and assigns.
"LTI GUARANTY" shall have the meaning assigned to that term in Section
4.02(f).
"LT IRELAND" means Lionbridge Technologies Ireland, an unlimited
liability company duly
5
incorporated under the laws of Ireland, and its successors and assigns.
"MATERIAL ADVERSE EFFECT" shall have the meaning assigned to that term
in Section 6.01.
"MSI WARRANT" shall have the meaning assigned to that term in Section
3.01.
"MSC WARRANT" shall have the meaning assigned to that term in Section
3.01.
"NEW SENIOR DEBT FOREIGN GUARANTEE" shall have the meaning assigned to
that term in Section 7.01(p).
"NEW SENIOR DEBT GUARANTEE" shall have the meaning assigned to that
term in Section 7.01(p).
"NOTES" shall have the meanings assigned to such terms in Section
2.01.
"OPERATIVE DOCUMENTS" shall mean each of this Agreement, the Notes,
the Warrants, the Guaranties, the Restated Stockholders' Agreement, and the
Restated Registration Rights Agreement.
"PERMITTED LIENS" shall have the meaning assigned to that term in
Section 7.02(a).
"PERSON" means and includes an individual, a corporation, a
partnership, a joint venture, a trust, an unincorporated organization, or a
government or any agency or political subdivision thereof.
"PREFERRED STOCK" shall mean the outstanding shares of Series B
Preferred Stock, $.01 par value of the Company.
"PURCHASER" shall mean MSC, MSI and any other holder or holders from
time to time of any of the Notes.
"QUALIFIED DISPOSITION" means (i) any merger or consolidation of the
Company with any Person, (ii) any sale, assignment, lease or other disposition
of or voluntary parting with the control of (whether in one transaction or in a
series of transactions) all or substantially all of the consolidated assets
(whether now owned or hereafter acquired) of the Company and the Subsidiaries,
(iii) any issuance of equity securities of the Company to Persons other than the
Purchaser or other holders of the capital stock of the Company or securities
convertible into or exercisable for such capital stock as of the date hereof
which, when aggregated with all issuances of equity securities of the Company
subsequent to the Closing, exceeds fifty percent (50%) of the aggregate of all
outstanding equity securities of the Company immediately after the Closing on a
fully diluted basis, and (iv) any liquidation or winding up of the Company,
except for (1) mergers, consolidations or asset transfers with or between two or
more Subsidiaries, (2) mergers or asset transfers by any Subsidiary with or to
the Company and (3) the merger of any Person into the Company or other issuance
of securities by the Company in connection with the acquisition of a Person as
long as the Company is the surviving entity, such merger or acquisition does not
result in the violation of any of the provisions of this Agreement and no such
violation exists at the time of such merger or acquisition, and the
consideration paid by the Company in connection with such merger or acquisition
has a fair market value of less than Twenty-Five Million Dollars ($25,000,000)
at the date of the closing of such transaction.
6
"QUALIFYING LIQUIDITY EVENT" means any of the following events: (i) a
Qualified Disposition; (ii) a Change of Control; and (iii) a Liquidity IPO with
respect to any member of the Consolidated Group.
"QUICK ASSETS" means, as of any applicable date, the consolidated
cash, cash equivalents, accounts receivable and investments with maturities of
less than ninety (90) days of the Consolidated Group determined in accordance
with GAAP.
"RESTATED REGISTRATION RIGHTS AGREEMENT" means that certain Second
Restated Registration Rights Agreement dated as of the date hereof by and among
LTI, CRL the Company, MSC, MSI and certain other stockholders of the Company.
"RESTATED STOCKHOLDERS' AGREEMENT" means that certain Second Restated
Stockholders' Agreement dated as of the date hereof by and among LTI, CRL the
Company, MSC, MSI and certain other stockholders of the Company.
"SECURITIES" means collectively the Notes, the Warrants and the
Warrant Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SENIOR DEBT" means (i) all Indebtedness of the Company and any of its
Subsidiaries for money borrowed from the Bank (including, without limitation,
money borrowed from the Bank pursuant to the Loan Agreement) or from other banks
or institutional lenders, including any extensions or renewals thereof, whether
outstanding on the date hereof or hereafter created or incurred, which is not by
its terms subordinate and junior to the Notes and which is disclosed on the
Financial Statements or is permitted by this Agreement at the time it is created
or incurred, (ii) all Indebtedness of the Company and any of its Subsidiaries
incurred to refinance any of the Indebtedness referred to in item (i) above,
where the security securing such Indebtedness is substantially the same security
as that securing the Indebtedness being refinanced, (iii) all capitalized lease
obligations of the Company and any of its Subsidiaries which are permitted by
this Agreement at the time they are incurred and (iv) all guarantees by the
Company and any of its Subsidiaries which are not by their terms subordinate and
junior to the Notes and which are permitted hereby at the time they are made of
Indebtedness of any Subsidiary if such Indebtedness would have been Senior Debt
pursuant to the provisions of clause (i), (ii) or (iii) of this sentence had it
been indebtedness of the Company.
"SUBORDINATED DEBT" means any Indebtedness of the Company and any of
its Subsidiaries that is contractually subordinated to any Senior Debt.
"SUBSIDIARY" or "SUBSIDIARIES" means (i) any corporation more than
fifty percent (50%) of whose stock or equity interests of any class or classes
having by the terms thereof ordinary voting power to elect a majority of the
directors of such corporation (irrespective of whether or not at the time stock
of any class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time owned
directly or indirectly by the Company and/or any one or more of its
Subsidiaries, and (ii) any partnership, association, joint venture, limited
liability company or other entity in which the Company and/or one or more of its
Subsidiaries has more than a fifty percent (50%) equity
7
interest at the time.
"SUBSIDIARY GUARANTORS" means collectively each Subsidiary which has
executed and delivered to the Purchaser a guarantee in form and substance
satisfactory to the Purchaser pursuant to which such Subsidiary guarantees all
of the obligations of the Company to the Purchaser, including, without
limitation, the obligations of the Company hereunder and under the Notes.
"VTI" means VeriTest, Inc., a California company, together with its
successors and assigns.
"VTI GUARANTY" shall have the meaning assigned to that term in Section
4.02(g).
"VTI SELLER NOTES" means those two (2) certain promissory notes dated
January 11, 1999 issued by the Company to the VTI Sellers, respectively, each in
the original principal amount of $375,000, as each may be amended and in effect
from time to time.
"VTI SELLERS" mean ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, and their
respective successors and assigns.
"WARRANTS" shall have the meaning assigned to such terms in Section
3.01.
"WARRANT SHARES" shall have the meaning assigned to that term in
Section 3.01.
1.02. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, and all financial data
submitted pursuant to this Agreement and all financial tests to be calculated in
accordance with this Agreement shall be prepared and calculated in accordance
with GAAP.
ARTICLE II
PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS
2.01. THE NOTES. The Company has authorized the issuance and sale to
(a) MSC of the Company's 12% Senior Subordinated Note due March 9, 2006 in the
original aggregate principal amount of $1,055,638, and (b) MSI of the Company's
12% Senior Subordinated Note due March 9, 2006 in the original aggregate
principal amount of $144,362. The 12% Senior Subordinated Notes shall be
substantially in the forms attached to EXHIBIT 2.01 hereto and are herein each
referred to individually as an "Initial Note", and collectively as the "Initial
Notes"; and, the Initial Notes together with any note or notes delivered in
substitution, replacement or exchange therefor are herein referred to
collectively as the "Notes." The Notes shall (a) be payable on March 9, 2006
(subject to the redemption thereof required pursuant to Section 2.06) and (b)
bear interest (based on a 360-day year counting actual days elapsed) on the
unpaid principal amount thereof until paid in full at the rate of twelve percent
(12%) per annum, which interest shall be payable quarterly in arrears on the
last Business Day of March, June, September and December in each year commencing
on March 31, 1999.
2.02. PURCHASE AND SALE OF THE NOTES AND THE WARRANTS. The Company
agrees to issue and sell to the Purchaser, and, subject to and in reliance upon
the representations, warranties, terms and conditions
of this Agreement, the Purchaser agrees to purchase, the Initial Notes and
the Warrants. Such purchase and sale shall take place at a closing (the
"Closing") to be held at the offices of Sherburne, Powers, Holland & Knight,
at 10:00 a.m. local time, on the date on which this Agreement is executed and
delivered (the "Closing Date"). At the Closing, the Company will issue (a)
the Initial Note described in clause (a) in Section 2.01 to MSC, dated the
Closing Date and payable to the order of MSC, and the Company will issue to
MSC the MSC Warrant, against receipt of funds by wire transfer to an account
or accounts designated by the Company prior to the Closing in the amount of
$1,055,638, and (b) the Initial Note described in clause (b) in Section 2.01
to MSI dated the Closing Date and payable to the order of MSI, and the
Company will issue to MSI the MSI Warrant, against receipt of funds by wire
transfer to an account or accounts designated by the Company prior to the
Closing in the amount of $144,362. The parties hereto hereby acknowledge and
agree that the purchase and sale of the Initial Notes and the Warrants
hereunder is part of an overall financing provided by MSC and MSI to the
Consolidated Group, which financing also includes, among other things, the
issuance by LTHBV of the LTHBV Notes, the delivery of the Foreign Guaranties
and the execution and delivery of the LTHBV Note Purchase Agreement.
2.03. ISSUE PRICE; ORIGINAL ISSUE DISCOUNT. Having considered all
facts relevant to a determination of the value of the Initial Notes and the
Warrants being acquired by the Purchaser, the Company and the Purchaser have
concluded and do hereby agree that, for purposes of Section 1273 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the Regulations thereunder,
and for purposes of determining any original issue discount with respect to the
Initial Notes thereunder, the aggregate "issue price" for (a) the Initial Note
to be issued to MSC is $721,808, and (b) the Initial Note to be issued to MSI is
$98,710. The Company and the Purchaser agree not to take a position on any
income tax return, before any governmental agency charged with the collection of
any income tax or in any judicial proceeding that is inconsistent with the terms
of this Section 2.03.
2.04. USE OF PROCEEDS. The Company agrees to use the full proceeds
from the sale of the Initial Notes and the Warrants for the purposes and as set
forth on EXHIBIT 2.04 attached hereto.
2.05. PAYMENTS AND ENDORSEMENTS. Payments of principal, interest and
premium, if any, on the Notes shall be made without setoff or counterclaim
directly by check duly mailed or delivered to MSC and MSI at their addresses
referred to in Section 9.03 hereof, without any presentment or notation of
payment, except that prior to any transfer of any Note, the holder thereof shall
endorse on such Note a record of the date to which interest has been paid and
all payments made on account of principal of such Note. All payments and
prepayments of principal of and interest on the Notes shall be applied (to the
extent thereof) to all of the Notes PRO RATA based on the principal amount
outstanding and held by each holder thereof.
