EXHIBIT 10.29
================================================================================
NOTE AND WARRANT PURCHASE AGREEMENT
DATED MAY 17, 2000
AMONG
PRAIRIE CAPITAL MEZZANINE FUND, L.P.,
▇▇▇▇▇ HOLDINGS, INC.
AND
▇▇▇▇▇ PRODUCTS, INC.
================================================================================
TABLE OF CONTENTS
Page
1. Definitions and Related Matters .............................................................. 1
1.1 Definitions ...................................................................... 1
1.2 Other Defined Terms .............................................................. 15
1.3 Accounting Principles ............................................................ 16
1.4 Other Interpretive Matters ....................................................... 17
2. Authorization and Closing..................................................................... 17
2.1 Authorization of the Securities .................................................. 18
2.2 Purchase and Sale of the Securities .............................................. 18
2.3 The Closing ...................................................................... 18
2.4 The Supplemental Closing ......................................................... 19
3. Conditions of the Purchaser's Obligation at the Closing....................................... 19
3.1 Representations, Warranties and Covenants; No Event of Default ................... 19
3.2 Certificate of Incorporation ..................................................... 19
3.3 Bylaws ........................................................................... 19
3.4 Intentionally Omitted ............................................................ 20
3.5 Investor Subscription Agreement .................................................. 20
3.6 Equityholders Agreement .......................................................... 20
3.7 Stockholders Agreement ........................................................... 20
3.8 Guaranty ......................................................................... 20
3.9 Sale of Securities to the Purchaser .............................................. 20
3.10 Intentionally Omitted ............................................................ 20
3.11 Securities Law Compliance ........................................................ 20
3.12 Acquisition Agreement ............................................................ 20
3.13 Senior Loan Agreement ............................................................ 21
3.14 Closing Fees and Expenses ........................................................ 21
3.15 Employment Agreements ............................................................ 21
3.16 Payment of Existing Indebtedness ................................................. 21
3.17 Intercreditor Agreement .......................................................... 21
3.18 Lease Plan - ▇▇▇▇▇ Products Investors, L.P. ...................................... 22
3.19 Seller Investment ................................................................ 22
3.20 Opinion of the Company's Counsel ................................................. 22
3.21 Opinion of Seller's Counsel ...................................................... 22
3.22 Closing Documents ................................................................ 22
3.23 Proceedings ...................................................................... 24
3.24 Intentionally Omitted ............................................................ 24
-i-
3.25 No Material Adverse Change ....................................................... 24
3.26 Compliance with Applicable Laws .................................................. 24
3.27 Waiver ........................................................................... 24
3A. Conditions of the Purchaser's Obligations Subsequent to Closing.............................. 24
3A.1 Delivery of Financial Information ................................................ 24
3A.2 Notice ........................................................................... 25
3A.3 Representations and Warranties; No Event of Default .............................. 25
3A.4 Covenant Compliance .............................................................. 25
3A.5 Acquisition Agreement ............................................................ 25
3A.6 Senior Lenders ................................................................... 25
3A.7 Supplemental Closing Fees and Expenses ........................................... 25
3A.8 Closing Documents ................................................................ 26
3A.9 Use of Proceeds .................................................................. 26
3A.10 Adjustment of Financial Covenant Levels .......................................... 26
4. Covenants..................................................................................... 27
4.1 Financial Statements and Other Information ....................................... 27
4.2 Inspection of Property ........................................................... 30
4.3 Attendance at Board Meetings ..................................................... 30
4.4 Affirmative Covenants ............................................................ 31
4.5 Note Negative Covenants .......................................................... 32
4.6 Equity Negative Covenants ........................................................ 36
4.7 Financial Covenants .............................................................. 38
4.8 Compliance with Agreements ....................................................... 40
4.9 Use of Proceeds .................................................................. 40
4.10 SBIC Regulatory Provisions ....................................................... 40
4.11 Intentionally Omitted ............................................................ 42
4.12 Intentionally Omitted ............................................................ 42
4.13 Intellectual Property Rights ..................................................... 42
4.14 Preemptive Rights ................................................................ 42
4.15 ▇▇▇▇▇ Earnout; Amended Financial Covenants ....................................... 43
4.16 Additional Subsidiaries .......................................................... 43
4.17 Further Assurances ............................................................... 44
5. Transfer of Restricted Securities............................................................. 44
5.1 General Provisions ............................................................... 44
5.2 Opinion Delivery ................................................................. 44
5.3 Information Requests ............................................................. 44
5.4 Legend Removal ................................................................... 45
-ii-
6. Representations and Warranties of the Company................................................. 45
6.1 Organization, Corporate Power and Licenses ....................................... 45
6.2 Capital Stock and Related Matters ................................................ 45
6.3 Subsidiaries; Investments ........................................................ 46
6.4 Authorization; No Breach ......................................................... 46
6.5 Financial Statements ............................................................. 47
6.6 Projections and Pro Forma Financial Statements ................................... 48
6.7 Absence of Undisclosed Liabilities ............................................... 48