9
2.06. REDEMPTIONS
(a) REQUIRED PERIODIC REDEMPTION. On the last Business Day of
March, June, September and December of each year beginning on March 31, 2003
through and including December 31, 2005, the Company agrees to redeem, without
premium or penalty, $100,000 in aggregate principal amount of the Notes, or such
lesser amount as may then be outstanding, together with all accrued and unpaid
interest and penalties, if any, then due on the amount so redeemed. On the
stated or accelerated maturity of the Notes, the Company agrees to pay the
principal amounts of the Notes then outstanding together with all accrued and
unpaid interest and penalties, if any, then due thereon. Except as set forth in
Section 2.06(b), no optional redemption of less than all of the Notes shall
affect the obligation of the Company to make the redemptions required by this
subsection.
(b) REQUIRED REDEMPTIONS IN THE EVENT OF A QUALIFYING LIQUIDITY
EVENT. In the event and upon the closing of a Qualifying Liquidity Event, the
Company agrees to redeem, without premium, all of the outstanding Notes,
together with all accrued and unpaid interest and penalties, if any, then due
thereon.
(c) OPTIONAL REDEMPTIONS. In addition to the redemptions of the
Notes required under Sections 2.06(a) and (b), the Company may, at any time and
from time to time, redeem, without premium or penalty, the Notes, in whole or in
part (in integral multiples of $1,000), together with interest due on the amount
so redeemed through the date of redemption. Partial redemptions made as provided
in this Section 2.06(c) shall, to the extent thereof, be applied first to reduce
the principal due at maturity of the Notes and next to reduce the payments
required by Section 2.06(a) in inverse order of maturity thereof.
(d) NOTICE OF REDEMPTIONS; PRO RATA REDEMPTIONS. Notice of any
required redemption pursuant to Section 2.06(a) or (b) or of any optional
redemption pursuant to Section 2.06(c) shall be given to all registered holders
of the Notes at least ten (10) Business Days prior to the date of such
redemption. Each redemption of Notes pursuant to Section 2.06(a), (b) or (c)
shall be made so that the Notes then held by each holder shall be redeemed in a
principal amount which shall bear the same ratio to the total unpaid principal
amount being redeemed on all Notes as the unpaid principal amount of Notes then
held by such holder bears to the aggregate unpaid principal amount of all of the
Notes then outstanding.
2.07. DEFAULT RATE OF INTEREST. If an Event of Default has occurred
and is continuing, from and after the date thirty (30) days after the date such
Event of Default occurred, the entire outstanding unpaid principal balance of
the Notes and any matured but unpaid interest from time to time due thereon
shall bear interest, payable on demand, at the rate of fifteen percent (15%) per
annum, or such lower rate as then may be the maximum rate permitted by
applicable law; PROVIDED, HOWEVER, that upon the cessation or cure of such Event
of Default, if no other Event of Default is then continuing, the Notes shall
again bear interest at the rates set forth in Section 2.01.
2.08. MAXIMUM LEGAL RATE OF INTEREST. Nothing in this Agreement or in
the Notes shall require the Company to pay interest at a rate in excess of the
maximum rate permitted by applicable law.
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2.09. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made
shall be due on a day which is not a Business Day, such payment may be made on
the next succeeding Business Day, and such extension of time shall in such case
be included in the computation of payment of interest due.
2.10. TRANSFER AND EXCHANGE OF NOTES. The holder of any Note or Notes
may, prior to maturity or prepayment thereof, surrender such Note or Notes at
the principal office of the Company for transfer or exchange to any Affiliate of
such holder. Any holder desiring to transfer or exchange any Note shall first
notify the Company in writing at least five (5) days in advance of such transfer
or exchange. Within a reasonable time after such notice to the Company from a
holder of its intention to make such exchange and without expense (other than
transfer taxes, if any) to such holder, the Company shall issue in exchange
therefor another Note or Notes, in such denominations as requested by the
holder, for the same aggregate principal amount, as of the date of such
issuance, as the unpaid principal amount of the Note or Notes so surrendered and
having the same maturity and rate of interest, containing the same provisions
and subject to the same terms and conditions as the Note or Notes so
surrendered. Each new Note shall be made payable to such Affiliate or Affiliates
of the holder, Person or Persons, or assigns, as the holder of such surrendered
Note or Notes may designate (subject to Section 9.05), and such transfer or
exchange shall be made in such a manner that no gain or loss of principal or
interest shall result therefrom.
2.11. REPLACEMENT OF NOTES. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; PROVIDED, HOWEVER, if any Note of which a
Purchaser, its nominee, or any of its partners is the holder is lost, stolen or
destroyed, the affidavit of an authorized partner or officer of the holder
setting forth the circumstances with respect to such loss, theft or destruction
shall be accepted as satisfactory evidence thereof, and no indemnification bond
or other security shall be required as a condition to the execution and delivery
by the Company of a new Note in replacement of such lost, stolen or destroyed
Note other than the holder's written agreement to indemnify the Company.
ARTICLE III
PURCHASE, SALE AND TERMS OF WARRANTS
3.01. THE WARRANTS. The Company has authorized the issuance and sale
to MSC and MSI of Common Stock Purchase Warrants (the "Warrants") for the
purchase (subject to adjustment as provided therein) of 337,202 (the "MSC
Warrant") and 46,113 (the "MSI Warrant") shares of Common Stock (the "Warrant
Shares"), respectively. The Warrants shall be substantially in the forms
attached to EXHIBIT 3.01 hereto. The term Warrants shall also include any
warrants delivered in exchange or replacement therefor. The Warrants shall be
exercisable at a purchase price, subject to adjustment, equal to $.01 per
Warrant Share.
3.02. PURCHASE AND SALE OF WARRANTS. The Company agrees to issue and
sell to the Purchaser, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this
11
Agreement, the Purchaser agrees to purchase, Warrants to purchase the Warrant
Shares as set forth in Section 3.01 above. Such purchase and sale shall take
place at the Closing, and at the Closing the Company will initially issue to MSC
and MSI the MSC Warrant and the MSI Warrant, respectively, to purchase (subject
to adjustment as provided therein) the number of Warrant Shares set forth in
Section 3.01 above.
3.03. RIGHT TO PURCHASE NEW SUBORDINATED DEBT. Prior to issuing any
Subordinated Debt of the Company or any of its Subsidiaries to any Person after
the date hereof (other than any such Subordinated Debt issued to a seller in
connection with an acquisition by any member of the Consolidated Group involving
such seller), the Company will give, or cause such Subsidiary to give, to each
holder of any Note or Notes the right to purchase, on the same terms and subject
to the same conditions, the same proportion of the Subordinated Debt proposed to
be sold by the Company or such Subsidiary as the original principal amount of
the Notes and the LTHBV Notes held by each such holder bears to the aggregate
principal amount of Subordinated Debt outstanding at that time. Any such right
of purchase shall be exercisable for a period of thirty (30) days after all of
the holders have received written notice of a proposed issuance of Subordinated
Debt (and any such notice by the Company or any Subsidiary shall be given not
less than thirty (30) nor more than ninety (90) days prior to any such
issuance). The Company shall be entitled to sell to any Person any Subordinated
Debt not purchased by the holders of the Notes pursuant to this Section 3.03:
(i) during the period ending six (6) months after the date of the Company's or
its Subsidiary's notice to such holders and (ii) at not less than the same price
and upon terms not materially less favorable to the Company or its Subsidiary
than those offered to the holders of the Notes, but may not otherwise sell such
Subordinated Debt without renewed compliance with this Section 3.03.
ARTICLE IV
CONDITIONS TO PURCHASER'S OBLIGATION
The obligation of the Purchaser to purchase and pay for the Notes and
Warrants at the Closing is subject to the following conditions, all or any of
which may be waived in writing by the Purchaser:
4.01. REPRESENTATIONS AND WARRANTIES. Each of the representations of
the Company set forth in Article VI hereof shall be true and correct in all
respects at the time of, and immediately after giving effect to, the sale of the
Notes and the Warrants.
4.02. DOCUMENTATION AT CLOSING. The Purchaser shall have received
prior to or at the Closing all of the following, each in form and substance
satisfactory to the Purchaser and its counsel:
(a) The Initial Notes duly executed and delivered by the Company.
(b) The Warrants duly executed and delivered by the Company.
(c) An executed amended and restated guaranty from JLSI in
substantially the form attached hereto as EXHIBIT 4.02(c) (the "JLSI Guaranty").
(d) An executed amended and restated guaranty from LTCI in
substantially the form
12
attached hereto as EXHIBIT 4.02(d) (the "LTCI Guaranty").
(e) An executed amended and restated guaranty from LTI in
substantially the form attached hereto as EXHIBIT 4.02(e) (the "LTI Guaranty").
(f) An executed amended and restated guaranty from VTI in
substantially the form attached hereto as EXHIBIT 4.02(f) (the "VTI Guaranty").
(g) A certified copy of all charter documents of the Company and
each of the Guarantors; a certified copy of the resolutions of the Board of
Directors and, to the extent required, the stockholders of the Company and each
of the Guarantors evidencing approval, as applicable, of this Agreement, the
Operative Documents and all other matters contemplated hereby and thereby,
including, without limitation, the consent of the stockholders of the Company to
the transactions contemplated hereby pursuant to the terms of the Restated
Stockholders' Agreement; a certified copy of the By-laws of the Company and each
of the Guarantors and certified copies of all documents evidencing other
necessary corporate or other action and governmental approvals, if any, with
respect to this Agreement, the Operative Documents and all other matters
contemplated hereby or thereby.
(h) A favorable opinion of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP,
counsel for the Company and Guarantors, in substantially the form attached
hereto as EXHIBIT 4.02(h).
(i) Certificates of the Secretaries or Assistant Secretaries of
the Company and each of the Guarantors which shall certify the names of the
officers of the Company authorized to sign this Agreement, the Operative
Documents and any other documents or certificates to be delivered pursuant
hereto or thereto by the Company and each of the Guarantors or any of its
officers, together with the true signatures of such officers. The Purchaser may
conclusively rely on such certificates until it shall receive further
certificates of the Secretaries or Assistant Secretaries of the Company and each
of the Guarantors canceling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate.
(j) A certificate from a duly authorized officer of the Company
stating that the representations and warranties contained in Article VI hereof
and otherwise made by the Company in writing in connection with the transactions
contemplated hereby are true and correct and that no condition or event has
occurred or is continuing or will result from the execution and delivery of this
Agreement or the Operative Documents which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
(k) Intentionally omitted.
(l) Payment for the costs, expenses, taxes and filing fees
identified in Section 9.04 as to which the Purchaser gives the Company notice
prior to the Closing.
(m) A certificate from a duly authorized officer of the Company
stating that all the conditions set forth in this Article IV have been
satisfied, other than those, if any, waived by the Purchaser in writing.
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(n) An fully-executed Restated Stockholders' Agreement together
with executed waivers of the rights of first offer referenced in Section 6.02.
(o) A fully-executed Restated Registration Rights Agreement.
(p) Such other documents referenced in any Exhibit hereto or
relating to the transactions contemplated by this Agreement as the Purchaser or
its counsel may reasonably request.
4.03. CLOSING OF LTHBV NOTE PURCHASE AGREEMENT. All documents in
connection with the LTHBV Financing, including, without limitation the LTHBV
Note Purchase Agreement, the LTHBV Notes, the Foreign Guaranties and such other
documents referenced in any exhibit thereto or otherwise relating to the
transactions contemplated by the LTHBV Note Purchase Agreement shall have been
executed and delivered to the Purchaser.
4.04. NO DEFAULT. At the time of and immediately after giving effect
to the sale of the Notes there shall exist no Event of Default and no condition,
event or act that, with the giving of notice or lapse of time, or both, would
constitute such an Event of Default.
4.05. WAIVERS AND CONSENTS. The Company shall have obtained any
waivers or consents that may be required under the Loan Agreement and any other
agreement to which the Company or any of its Subsidiaries is a party in order to
enter into this Agreement and the Operative Documents and to consummate the
transactions contemplated hereby and thereby and such waiver or consents shall
have been delivered to the Purchaser.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.01. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Each of MSC and
MSI hereby represents and warrants as follows:
(a) It has duly authorized, executed and delivered this Agreement
and such of the Operative Documents as require execution by it.
(b) Its present intention is to acquire the Securities to be
issued to it for its own account.
(c) The Securities to be issued to it are being and will be
acquired for the purpose of investment and not with a view to distribution or
resale thereof; subject, nevertheless, to the condition that, except as
otherwise provided herein, the disposition of its property shall at all times be
within its control.
(d) It acknowledges that it has reviewed and discussed the
Company's business, affairs and current prospects with such officers of the
Company and others as it has deemed appropriate or desirable in connection with
the transactions contemplated by this Agreement. It further acknowledges that it
has requested, received and reviewed such information, undertaken such
investigation and made
14
such further inquiries of officers of the Company and others as it has deemed
appropriate or desirable in connection with such transactions, PROVIDED,
HOWEVER, no investigation made heretofore or hereafter by it or on its behalf
shall have any effect whatsoever on the representations and warranties of the
Company hereunder, each of which will survive any such investigation.
(e) It understands that it must bear the economic risk of its
investment in the Securities to be issued to it for an indefinite period of time
because such Securities are not, and will not be, registered under the
Securities Act or any applicable state securities laws, except as may be
provided in this Agreement, and may not be resold unless subsequently registered
under the Securities Act and such other laws or unless an exemption from such
registration is available. It also understands that it is not contemplated by
the Company that any registration will be made under the Securities Act or any
state securities laws, or that the Company will take steps which will make the
provisions of Rule 144 under the Securities Act available to permit resale of
the Securities to be issued to it.
(f) It represents that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of its investment in the Securities. It further represents that it is an
"accredited investor" as such term is defined in Rule 501 of Regulation D of the
Commission under the Securities Act with respect to the purchase of the Notes.
(g) No Person has or will have, as a result of the transactions
contemplated by this Agreement, any rights, interest or valid claim against or
upon the Company or any of its Subsidiaries for any commission, fee or other
compensation as a finder or broker because of any act or omission by it or any
of its agents.
(h) It hereby acknowledges that the Securities to be issued to it
(and each certificate representing the Warrant Shares issued to it and any other
securities issued in respect of such shares upon any stock split, stock
dividend, recapitalization, merger or similar event (unless no longer required
in the opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company, it being agreed that Holland & Knight LLP shall be
satisfactory)) shall bear a legend substantially in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL
AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
The acquisition by it of the Warrant Shares which are the subject of the Warrant
to be issued to it shall constitute a confirmation by it of the foregoing
representations.
15
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows:
6.01. ORGANIZATION AND STANDING OF THE COMPANY AND SUBSIDIARIES;
OWNERSHIP. The Company and each of its Subsidiaries is a corporation duly
organized (to the extent applicable), duly incorporated (to the extent
applicable), validly existing and in good standing (to the extent applicable)
under the laws of the jurisdiction of its organization or incorporation and has
all requisite corporate power and authority for the ownership and operation of
its properties and for the carrying on of its business as now conducted and as
now proposed to be conducted. The Company and each of its Subsidiaries is duly
licensed or qualified and in good standing as a foreign corporation authorized
to do business in all jurisdictions wherein the character of the property owned
or leased, or the nature of the activities conducted by it makes such licensing
or qualification necessary, except where the failure to be so licensed or
qualified, either individually or in the aggregate, would not have a material
adverse effect on the business, assets, liabilities, financial condition, or on
the results of operations of the Company and its Subsidiaries taken as a whole
(a "Material Adverse Effect"). Except as set forth on EXHIBIT 6.01 attached
hereto, neither the Company nor any of its Subsidiaries owns, directly or
indirectly, any capital stock or other equity or ownership or proprietary
interest in any corporation, partnership, association, trust, joint venture or
other entity.
6.02. CORPORATE ACTION. The Company and each of the Guarantors has all
necessary corporate power and has taken all corporate, stockholder and other
action required to make, as applicable, all the provisions of this Agreement,
the Operative Documents and any other agreements and instruments executed in
connection herewith and therewith the valid and enforceable obligations they
purport to be. The Company and each of the Guarantors has duly executed and
delivered, as applicable, this Agreement, each of the Operative Documents and
each other agreement and instrument executed by it in connection herewith and
therewith and each is a legal, valid and binding obligation of the Company and
the Guarantors as applicable, enforceable against the Company and the Guarantors
as applicable, in accordance with its terms, except as enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally and by general
principles of equity. The Company has authorized the issuance and sale to the
Purchaser of the Warrants for the purchase (subject to adjustment as provided
therein) of 383,315 shares of Common Stock. Sufficient shares of authorized but
unissued Common Stock of the Company have been reserved by appropriate corporate
action in connection with the prospective exercise of the Warrants. While
certain stockholders of the Company are entitled to rights of first offer
pursuant to the Restated Stockholders' Agreement in connection with the issuance
of the Warrants hereunder and in connection with the issuance of the Warrant
Shares upon the exercise of the Warrants, such stockholders have waived such
rights with respect to the issuance of the Warrants and the issuance of the
Warrant Shares upon the exercise of the Warrants. Accordingly, neither the
issuance of the Notes or Warrants, nor the issuance of the Warrant Shares upon
the exercise of the Warrants, is subject to any preemptive or other similar
statutory or contractual rights.
6.03. GOVERNMENTAL APPROVALS. No authorization, consent, approval,
license, exemption of or
16
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary for, or in connection with, the offer, issuance, sale, execution or
delivery by the Company or any of the Subsidiaries of, or for the performance by
the Company or any of the Subsidiaries of their respective obligations under,
this Agreement or any of the Operative Documents or the Warrant Shares.
6.04. LITIGATION. Except as set forth on EXHIBIT 6.04 attached hereto,
there is no litigation, action or governmental proceeding or investigation
pending or, to the best knowledge of the Company, threatened against the Company
or any of its Subsidiaries, affecting any of their respective properties or
assets, or against any officer, key employee or principal stockholder of the
Company or any of its Subsidiaries where such litigation, proceeding or
investigation (i) either individually or in the aggregate would have a Material
Adverse Effect, (ii) might call into question the validity of this Agreement,
any Operative Document or any action taken by the Company or any of its
Subsidiaries or to be taken pursuant hereto or thereto or (iii) seeks to prevent
the consummation by the Company or any of its Subsidiaries of the transactions
contemplated by this Agreement, nor, to the best knowledge of the Company, has
there occurred any event on the basis of which any litigation, proceeding or
investigation meeting the criteria of (i), (ii) or (iii) above might properly be
instituted. Except as set forth on EXHIBIT 6.04, neither the Company nor any of
its Subsidiaries nor, to the best knowledge of the Company, any of their
respective officers, key employees or principal stockholders (in their
capacities as such), is in default with respect to any order, writ, injunction,
decree, ruling or decision of any court, commission, board or other government
agency affecting the Company or any of its Subsidiaries.
6.05. COMPLIANCE WITH LAW. The Company and each of its Subsidiaries is
in compliance in all respects with the terms and provisions of this Agreement
and of its charter documents and by-laws and in all material respects with the
terms and provisions of all judgments, decrees, governmental orders, statutes,
rules and regulations to which it and its properties and assets are subject
(collectively, the "Applicable Laws"). Neither the execution and delivery of
this Agreement and the Operative Documents, nor the consummation of any
transactions contemplated hereby or thereby, has constituted or resulted in, or
will constitute or result in, a violation of any provision of any Applicable
Law.
6.06. FEDERAL RESERVE REGULATIONS. Neither the Company nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of the Notes or Warrants will be used to purchase or carry any margin security
or to extend credit to others for the purpose of purchasing or carrying any
margin security or in any other manner which would involve a violation of any of
the regulations of the Board of Governors of the Federal Reserve System.
6.07. TITLE TO ASSETS, PATENTS. Except as set forth on EXHIBIT 6.07
attached hereto, the Company and each of its Subsidiaries has good and
marketable title in fee to such of its fixed assets as are real property, and
good and merchantable title to all of its other assets, now carried on its books
including those reflected in the most recent balance sheet of the Company
included in the Financial Statements, or acquired since the date of such balance
sheet (except personal property disposed of since said date in the ordinary
course of business), free of any mortgages, pledges, charges, liens, security
interests or other encumbrances. Except as set forth on EXHIBIT 6.07, the
Company and each of its Subsidiaries enjoys peaceful and undisturbed possession
under all leases under which it is operating, and
17
all of said leases are valid and subsisting and in full force and effect. Except
as set forth on EXHIBIT 6.07, the Company and each of its Subsidiaries owns or
has a valid right to use the patents, patent rights, licenses, permits, trade
secrets, trademarks, trademark rights, trade names or trade name rights or
franchises, copyrights, inventions and intellectual property rights being used
to conduct its business as now operated and as now proposed to be operated; and
the conduct of its business as now operated and as now proposed to be operated
does not and will not conflict with valid patents, patent rights, licenses,
permits, trade secrets, trademarks, trademark rights, trade names or trade name
rights or franchises, copyrights, inventions and intellectual property rights of
others. Except as set forth on EXHIBIT 6.07, neither the Company nor any of its
Subsidiaries has any obligation to compensate any Person for the use of any such
intellectual property rights nor has the Company or any of its Subsidiaries
granted to any Person any license or other rights to use in any manner any of
such intellectual property rights.