6.8 No Material Adverse Change ....................................................... 48
6.9 Absence of Certain Developments .................................................. 49
6.10 Assets ........................................................................... 50
6.11 Tax Matters ...................................................................... 50
6.12 Contracts and Commitments ........................................................ 51
6.13 Intellectual Property Rights ..................................................... 53
6.14 Intentionally Omitted ............................................................ 54
6.15 Litigation, etc .................................................................. 54
6.16 Product Warranty ................................................................. 54
6.17 Brokerage ........................................................................ 55
6.18 Governmental Consent, etc ........................................................ 55
6.19 Insurance ........................................................................ 55
6.20 Employees ........................................................................ 55
6.21 ERISA ............................................................................ 55
6.22 Compliance with Laws ............................................................. 56
6.23 Environmental and Safety Matters ................................................. 57
6.24 Small Business Matters ........................................................... 58
6.25 Affiliated Transactions .......................................................... 58
6.26 Solvency, etc .................................................................... 58
6.27 Investment Company ............................................................... 59
6.28 Margin Regulations ............................................................... 59
6.29 Public Utility Holding Company Act ............................................... 59
6.30 Acquisition Agreement and Senior Loan Agreement Representations .................. 59
6.31 Disclosure ....................................................................... 59
6.32 Closing Date ..................................................................... 60
6.33 Business of the Company .......................................................... 60
7. Events of Default............................................................................. 60
7.1 Definition ....................................................................... 60
7.2 Consequences of Events of Default ................................................ 63
8. Miscellaneous................................................................................. 64
8.1 Expenses ......................................................................... 64
-iii-
8.2 Remedies ......................................................................... 65
8.3 Purchasers' Investment Representations ........................................... 65
8.4 Amendments and Waivers ........................................................... 66
8.5 Survival of Agreement ............................................................ 66
8.6 No Setoffs, etc .................................................................. 66
8.7 Successors and Assigns ........................................................... 67
8.8 Aggregation ...................................................................... 67
8.9 Severability ..................................................................... 67
8.10 Counterparts ..................................................................... 67
8.11 Descriptive Headings; Interpretation ............................................. 67
8.12 Governing Law .................................................................... 67
8.13 Notices .......................................................................... 68
8.14 Consideration for Warrants ....................................................... 69
8.15 Construction ..................................................................... 69
8.16 Complete Agreement ............................................................... 70
8.17 Indemnification .................................................................. 70
8.18 Payment Set Aside ................................................................ 71
8.19 Jurisdiction and Venue ........................................................... 71
8.20 Waiver of Right to Jury Trial .................................................... 71
8.21 Certain Waivers .................................................................. 72
8.22 Joint and Several Liability of the Borrowers ..................................... 72
Schedules and Exhibits
Schedule of Purchasers
List of Exhibits
List of Disclosure Schedules
-iv-
▇▇▇▇▇ HOLDINGS, INC.
▇▇▇▇▇ PRODUCTS, INC.
NOTE AND WARRANT PURCHASE AGREEMENT
THIS AGREEMENT is made as of May 17, 2000, among ▇▇▇▇▇ Holdings, Inc.,
a Delaware corporation (the "Company"), ▇▇▇▇▇ Products, Inc., a New York
corporation ("▇▇▇▇▇," together with any other Persons from time to time joined
as parties hereto as a borrower, are collectively referred to herein as the
"Borrowers" and individually as a "Borrower"), Prairie Capital Mezzanine Fund,
L.P., a Delaware limited partnership ("Prairie"), and each of the other holders
of Notes, Warrants or Underlying Common Stock, if any, who become a party hereto
in accordance with the terms hereof (Prairie and such other holders are
collectively referred to herein as the "Purchasers" and individually as a
"Purchaser").
The parties hereto agree as follows:
Section 1. Definitions and Related Matters.
1.1 Definitions. For the purposes of this Agreement, the following
terms have the meanings set forth below (such meanings to be applicable to both
the singular and plural forms of the terms defined):
"Acquisition Documents" means the Acquisition Agreement and all
documents and instruments executed in connection therewith including, without
limitation, the agreements attached as exhibits thereto.
"Affiliate" of any particular Person means (i) any other Person which,
directly or indirectly, controls or is controlling by or is under common control
with such Person and (ii) any officer or director of such Person. A Person shall
be deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power to vote five percent (5%) or more of the
securities (on a fully diluted basis) having ordinary voting power for the
election of directors or managers or power to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
"Affiliated Group" means any affiliated group as defined in Code ss.
1504 that has filed a consolidated return for federal income tax purposes (or
any similar group under state, local or foreign law) for a period during which
any Security Party or any of its Subsidiaries was a member.
"AHD" means American Home Direct Corp., a New York corporation.
"Asset Sale" means the sale, lease, assignment or other transfer for
value (each a "Disposition") by any Security Party or its Subsidiaries (other
than to any other Security Party or any wholly-owned Subsidiary of any Security
Party) of any asset or right of any Security Party or any of its Subsidiaries,
other than (a) the Disposition of any asset which is to be replaced, and is in
fact replaced, within one hundred eighty (180) days after the consummation of
such Disposition with another asset performing the same or a similar function,
(b) the sale or lease of inventory in the ordinary course of business and (c)
other Dispositions to the extent the Net Proceeds thereof do not exceed $100,000
in the aggregate in any fiscal year.