6.08. FINANCIAL INFORMATION. (a) Attached hereto as EXHIBIT 6.08(a)
are true, correct and complete copies of (i) the audited balance sheet of the
Company and its Subsidiaries as of December 31, 1997 and the related statements
of income and retained earnings and of cash flows for the fiscal year then
ended, certified by PricewaterhouseCoopers, the Company's independent public
accountants (including the notes thereto) and (ii) the unaudited balance sheet
of the Company and its Subsidiaries as of December 31, 1998, and the related
statements of income and retained earnings for the 12-month period then ended
((i) and (ii) collectively the "Financial Statements"). All Financial Statements
have been prepared in accordance with GAAP, subject to normal year-end audit
adjustments, and consistent with prudent business management practices, are
complete in all material respects and fairly present the financial position of
the Company and its Subsidiaries as of the respective dates thereof and results
of operations and changes in financial position of the Company and its
Subsidiaries for each of the periods then ended.
(b) Since December 31, 1998, there has been no material adverse
change in the business, assets, liabilities, condition (financial or other), or
in the results of operations or prospects of the Company and its Subsidiaries
taken as a whole.
(c) Except as disclosed on EXHIBIT 6.08(c) attached hereto,
neither the Company nor any of its Subsidiaries has any liability, contingent or
otherwise, not disclosed in the Financial Statements or in the notes thereto
that could, together with all such other liabilities, have a Material Adverse
Effect, nor does the Company have any reasonable grounds to know of any such
liability.
(d) A schedule of Indebtedness of the Company and its
Subsidiaries as of December 31, 1998 (including lease obligations required to be
capitalized in accordance with GAAP) is attached hereto as EXHIBIT 6.08(d).
6.09. TAXES. Except as described on EXHIBIT 6.09 attached hereto, the
Company and each of its Subsidiaries has accurately prepared and timely filed
all federal, state and other tax returns required by law to be filed by it, and
all taxes shown to be due and all additional assessments have been paid or
provision made therefor. The Company does not know of any material additional
assessments or adjustments pending or threatened against the Company or any of
its Subsidiaries for any period, nor of any basis for any such assessment or
adjustment. The charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Company, adequate.
18
6.10. ERISA
(a) The Company and each of the Guarantors is in compliance in
all material respects with the currently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the applicable
provisions of Section 401(a) of the Code. No employee benefit plan established
or maintained, or to which contributions have been made, by the Company or any
of its Subsidiaries, which is subject to part 3 of Subtitle B of Title I of
ERISA, had an accumulated funding deficiency (as such term is defined in Section
302 of ERISA) as of the last day of the most recent fiscal year of such plan
ended prior to the date hereof, and no material liability to the Pension Benefit
Guaranty Corporation has been incurred with respect to any such plan by the
Company or any of its Subsidiaries.
(b) The execution and delivery of this Agreement and the other
Operative Documents and the issuance and sale of the Notes and the Warrants
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) through section 4975(c)(1)(D), inclusive, of
the Code.
6.11. TRANSACTIONS WITH AFFILIATES. Except as set forth on EXHIBIT
6.11 attached hereto, there are no loans, leases, royalty agreements or other
continuing transactions between the Company or any of its Subsidiaries, on the
one hand, and any Person owning, or who did own at any time within the two-year
period preceding the date of this Agreement, five percent (5%) or more of any
class of capital stock of the Company or other entity controlled by such
stockholder or a member of such stockholder's family, on the other hand.
6.12. ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS.
Except as disclosed on EXHIBIT 6.08(c) hereto, neither the Company nor any of
its Subsidiaries has assumed, guaranteed, endorsed or otherwise become directly
or contingently liable on (including, without limitation, liability by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor or otherwise to assure the
creditor against loss) any Indebtedness of any other Person.
6.13. LOANS TO OTHER PERSONS. Except as set forth on EXHIBIT 6.13
attached hereto, neither the Company nor any of its Subsidiaries has made any
loan or advance to any Person which is outstanding on the date of this
Agreement, nor is the Company or any of its Subsidiaries obligated or committed
to make any such loan or advance.
6.14. SECURITIES ACT. Neither the Company nor anyone acting on its
behalf has offered any of the Notes, Warrants or similar securities, or
solicited any offers to purchase or made any attempt by preliminary conversation
or negotiations to dispose of the Notes, Warrants or similar securities, within
the meaning of all applicable federal and state securities laws, to any Person
other than (i) the Purchaser, and (ii) no more than twenty-five (25) other
Persons, each of which is an "accredited investor" (as such term is defined in
Rule 501 of Regulation D promulgated pursuant to the Securities Act), and no
Person other than the Purchaser will purchase any Notes, Warrants or similar
securities. Neither the Company nor anyone acting on its behalf has offered or
will offer to sell the Notes or similar securities to, or solicit
19
offers with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any Person, so as to bring the issuance and
sale of the Note, Warrants under the registration provisions of the Securities
Act.
6.15. DISCLOSURE. Neither this Agreement, the Financial Statements,
the Operative Documents, nor any other agreement, document, certificate or
written statement furnished to the Purchaser or the Purchaser's counsel by or on
behalf of the Company or any of its Subsidiaries in connection with the
transactions contemplated hereby or thereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. There is no fact within the knowledge
of the Company or any of its executive officers which has not been disclosed
herein or otherwise by them to the Purchaser and which has a Material Adverse
Effect, or in the future in their opinion could reasonably be expected to have a
Material Adverse Effect. Without limiting the foregoing, the Company has no
knowledge of any specific existing, pending or planned patent, invention or
device which would have a Material Adverse Effect.
6.16. NO BROKERS OR FINDERS. As of the Closing, no Person had, has or
will have, as a result of the transactions contemplated by this Agreement, any
right, interest or valid claim against or upon the Purchaser for any commission,
fee or other compensation as a finder or broker because of any act or omission
by the Company, any of its Subsidiaries or any or its or their agents.
6.17. OTHER AGREEMENTS OF OFFICERS. Except as set forth on EXHIBIT
6.17 attached hereto, no officer or key employee of the Company or any of its
Subsidiaries is a party to or bound by any agreement, contract or commitment, or
subject to any restrictions, particularly but without limitation in connection
with any previous employment of any such person, which has a Material Adverse
Effect, or in the future may (so far as the Company can reasonably foresee) have
a Material Adverse Effect. To the best knowledge of the Company, no officer or
key employee of the Company or any of its Subsidiaries has any present intention
of terminating his employment with the Company or any of its Subsidiaries and
neither the Company nor any of its Subsidiaries has any present intention of
terminating any such employment.
6.18. CAPITALIZATION OF THE COMPANY; STATUS OF CAPITAL STOCK. The
Company has a total authorized capitalization consisting of 25,950,867 shares of
Common Stock. A complete list of the outstanding capital stock of the Company
and the names in which such capital stock of the Company is registered is set
forth on EXHIBIT 6.18 attached hereto. All the outstanding shares of capital
stock of the Company have been duly authorized, are validly issued and are fully
paid and nonassessable. Except as otherwise set forth on EXHIBIT 6.18 and except
for the Warrants, there are no options, warrants or rights to purchase shares of
capital stock or other securities of the Company authorized, issued or
outstanding, nor is the Company obligated in any other manner to issue shares of
its capital stock or other securities. The shares of Common Stock issuable upon
exercise of the Warrants, when issued in accordance with the terms of the
Warrants, will be duly authorized, validly issued and fully paid and
nonassessable. Except as otherwise set forth on EXHIBIT 6.18, there are no
restrictions on the transfer of shares of capital stock of the Company other
than those imposed by relevant state and federal securities laws. Except as set
forth in this Agreement or as otherwise set forth on EXHIBIT 6.18, no holder of
any security of the Company is entitled to preemptive or similar statutory or
contractual rights, either arising pursuant to any agreement or instrument to
which the Company is a party, or which are otherwise binding upon the Company.
20
Neither the issuance of the Notes or Warrants, nor the issuance of shares of
Common Stock upon the exercise of the Warrants, will trigger any preemptive or
similar right on the part of any party. The offer and sale of all shares of
capital stock and other securities of the Company issued before the Closing
complied with or were exempt from all federal and state securities laws.
6.19. CAPITAL STOCK OF SUBSIDIARIES. Except as set forth on EXHIBIT
6.19 attached hereto, the Company owns all of the outstanding capital stock of
each of the Subsidiaries, beneficially and of record, free and clear of all
liens, encumbrances, restrictions and claims of every kind. All the outstanding
shares of capital stock of each of the Subsidiaries have been duly authorized,
are validly issued and are fully paid and nonassessable. There are no options,
warrants or rights to purchase shares of capital stock or other securities of
any of the Subsidiaries authorized, issued or outstanding, nor is any Subsidiary
obligated in any other manner to issue shares of its capital stock or other
securities.
6.20. LABOR RELATIONS. To the best knowledge of the Company, no labor
union or any representative thereof has made any attempt to organize or
represent employees of the Company or any of its Subsidiaries. There are no
unfair labor practice charges, pending trials with respect to unfair labor
practice charges, pending material grievance proceedings or adverse decisions of
a Trial Examiner of the National Labor Relations Board or similar board against
the Company or any of its Subsidiaries. Furthermore, to the best knowledge of
the Company, relations with employees of the Company and its Subsidiaries are
good and there is no reason to believe that any material labor difficulties will
arise in the foreseeable future.
6.21. INSURANCE. Except as set forth on EXHIBIT 6.21 attached hereto,
the Company and each of its Subsidiaries has insurance covering its properties
and business adequate and customary for the type and scope of its properties and
business.
6.22. BOOKS AND RECORDS. The books of account, ledgers, order books,
records and documents of the Company and its Subsidiaries accurately and
completely reflect all material information relating to the business of the
Company and its Subsidiaries, the nature, acquisition, maintenance, location and
collection of the assets of the Company and its Subsidiaries, and the nature of
all transactions giving rise to the obligations or accounts receivable of the
Company and its Subsidiaries.
6.23. HAZARDOUS AND TOXIC MATERIALS. Except as set forth in EXHIBIT
6.23 attached hereto, (a) to the best knowledge of the Company and each of its
Subsidiaries, no hazardous or toxic waste or substance or any other contaminant
or pollutant including without limitation any oil or pesticide ("Hazardous
Materials") have been generated, used, treated or stored on, or transported to
or from, any of the property owned, leased or operated by the Company or any of
its Subsidiaries except in compliance with all applicable Environmental Laws,
(b) to the best knowledge of the Company and its Subsidiaries, there have been
no spills, discharges, releases or cleanups of any Hazardous Materials
("Hazardous Discharges") on any of the property owned, leased or operated by the
Company or any of its Subsidiaries, except such Hazardous Discharges which do
not violate any federal, state or local laws, ordinances, rules, regulations, or
policies existing or enacted relating to the environment, health and safety, any
Hazardous Discharges or to industrial hygiene or environmental conditions
(collectively "Environmental Laws"), (c) the Company and its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws and
the requirements of any permits issued under such Environmental Laws with
respect to any property owned, leased or operated by the Company or any of its
Subsidiaries, and (d)
21
there are no pending or, to the best knowledge of the Company and its
Subsidiaries, threatened claims relating to the foregoing against the Company,
any of its Subsidiaries or the property owned, leased or operated by the Company
or its Subsidiaries.
6.24. REGISTRATION RIGHTS. Other than pursuant to the terms of the
Restated Registration Rights Agreement, no Person has demand or other rights to
cause the Company to file any registration statement under the Securities Act
relating to any securities of the Company or any right to participate in any
such registration statement.
6.25. OTHER AGREEMENTS. Except as explicitly disclosed and described
in the Financial Statements or as set forth on EXHIBIT 6.25 attached hereto,
neither the Company nor any of its Subsidiaries is a party to any written or
oral contract or instrument or other corporate restriction the due performance
of which individually or in the aggregate could have a Material Adverse Effect.
Except as specifically contemplated by this Agreement or as set forth on said
EXHIBIT 6.25, neither the Company nor any of its Subsidiaries is a party to any
written or oral:
(a) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(b) agreement or indenture relating to the borrowing of money or
to the mortgaging or pledging of, or otherwise placing a lien or security
interest on, any asset of the Company or any of its Subsidiaries;
(c) guaranty of any obligation for borrowed money or otherwise;
(d) voting trust, stockholders agreement, pledge agreement or
buy-sell agreement relating to any securities of the Company which shall be in
effect after the Closing except to the extent contemplated hereunder;
(e) agreement or obligation (contingent or otherwise) to issue or
sell or to repurchase or otherwise acquire or retire any share of its capital
stock or any of its other equity securities, other than the repurchase of shares
of Common Stock held by any employee or consultant of the Company at cost upon
the termination of such employee's or consultant's services to the Company; or
(f) other contract or group of related contracts with the same
party involving more than $2,000,000 (or its equivalent in any other currency)
and continuing over a period of more than six (6) months from the date or dates
thereof (including renewals or extensions optional with another party), which
contract or group of contracts is not terminable by the Company or any of its
Subsidiaries without penalty upon notice of thirty (30) days, or less, but
excluding any contract or group of contracts with a vendor to, or customer of,
the Company or any of its Subsidiaries for the sale, lease or rental of their
respective products or services if such contract or group of contracts was
entered into in the ordinary course of business.
The Company, each Subsidiary, and, to the best knowledge of the Company, each
other party thereto have in all material respects performed all the obligations
required to be performed by them to date, have received no notice of default and
are not in material default under, any lease, agreement or contract now
22
in effect to which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries or its property may be bound. The Company
and the Subsidiaries currently have no expectation or intention of not fully
performing all their obligations under each such lease, contract or other
agreement, and the Company has no knowledge of any material breach or
anticipated material breach by the other party to any contract or commitment to
which the Company or any of its Subsidiaries is a party.
6.26. CUSTOMERS, VENDORS AND SUPPLIERS. None of the customers of the
Company and the Subsidiaries or vendors or suppliers of merchandise or supplies
to the Company and the Subsidiaries has canceled or otherwise terminated or made
any threat to cancel or otherwise terminate its relationship with the Company or
any Subsidiary, nor has any such customer, vendor or supplier indicated an
intent or desire to materially decrease its sales volume or purchase volume, as
the case may be, with the Company or any Subsidiary, except where any such
cancellation, termination, threat to cancel or terminate or intent or desire to
decrease its sales volume or purchase volume would not have a Material Adverse
Effect.
6.27. NO VIOLATIONS. Neither the execution and delivery of this
Agreement and the Operative Documents, nor the consummation of any of the
transactions contemplated hereby or thereby, by the Company, will (a) violate,
conflict with, or result in a breach or default under any provision of the
Certificate of Incorporation or Bylaws of the Company, (b) violate any provision
of any Applicable Laws, or (c) result in a violation or breach by the Company
of, conflict with, constitute (with or without due notice or lapse of time or
both) a default by the Company (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
Lien upon any of the properties or assets of the Company under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or other instrument or
obligation to which the Company is a party, or by which it or any of its
properties or assets may be bound.
ARTICLE VII
COVENANTS OF THE COMPANY
7.01. AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING
REQUIREMENTS. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that, until the later of the repayment in full of
(i) the aggregate outstanding principal balance of the Notes, together with all
interest and penalties, if any, due thereon, or (ii) the aggregate outstanding
principal balance of the LTHBV Notes, together with all interest and penalties,
if any due thereon, it will perform and observe the following covenants and
provisions and will cause each Subsidiary to perform and observe such of the
following covenants and provisions as are applicable to such Subsidiary:
(a) PUNCTUAL PAYMENT. Pay the principal of, premium, if any, and
interest on each of the Notes at the times and place and in the manner provided
in the Notes and herein.
(b) PAYMENT OF TAXES AND TRADE DEBT. Pay and discharge, and cause
each Subsidiary to pay and discharge, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or business, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a lien or charge
upon
23
any properties of the Company or any Subsidiary, provided that neither the
Company nor any Subsidiary shall be required to pay any such tax, assessment,
charge, levy or claim which is being contested in good faith and by appropriate
proceedings if the Company or the Subsidiary concerned shall have set aside on
its books adequate reserves with respect thereto. Pay and cause each Subsidiary
to pay, when due, or in conformity with customary trade terms, all material
lease obligations, all trade debt, and all other Indebtedness incident to the
operations of the Company or the Subsidiaries, except such as are being
contested in good faith and by appropriate proceedings if the Company or the
Subsidiary concerned shall have set aside on its books adequate reserves with
respect thereto.
(c) MAINTENANCE OF INSURANCE. Maintain, and cause each Subsidiary
to maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or such Subsidiary operates.
(d) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain,
and cause each Subsidiary to preserve and maintain, its corporate existence,
rights, franchises and privileges in the jurisdiction of its incorporation, and
qualify and remain qualified, and cause each Subsidiary to qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties, except where the failure to remain so
qualified would not, either individually or in the aggregate, have a Material
Adverse Effect; provided, however, that nothing herein contained shall prevent
any merger, consolidation or transfer of assets permitted by subsection 7.02(e).
Preserve and maintain, and cause each Subsidiary to preserve and maintain, all
licenses and other rights to use patents, processes, licenses, trademarks, trade
names, inventions, intellectual property rights or copyrights owned or possessed
by it and necessary to the conduct of its business, except such licenses, other
rights and copyrights which are part of a transfer of assets permitted by
Section 7.02(e).
(e) COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to
comply, with all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which could have a Material Adverse
Effect.
(f) INSPECTION RIGHTS. At any reasonable time and from time to
time, but not more frequently than twice in any 12-month period unless an Event
of Default shall have occurred and is continuing, permit the Purchaser or any of
its agents or representatives, to examine and make copies of and extracts from
the records and books of account of, and visit and inspect the properties of,
the Company and any Subsidiary, and to discuss the affairs, finances and
accounts of the Company and any Subsidiary with any of their officers or
directors and independent accountants. All reasonable out-of-pocket expenses of
the Purchaser (or its agents or representatives), the Company or any Subsidiary
incurred in connection with such inspection rights shall be borne by the
Company, such amount not to exceed $10,000 per annum.
(g) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep, and cause each
Subsidiary to keep, adequate records and books of account, in which complete
entries will be made in accordance with GAAP, but subject to normal year-end
audit adjustments, reflecting all financial transactions of the Company and each
Subsidiary, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business
24
shall be made; PROVIDED, HOWEVER, that with respect to Subsidiaries which are
not incorporated or organized under the laws of any State of the United States
or the District of Columbia (collectively, the "Foreign Subsidiaries"), the
Company shall cause each such Subsidiary to make entries in its records and
books of account in accordance with the generally accepted accounting principles
recognized in the country in which such Subsidiary was organized or
incorporated.
(h) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and
cause each Subsidiary to maintain and preserve, all of its properties, necessary
or useful in the proper conduct of its business, in good repair, working order
and condition, ordinary wear and tear excepted, except such properties which are
part of a transfer of assets permitted by Section 7.02(e).
(i) COMPLIANCE WITH ERISA. Comply, and cause each Guarantor to
comply, with all minimum funding requirements applicable to any pension or other
employee benefit plans which are subject to ERISA or to the Code, and comply,
and cause each Guarantor to comply, in all other material respects with the
provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any United States
Subsidiary will permit any event or condition to exist which could permit any
such plan to be terminated under circumstances which would cause the lien
provided for in Section 4068 of ERISA to attach to the assets of the Company or
any Subsidiary.
(j) ATTENDANCE AT BOARD MEETINGS. At any time at which a nominee
of the Purchaser is not a member of the board of directors or any committee of
the Company as provided in this Agreement and the Restated Stockholders'
Agreement, permit the Purchaser or its designee to have one observer attend each
meeting of the board of directors of the Company. The Company will send to the
Purchaser and its designee the notice of the time and place of any such meeting
in the same manner and at the same time as notice is sent to the directors;
PROVIDED, HOWEVER, that the Purchaser and its designee shall always receive at
least five (5) Business Days prior notice of any meeting which is not an
emergency meeting and at least three (3) Business Days' notice of any emergency
meeting. The Company shall also provide to the Purchaser copies of all notices,
reports, minutes, consents and other documents at the time and in the manner as
they are provided to the board of directors. The Purchaser shall have the right,
upon request and with reasonable notice, to consult with and advise the Company
regarding the Company's business. The Company shall reimburse each the Purchaser
or its designee for all reasonable costs incurred by the Purchaser or its
designee in connection with traveling to and from and attending meetings of the
Company's board of directors. The Purchaser and its designee hereby agree to
maintain the confidentiality of all confidential information of the Company to
which it obtains access pursuant to Section 7.01(f), this Section 7.01(j) or
Section 7.03(g); provided, however, that nothing herein shall limit the
disclosure of any such information (i) to the extent required by statute, rule,
regulation or judicial process, (ii) to counsel to, or auditors, accountants or
consultants for, the Purchaser, (iii) in connection with any litigation to which
the Purchaser is a party, or (iv) to any assignee or prospective assignee of any
of the Notes.
(k) BOARD OF DIRECTORS AND COMMITTEES. The board of directors of
the Company shall consist of no more than six (6) members, as provided for in
the Restated Stockholders' Agreement. The Company shall at all times maintain a
Compensation Committee and an Audit Committee of its board of directors.
25
(l) NOTICE OF DEFAULT OF SENIOR DEBT. The Company shall provide
the holders of the Notes with written notice promptly upon an event of default
under the Senior Debt or upon the occurrence of an event which, with the giving
of notice or passage of time or both, would result in an event of default under
the Senior Debt.
(m) KEY MAN LIFE INSURANCE. The Company will maintain a "key man"
life insurance policy in the amount of Two Million Dollars ($2,000,000.00) on
▇▇▇▇ ▇. ▇▇▇▇▇. Proceeds of such policy will be payable to the Company.