"Business Day" means any day other than a Saturday, Sunday or public
holiday under the laws of the State of Illinois or other day on which banking
institutions are authorized or obligated to close in Chicago, Illinois.
"Capital Expenditures" means all expenditures which, in accordance with
GAAP, would be required to be capitalized and shown on the consolidated balance
sheet of the Company and its Subsidiaries, but excluding expenditures made in
connection with the replacement, substitution or restoration of assets to the
extent financed (i) from insurance proceeds (or similar recoveries) paid on
account of the loss of or damage to the assets being replaced or restored, (ii)
with awards of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced or (iii) substantially concurrently
with the proceeds from the sale of similar assets.
"Capitalized Lease" means a lease under which the obligations of the
lessee should, in accordance with GAAP consistently applied, be included in
determining total liabilities as shown on the liability side of a balance sheet
of the lessee.
"Capitalized Lease Obligations" means the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in accordance with GAAP consistently applied and
Statement of Financial Accounting Standards No. 13.
"Change in Control" means (A) any sale, transfer or issuance or series
of sales or issuances of the Company's capital stock by the Company or any
holder or holders thereof, or any merger, consolidation or other transaction
involving the Company, immediately after which (x) HIG no longer possesses the
voting power to elect a majority of the Company's board of director or (y) HIG
no longer holds record and beneficial ownership of at least forty-five percent
(45%) of the Common Stock, (B) any sale, transfer or issuance or series of sales
or issuances of any Borrower's
-2-
capital stock by such Borrower or any holder or holders thereof, or any merger,
consolidation or other transaction involving such Borrower, immediately after
which the Company no longer holds record and beneficial ownership of 100% of
such Borrower's outstanding capital stock (except as otherwise expressly
permitted under Section 4.5(v), (C) any sale of all or substantially all of the
Company's and its Subsidiaries' assets on a consolidated basis, (D) after the
Closing, any Person or group of Persons (within the meaning of Section 13 or 14
of the Securities Exchange Act of 1934, but excluding any Specified Person (as
defined below)) shall acquire beneficial ownership (within the meaning of Rule
13d-3 promulgated under such Act) of more than twenty-five percent (25%) of the
outstanding securities (on a fully diluted basis and taking into account any
securities or contract rights exercisable, exchangeable or convertible into
equity securities) of the Company having voting rights in the election of
directors under normal circumstances, (E) any Security Party (other than the
Company) shall cease to be a Wholly-Owned Subsidiary of the Company, (F) a
majority of the members of the Board of Directors of the Company shall cease to
be Continuing Members (as defined below), (G) a period of thirty (30)
consecutive days shall have elapsed during which any two of the individuals
named on the attached Continuing Members Schedule shall have ceased to hold
executive offices with the Company at lease equal in seniority and
responsibility to such individuals' present offices described as set out in such
schedule, excluding any individual who has been replaced by another individual
or individuals reasonably satisfactory to the Purchaser (it being understood
that any such replacement individual shall be deemed added to the Continuing
Members Schedule on the date of approval thereof by the Purchaser); for purposes
of the foregoing, "Continuing Members" means a member of the Board of Directors
of the Company who either (1) was member of the Company's Board of Directors on
the day before the Closing or (2) became a member of such Board of Directors
after the day before the Closing and whose election or nomination for election
was approved by a vote of the majority of the Continuing Members then members of
the Company's Board of Directors; and "Specified Person" means HIG.
"Code" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular Code section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"Co-Invest Put Notes" has the meaning set forth in the Initial Warrant.
"Common Stock" means, collectively, the Company's Common Stock, par
value $.001 per share, and any capital stock of any class of the Company
hereafter authorized that is not limited to a fixed sum or percentage of par or
stated value in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company.
"Common Stock Deemed Outstanding" means, at any given time and from
time to time, the number of shares Common Stock actually outstanding at such
time, plus the maximum number of shares of Common Stock issuable upon exercise,
conversion or exchange or any
-3-
outstanding Options or Convertible Securities in each case regardless of whether
the Options or Convertible Securities are actually exercisable at such time.
"Computation Period" means each period of four consecutive fiscal
quarters ending on the last day of a fiscal quarter commencing with the fiscal
quarter ending September 30, 2000.
"Consolidated Interest Expense" means, for any period, the consolidated
interest expense of the Company and its Subsidiaries for such period (including
all imputed interest on Capitalized Leases) paid in cash net of cash interest
income.
"Consolidated Net Income" means, with respect to the Company and its
Subsidiaries for any period, the net income (or loss) of the Company and its
Subsidiaries for such period, excluding any gains or losses from Asset Sales
(and transactions of a type described in clauses (a) and (c) of the definition
of "Asset Sales"), any extraordinary gains or losses and any gains or losses
from discontinued operations.
"Consolidated Total Assets" means