(n) QUICK RATIO. Commencing with the fiscal quarter ending
December 31, 1999, the Company shall cause the Consolidated Group to maintain at
the end of each fiscal quarter a ratio of Quick Assets to Current Liabilities of
not less than 0.50 to 1.0.
(o) MINIMUM EBITDA. The Company shall cause the Consolidated
Group to have at the end of each of the following fiscal quarters minimum EBITDA
of not less than the respective amounts set forth below opposite each such
fiscal quarter:
FISCAL QUARTER MINIMUM EBITDA
Quarter Ending 3/31/99 ($500,000)
Quarter Ending 6/30/99 $500,000
Quarter Ending 9/30/99 $1,000,000
Quarter Ending 12/31/99 and $750,000
each fiscal quarter thereafter
(p) SUBSIDIARY GUARANTORS. Within five (5) Business Days after
any Subsidiary which (i) is not (x) a Subsidiary Guarantor on the date hereof
and (y) a Foreign Subsidiary guarantees any Senior Debt (each a "New Senior Debt
Guarantee"), the Company shall cause such Subsidiary to execute and deliver to
the Purchaser a guarantee in form and substance satisfactory to the Purchaser
pursuant to which such Subsidiary guarantees all of the obligations of the
Company to the Purchaser, including, without limitation, the obligations of the
Company hereunder and under the Notes, together with any other documents as the
Purchaser may reasonably request, and (ii) is a Foreign Subsidiary, but not a
Subsidiary Guarantor under the LTHBV Note Purchase Agreement on the date hereof,
guarantees any Senior Debt (each a "New Senior Debt Foreign Guarantee") of any
other Foreign Subsidiary, the Company shall cause such Subsidiary to execute and
deliver to the Purchaser under the LTHBV Note Purchase Agreement a guarantee in
form and substance satisfactory to such Purchaser pursuant to which such
Subsidiary guarantees all of the obligations of LTHBV to such Purchaser
including, without limitation, the obligations of LTHBV under the LTHBV Note
Purchase Agreement and the LTHBV Notes.
7.02. NEGATIVE COVENANTS OF THE COMPANY. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that, until
the later of the repayment in full of (i) the aggregate outstanding principal
balance of the Notes, together with all interest and penalties, if any
26
due thereon, or (ii) the aggregate outstanding principal balance of the LTHBV
Notes, together with all interest and penalties, if any due thereon, it will
comply with and observe the following covenants and provisions, and will cause
each Subsidiary to comply with and observe such of the following covenants and
provisions as are applicable to such Subsidiary, and will not:
(a) LIENS. Create, incur, assume or suffer to exist, or permit
any Subsidiary to create, incur, assume or suffer to exist, any mortgage, deed
of trust, pledge, lien, security interest or other charge or encumbrance
(including the lien or retained security title of a conditional vendor) of any
nature, upon or with respect to any of its properties, now owned or hereafter
acquired, or assign or otherwise convey any right to receive income, except that
the foregoing restrictions shall not apply to mortgages, deeds of trust,
pledges, liens, security interests or other charges or encumbrances
(collectively, "Permitted Liens"):
(i) for taxes, assessments or governmental charges or levies
on property of the Company or any Subsidiary if the same shall
not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate
proceedings;
(ii) imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary
course of business;
(iii) arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar
legislation;
(iv) securing the performance of bids, tenders, contracts
(other than for the repayment of borrowed money), statutory
obligations and surety bonds;
(v) in the nature of zoning restrictions, easements and
rights or restrictions of record on the use of real property
which do not materially detract from its value or impair its use;
(vi) arising by operation of law in favor of the owner or
sublessor of leased premises and confined to the property rented;
(vii) arising from any litigation or proceeding which is
being contested in good faith by appropriate proceedings,
provided, however, that no execution or levy has been made;
(viii) described on EXHIBIT 6.07 which secure the
Indebtedness set forth on EXHIBIT 6.08(d), provided that no such
lien is extended to cover other or different property of the
Company or any Subsidiary;
(ix) liens which secure Indebtedness permitted by Section
7.02(b); and
(x) other liens or encumbrances arising in the ordinary
course of business
27
not incurred in connection with the borrowing of money which do
not interfere in any material respect with the conduct of the
business of the Company and its Subsidiaries.
(b) INDEBTEDNESS. Without the prior written consent of the
Purchaser, create, incur, assume or suffer to exist, or permit any Subsidiary to
create, incur, assume or suffer to exist, any Indebtedness other than (1) up to
$15,000,000 (or its equivalent in any other currency) in Senior Debt; (2) an
unlimited amount of Junior Subordinated Debt outstanding at any time on a
consolidated basis, PROVIDED that the incurrence and maintenance of all such
Indebtedness will not result in the Company's or any Subsidiary's failure to
comply with any of the provisions of Article VII hereof; and (3) Indebtedness
described in EXHIBIT 7.02(b), PROVIDED, HOWEVER, that neither the Company, nor
any Subsidiary shall make an intercompany loan to a Subsidiary that is not a
Subsidiary Guarantor (as such term is defined under this Agreement and as such
term is defined under the LTHBV Note Purchase Agreement). In addition, without
the prior written consent of the Purchaser, (i) the Company shall make no
payments whatsoever on the VTI Seller Notes during the existence of an Event of
Default, and (ii) the Company shall not agree to any amendment or modification
to the VTI Seller Notes, which would have a material adverse impact upon the
interests of the Purchaser.
(c) LEASE OBLIGATIONS. Become obligated to pay rent under any
leases or other rental arrangements (excluding capitalized leases) under which
the amount of the aggregate lease or other payments for all such agreements or
arrangements exceeds $5,000,000 on a consolidated basis for any twelve-month
period.
(d) ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS.
Assume, guarantee, endorse or otherwise become directly or contingently liable
on, or permit any Subsidiary to assume, guarantee, endorse or otherwise become
directly or contingently liable on (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss) any Indebtedness of any other Person, except
for guarantees by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business and except by the Company or any
Subsidiary with respect to any Indebtedness of the Company or any Subsidiary
which is permitted by this Agreement; provided, however, in no event shall (i)
the Company guarantee any Senior Debt of any of the Company's Subsidiaries
without the prior written consent of the Purchaser, and (ii) any Foreign
Subsidiary guarantee any Senior Debt of the Company or any Subsidiary of the
Company that is not a Foreign Subsidiary without the prior written consent of
the Purchaser.
(e) MERGERS, SALE OF ASSETS, ETC. Without the prior written
consent of the Purchaser, merge or consolidate with any Person, or sell, assign,
lease or otherwise dispose of or voluntarily part with the control of (whether
in one transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereinafter acquired) or permit any Subsidiary
to do so, except that (1) any Subsidiary may merge into or consolidate with or
transfer assets to any Subsidiary Guarantor; (2) any Subsidiary may merge into
or transfer assets to the Company (3) the Company may merge with any Person or
issue securities in connection with the acquisition of a Person, provided that
the Company is the surviving entity and the stockholders of the Company as of
the Closing own or are able to vote or control at least 50% of the aggregate of
all outstanding equity securities of the Company at that time, such merger or
acquisition does not result in the violation of any of the provisions of this
Agreement, and no Event of Default exists at the time of such merger or
acquisition, and (4) the Company may merge or consolidate
28
with any Person or shall, assign, lease or otherwise dispose of or voluntarily
part with control of any of its assets or permit any Subsidiary to do so in
connection with any transaction which results in net cash proceeds to the
holders of the outstanding Common Stock of the Company at such time of at least
$50,000,000.
(f) INVESTMENTS IN OTHER PERSONS. Without the prior written
consent of the Purchaser, make or permit any Subsidiary to make, any loan or
advance to any Person, or purchase, otherwise acquire, or permit any Subsidiary
to purchase or otherwise acquire, any capital stock, assets or other property
of, obligations of, or any interest in, any Person, except:
(i) investments by the Company or any Subsidiary in
evidences of indebtedness issued or fully guaranteed by the
United States of America or any U.S. government agency having a
maturity of not more than one year from the date of acquisition;
(ii) investments by the Company or any Subsidiary in
certificates of deposit, money market accounts, notes,
acceptances and repurchase agreements having a maturity of not
more than one year from the date of acquisition issued by a bank
organized in the United States having capital, surplus and
undivided profits of at least $100,000,000 and whose parent
holding company has long-term debt rated Aal or higher, and whose
commercial paper (if rated) is rated Prime 1 by ▇▇▇▇▇'▇ Investors
Service, Inc.;
(iii) loans from a Subsidiary to the Company or another
Subsidiary or from the Company to a Subsidiary;
(iv) investments by the Company or any Subsidiary in the
highest-rated commercial paper having a maturity of not more than
one year from the date of acquisition;
(v) reasonable advances to employees for travel, relocation
or other business expenses in accordance with the ordinary course
of business;
(vi) loans or advances to employees to enable employees to
exercise vested stock options; and
(vii) acquisitions of assets, capital stock or other
property which individually and in the aggregate are not material
to the Company or such Subsidiary (assets, capital stock and
other property with a fair market value of less than $3,000,000
(or its equivalent in any other currency) acquired in any
one-year period in the aggregate shall not be deemed "material");
PROVIDED, HOWEVER, that each such acquisition can be made in
compliance with the other terms of this Agreement, including,
without limitation, Section 7.02(l).
(g) DISTRIBUTIONS. Without the prior written consent of the
Purchaser, declare or pay any dividends, purchase, redeem, retire, or otherwise
acquire for value any of its capital stock (or rights, options or warrants to
purchase such shares) now or hereafter outstanding, return any capital to its
stockholders as such, or make any distribution of assets to its stockholders as
such, or permit any Subsidiary to do any of the foregoing (such transactions
being hereinafter referred to as "Distributions"); provided, however, that
nothing herein contained shall prevent:
29
(i) the Company from effecting a stock split or declaring or
paying any dividend consisting of shares of any class of Common
Stock to the holders of shares of such class of Common Stock,
provided that such stock split or dividend is effected equally
across all classes of Common Stock;
(ii) any Subsidiary from declaring or making payment of cash
or stock dividends, returns of capital or distributions of assets
to the Company or another Subsidiary; or
(iii) the repurchase of shares of Common Stock held by any
employee or consultant of the Company at cost upon the
termination of such employee's or consultant's services to the
Company;
if in the case of any such transaction the Distribution can be made in
compliance with the other terms of this Agreement.
(h) DEALINGS WITH AFFILIATES. Without the prior written consent
of the Purchaser, enter or permit any Subsidiary to enter into any transaction
with any holder of five percent (5%) or more of any class of capital stock of
the Company, or any member of their families or any corporation or other entity
in which any one or more of such stockholders or members of their immediate
families directly or indirectly holds five percent (5%) or more of any class of
capital stock, except on an arms-length basis on terms no less favorable to the
Company or Subsidiary as it could obtain from an unrelated party.
(i) MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. Sell or otherwise
dispose of any shares of capital stock of any Subsidiary, except to the Company
or another Subsidiary, or permit any Subsidiary to issue, sell or otherwise
dispose of any shares of its capital stock or the capital stock of any
Subsidiary, except (i) to the Company or another Subsidiary, or (ii) to any
director of any Foreign Subsidiary to the extent the issuance to any such
director of any such capital stock is required under applicable law; PROVIDED,
HOWEVER, that nothing herein contained shall prevent any merger, consolidation
or transfer of assets permitted by Section 7.02(e).
(j) CHANGE IN NATURE OF BUSINESS. Without the prior written
consent of the Purchaser, make, or permit any Subsidiary to make, any material
change in the nature of its business as carried on at the date hereof.
(k) NO AMENDMENT OF CERTIFICATE OF INCORPORATION OR BYLAWS.
Without the prior written consent of the Purchaser, amend or alter its
Certificate of Incorporation or Bylaws in any manner which would have an adverse
impact upon the interests of the Purchaser. Prior to making any amendment or
alteration to its Certificate of Incorporation or Bylaws, the Company shall give
the Purchaser five (5) days prior written notice thereof. In the event the
Purchaser reasonably believes that such amendment or alteration would have an
adverse effect upon its interests and the Purchaser so notifies the Company
prior to the expiration of such five (5) day period, the Company shall not so
amend or alter its Certificate of Incorporation or Bylaws (as applicable).
(l) CAPITAL EXPENDITURES. Make, or permit any Subsidiary to make,
any capital
30
expenditure during any fiscal year of the Company which exceeds $3,000,000 (or
its equivalent in any other currency) in the aggregate on a consolidated basis.
7.03. REPORTING REQUIREMENTS. The Company will furnish to each holder
of any Note, Warrant or Warrant Share:
(a) as soon as possible and in any event within five (5) days
after the occurrence of each Event of Default or each event which, with the
giving of notice or lapse of time or both, would constitute an Event of Default,
the statement of the chief financial officer of the Company setting forth
details of such Event of Default or event and the action which the Company
proposes to take with respect thereto;
(b) as soon as available and in any event within thirty (30) days
after the end of each month, consolidated and consolidating balance sheets of
the Company and its Subsidiaries as of the end of such month and consolidated
and consolidating statements of income and retained earnings and of cash flows
of the Company and its Subsidiaries for such month and for the periods
commencing at the end of the previous fiscal year and ending with the end of
such month, and with respect to each quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding period of the
preceding fiscal year and the operating Budget for the current year (the
"Budget"), all in reasonable detail, in a format reasonably satisfactory to the
Purchaser, and duly certified (subject to normal year-end adjustments) by the
chief financial officer of the Company as having been prepared in accordance
with GAAP, subject to normal year-end audit adjustments, and including a
discussion by the Company's management of any variance from the Budget;
(c) at the time of delivery of each monthly statement, a
certificate, executed by the chief financial officer of the Company, stating
that such officer has caused this Agreement, the Notes and the Warrants to be
reviewed and has no knowledge of any Event of Default or default by the Company
or any Subsidiary in the performance or observance of any of the provisions of
this Agreement, the Notes or the Warrants or, if such officer has such
knowledge, specifying such Event of Default or default and the nature thereof,
and setting forth computations in reasonable detail demonstrating compliance
with the provisions of subsections 7.02(b) and (d);
(d) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company or any Subsidiary of the type described in Section 6.04;
(e) simultaneously as they are sent to the Bank, copies of all
financial statements, and upon written request, reports and other information
delivered by the Company to the Bank;
(f) promptly after sending, making available, or filing the same,
such reports and financial statements as the Company or any Subsidiary shall
send or make available to the stockholders of the Company or the Commission;
(g) such other information respecting the business, assets,
liabilities, financial condition, results of operations or prospects of the
Company or any of its Subsidiaries as the Purchaser
31
may from time to time reasonably request, and to make available to the Purchaser
and its representatives, members of management and employees with significant
responsibilities for the purposes of updating the Purchaser as to the condition
of the Company and its Subsidiaries;
(h) within thirty (30) days of the end of each calendar quarter,
a certificate signed by the President or Chief Financial Officer of the Company
which shall contain a detailed computation of the Company's compliance with the
financial covenants in Sections 7.01(n) and 7.01(o); and
(i) simultaneously with any Subsidiary entering into a New Senior
Debt Guarantee or a New Senior Debt Foreign Guarantee, a copy of such guarantee,
together with all other documents executed in connection therewith.
ARTICLE VIII
EVENTS OF DEFAULT
8.01. EVENTS OF DEFAULT. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) The Company or LTHBV shall fail to pay any installment of
principal of any of the Notes or any of the LTHBV Notes, respectively, when due;
or
(b) The Company or LTHBV shall fail to pay any interest or
premium, if any, on any of the Notes or any of the LTHBV Notes, respectively,
when due and such failure shall continue for five (5) days; or
(c) The Company shall default in the performance of any covenant
contained in Section 7.02 which default shall remain uncured for twenty (20)
days or more; or
(d) There shall be an Event of Default under the LTHBV Loan
Agreement or any documents or agreements executed in connection therewith;
(e) Any representation or warranty made by the Company in this
Agreement or by the Company (or any of its officers) in any certificate,
instrument or written statement contemplated by or made or delivered pursuant to
or in connection with this Agreement, shall prove to have been incorrect when
made in any material respect; or
(f) The Company or any Subsidiary shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement, the
Notes or the Warrants on its part to be performed or observed and any such
failure remains unremedied for twenty (20) days after written notice thereof
shall have been given to the Company by any registered holder of the Notes, or
the Warrants; or
(g) The Company or any Subsidiary shall fail to pay any
Indebtedness for borrowed money exceeding $1,000,000 (or its equivalent in any
other currency) owing by the Company or such Subsidiary (as the case may be), or
any interest or premium thereon, when due (or, if permitted by the
32
terms of the relevant document, within any applicable grace period), whether
such Indebtedness shall become due by scheduled maturity, by required
prepayment, by acceleration, by demand or otherwise, or shall fail to perform
any term, covenant or agreement on its part to be performed under any agreement
or instrument (other than this Agreement or the Notes) evidencing or securing or
relating to any Indebtedness owing by the Company or any Subsidiary, as the case
may be, when required to be performed (or, if permitted by the terms of the
relevant document, within any applicable grace period), if the effect of such
failure to pay or perform is to accelerate, or to permit the holder or holders
of such Indebtedness, or the trustee or trustees under any such agreement or
instrument to accelerate the maturity of such Indebtedness, unless such failure
to pay or perform shall be waived by the holder or holders of such Indebtedness
or such trustee or trustees; or
(h) The occurrence of an event of default or default under any
document, instrument, note or agreement evidencing or relating to any Senior
Debt, including, without limitation, Indebtedness of the Company and any of its
Subsidiaries for money borrowed from the Bank pursuant to the Loan Agreement.
(i) The occurrence of an event of default or default under (1)
the VTI Notes or any document or agreement relating thereto or (2) any document,
instrument, note or agreement relating or evidencing the CRL Indebtedness.
(j) The Company, any of the Guarantors or LTHBV shall be involved
in financial difficulties evidenced (i) by its admitting in writing its
inability to pay its debts generally as they become due; (ii) by its
commencement of a voluntary proceeding under Title 11 of the United States Code
as from time to time in effect, or foreign bankruptcy, insolvency, receivership,
examination or similar law, or by its authorizing, by appropriate proceedings of
its board of directors or other governing body, the commencement of such a
voluntary proceeding; (iii) by its filing an answer or other pleading admitting
or failing to deny the material allegations of a petition filed against it
commencing an involuntary proceeding under said Title 11, or foreign bankruptcy,
insolvency, receivership or similar law, or seeking, consenting to or
acquiescing in the relief therein provided, or by its failing to timely
controvert any such proceeding or the material allegations of any such petition;
(iv) by the entry of an order for relief in any involuntary proceeding commenced
under said Title 11, or foreign bankruptcy, insolvency, receivership,
examination or similar law; (v) by its seeking relief as a debtor under any
applicable law, other than said Title 11, or similar bankruptcy, insolvency,
receivership, examination or similar law, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or by its consenting to or acquiescing in such relief;
(vi) by the entry of an order by a court of competent jurisdiction (a) finding
it to be bankrupt or insolvent, (b) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors,
or (c) assuming custody of, or appointing a receiver, examiner, trustee,
custodian, sequestrator or similar official for, all or a substantial part of
its property; or (vii) by its making an assignment for the benefit of, or
entering into a composition with, its creditors, or appointing or consenting to
the appointment of a receiver, examiner, trustee, custodian, sequestrator or
similar official for all or a substantial part of its property;
(k) A Change of Control occurs with respect to the Company or any
material Subsidiary which is not consented to by the holders of at least a
majority of the principal amount of the Notes then outstanding; or
33
(l) Any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against a substantial part of the
property of the Company or any Subsidiary and such judgment, writ, or similar
process shall not be released, vacated or fully bonded within sixty (60) days
after its issue or levy;
then, and in any such event listed in Section 8.01(a) through
(l),
(1) the Purchaser may, by notice to the Company, declare the entire
unpaid principal amount of the Notes, all interest accrued and unpaid thereon
and all other amounts payable under this Agreement to be forthwith due and
payable, whereupon the Notes, all such accrued interest and all such amounts
shall become and be forthwith due and payable (unless there shall have occurred
an Event of Default under subsections 8.01(j) in which case all such amounts
shall automatically become due and payable), without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Company, and
(2) the holders of the Notes may proceed to protect and enforce their
respective rights against the Company in such manner as they may elect,
including without limitation, proceeding to protect and enforce their respective
rights by suit in equity (including without limitation a suit for rescission),
action at law and/or other appropriate proceeding either for specific
performance of any covenant, provision or condition contained or incorporated by
reference in this Agreement or any term of the Certificate of Incorporation of
the Company.
Without in any way limiting the rights of the holders of the Notes,
the Company hereby agrees that the holders of the Warrants or the Warrant Shares
would have no adequate remedy at law, for monetary compensation or otherwise,
for the damages that would be suffered if the Company were to fail to comply
with its obligations under Articles VII and VIII, and that the Company therefore
agrees that the holders of the Warrants and the Warrant Shares shall be entitled
to obtain specific performance of the Company's obligations under Articles VII
and VIII of this Agreement.
8.02. ANNULMENT OF DEFAULTS. Section 8.01 is subject to the condition
that, if at any time after the principal of any of the Notes shall have become
due and payable, and before any judgment or decree for the payment of the moneys
so due, or any thereof, shall have been entered, then and in every such case the
holders of at least a majority of the principal amount of all Notes then
outstanding may, by written instrument filed with the Company, rescind and annul
such declaration and its consequences; but no such rescission or annulment shall
extend to or affect any subsequent default or Event of Default or impair any
right consequent thereon.
ARTICLE IX
MISCELLANEOUS
9.01. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part
of any holder of any Notes, Warrants or Warrant Shares in exercising any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
34
9.02. AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this
Agreement, the Notes, the Warrants or the other Operative Documents to the
contrary notwithstanding, changes in or additions to this Agreement may be made,
and compliance with any covenant or provision herein set forth may be omitted or
waived, if the Company (x) shall obtain consent thereto in writing from the
holder or holders of (i) if any Notes are outstanding, at least a majority in
principal amount of all Notes then outstanding, and (ii) if no Notes are then
outstanding, at least a majority of the Warrant Shares (whether issued or
issuable), and (y) shall deliver copies of such consent in writing to any
holders who did not execute the same; PROVIDED that no such consent shall be
effective to reduce the principal or interest payable on any Note or extend the
maturity of the Notes without the consent of the holder thereof or to reduce the
percentage of the Notes and Warrants the consent of the holders of which is
required under this Section 9.02; AND PROVIDED FURTHER, that no covenant or
provision set forth in the Warrants may be omitted or waived without the written
consent of the holder or holders of at least a majority of the Warrant Shares.
Any waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. Written notice of any
waiver or consent effected under this subsection shall promptly be delivered by
the Company to any holders who did not execute the same.
9.03. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and
other communications provided for hereunder shall be in writing and mailed (by
first class registered or certified mail, postage prepaid), telegraphed, sent by
express overnight courier service or electronic facsimile transmission with a
copy by mail, or delivered to the applicable party at the addresses indicated
below:
IF TO THE COMPANY:
Lionbridge Technologies Holdings, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
35
IF TO MSC
AND MSI:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Capital Fund II Annex, ▇.▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Investors Annex, L.P.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
Holland & Knight LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO ANY OTHER HOLDER OF THE NOTES OR WARRANTS:
at such holder's address for notice as set
forth in the transfer records of the
Company
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall, when mailed, telegraphed or sent, respectively, be
effective (i) two days after being deposited in the mails or (ii) one day after
being delivered to the telegraph company, deposited with the express overnight
courier service or sent by electronic facsimile transmission (with receipt
confirmed), respectively, addressed as aforesaid.
9.04. COSTS, EXPENSES AND TAXES. The Company agrees to pay on demand
all reasonable costs and expenses of the Purchaser in connection with the
preparation, execution and delivery of this Agreement, the Notes, the Warrants,
the other Operative Documents and other instruments and documents to be
delivered hereunder, and in connection with the consummation of the transactions
contemplated hereby and thereby, as well as all costs and expenses of the
Purchaser in connection with the amendment, waiver (whether or not such
amendment or waiver becomes effective) or enforcement of this Agreement, the
Notes, the Warrants, the other Operative Documents, and other instruments and
documents to be delivered hereunder and thereunder. Notwithstanding the
preceding sentence, and in addition to the provisions of such sentence, the
Company agrees to pay on demand all reasonable fees and out-of-pocket expenses
of Holland & Knight LLP, counsel to the Purchaser, in connection with the
transactions contemplated by this Agreement, including any amendment, waiver
(whether or not such amendment or waiver becomes effective) or enforcement of
this Agreement, the Notes, the Warrants, the Operative Documents, and other
instruments and documents to be delivered hereunder and thereunder. In addition,
the Company agrees to pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Agreement, the Notes, the Warrants, the
36
other Operative Documents, and the other instruments and documents to be
delivered hereunder or thereunder and the Company agrees to save each Purchaser
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and filing fees.
9.05. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Company and the Purchaser and their respective
successors and assigns, except that (i) the Company shall not have the right to
assign its rights hereunder or any interest therein without the prior written
consent of the Purchaser and (ii) the Purchaser shall not have the right to
assign its rights under this Agreement, the Notes or the Warrants or any
interest therein to any Person not an Affiliate of the Purchaser without the
prior written consent of the Company, and the Purchaser shall not have the right
to assign fewer than 40,000 Warrant Shares (or Warrants exercisable therefor)
without the prior written consent of the Company. The Purchaser shall notify the
Company of any assignment that it makes of its rights hereunder, at such time as
it makes such assignment. Except as expressly set forth herein, nothing in this
Agreement shall confer any claim, right, interest or remedy on any third party
or inure to the benefit of any third party.
9.06. PAYMENTS IN RESPECT OF NOTES. The Purchaser and any successor
holder of the Notes, by their acceptance thereof, agree that, with respect to
all sums received by them applicable to the payment of principal of or interest
on the Notes, equitable adjustment will be made among them so that, in effect,
all such sums shall be shared ratably by all of the holders of the Notes whether
received by voluntary payment, by realization upon security, by the exercise of
the right of setoff, by counterclaim or cross-action or by the enforcement of
any or all of the Notes. If any holder of the Notes receives any payment on its
Notes in excess of its pro rata portion, then such holder receiving such excess
payment shall purchase for cash from the other holders an interest in their
Notes in such amounts as shall result in a ratable participation by all of the
holders in the aggregate unpaid amount of Notes then outstanding.
9.07. PAYMENTS IN RESPECT OF WARRANTS. The Purchaser and any successor
holder of the Warrants, by their acceptance thereof, agree that, with respect to
the sale to, or repurchase by, the Company or any Person directly or indirectly
affiliated with the Company or any of its directors, officers, or shareholders,
of the Warrants, equitable adjustment will be made among the holders of the
Warrants so that in effect all sums so received shall be shared ratably in
proportion to their respective holdings of Warrants. If any holder of the
Warrants receives any such sum in respect of its Warrants in excess of its pro
rata portion, then such holder receiving such excess shall purchase for cash
from the other holders of the Warrants an interest in their Warrants in such
amount as shall result in a ratable participation of all of the holders in the
aggregate of all Warrants then outstanding.
9.08. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Purchaser, its subsidiaries, directors, officers, partners, counsel
and employees, from and against any and all liability (including, without
limitation, reasonable legal fees incurred in defending against any such
liability) under, arising out of or relating to this Agreement, the Notes, the
Warrants, the Warrant Shares, the transactions contemplated hereby or thereby or
in connection herewith or therewith, including (to the maximum extent permitted
by law) any liability arising under federal or state securities laws, except to
the extent such liability shall result from any act or omission on the part of
the Purchaser or its employees, agents, brokers or other representatives. The
obligations of the Company under this Section 9.08 shall survive and continue to
be in full force and effect notwithstanding (a) the repayment of
37
the Notes and (b) the termination of this Agreement.
9.09. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made in this Agreement, the Notes, the Warrants, the Operative
Documents or any other instrument or document delivered in connection herewith
or therewith, shall survive the execution and delivery hereof and thereof,
regardless of any investigation made by the Purchaser or on behalf of the
Purchaser.
9.10. INTENTIONALLY OMITTED.
9.11. SEVERABILITY. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
9.12. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the Commonwealth of
Massachusetts.
9.13. WAIVER OF RIGHT TO JURY TRIAL. The parties hereby waive all
rights to a trial by jury for all legal proceedings concerning this Agreement or
the Notes.
9.14. HEADINGS. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
9.15. SEALED INSTRUMENT. This Agreement is executed as an instrument
under seal.
9.16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.
9.17. FURTHER ASSURANCES. From and after the date of this Agreement,
upon the request of the Purchaser, the Company and each Subsidiary shall execute
and deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement, the Notes and the Warrants.
9.18. CONSENT TO JURISDICTION. The Company irrevocably submits to the
non-exclusive jurisdiction of any state or federal court sitting in the
Commonwealth of Massachusetts over any suit, action or proceeding arising out of
or relating to this Agreement or any of the Notes, the Warrants or the Warrant
Shares. To the fullest extent it may effectively do so under applicable law, the
Company irrevocably waives and agrees not to assert, by way of motion, as a
defense or otherwise, any claim that it is not subject to the jurisdiction of
any such court, any objection that it may now or hereafter have to the laying of
the venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
9.19. EFFECT OF JUDGMENT. The Company agrees, to the fullest extent it
may effectively do so under applicable law, that a judgment in any suit, action
or proceeding of the nature referred to in Section 9.18 brought in any such
court shall, subject to such rights of appeal on issues other than jurisdiction
as may be available to the Company, be conclusive and binding upon the Company
and may
38
be enforced in the courts of the United States of America or the Commonwealth
of Massachusetts (or any other courts to the jurisdiction of which the
Company is or may be subject) by a suit upon such judgment.
9.20. SERVICE OF PROCESS. The Company consents to service of process
in any suit, action or proceeding of the nature referred to in Section 9.18 by
actual receipt of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to the address of the Company specified in or
designated pursuant to Section 9.03. The Company agrees that such service (i)
shall be deemed in every respect effective service of process upon the Company
in any such suit, action or proceeding and (ii) shall, to the fullest extent
permitted by law, be taken and held to be valid personal service upon and
personal delivery to the Company.
9.21. NO LIMITATION. Nothing in Sections 9.18, 9.19, 9.20 or 9.22
shall affect the right of the Purchaser to serve process in any manner permitted
by law, or limit any right that the Purchaser may have to bring proceedings
against the Company in the courts of any jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
9.22. SPECIFIC PERFORMANCE. Upon breach or default by the Company with
respect to any obligation hereunder or under the Notes, the holders of the Notes
shall be entitled to protect and enforce their rights at law, or in equity or by
other appropriate proceedings for specific performance of such obligation, or
for an injunction against such breach or default, or in aid of the exercise of
any power or remedy granted hereby or thereby or by law.
9.23. ACTIONS BY PURCHASER. Wherever in this Agreement action is
required or permitted to be taken by, or consent is required of, or a matter
requires the satisfaction of, the Purchaser, unless the context otherwise
requires, such action may be taken by, and/or such consent may be obtained from,
and/or such satisfaction may be expressed by, (i) for as long as any of the
Notes remain outstanding, the holders of at least a majority of the principal
amount of all Notes then outstanding, or (ii) if no Notes are then outstanding,
the holders of at least a majority of the Common Stock issued and issuable upon
exercise of the Warrants; PROVIDED, HOWEVER, that the provisions of this Section
9.23 shall not limit in any manner any action which may be taken by the
Purchaser pursuant to the provisions of Section 8.01 hereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
39
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands as of the date first above written.
COMPANY: LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
By: ___________________________________
Name:
Title:
PURCHASER: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VENTURE CAPITAL FUND II ANNEX, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners II, L.P.,
its General Partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Capital II, Inc.,
its Managing General Partner
By: ___________________________________
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VENTURE INVESTORS ANNEX, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Partners II, L.P.,
its General Partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Venture Capital II, Inc.,
its Managing General Partner
By: ___________________________________
Name:
Title: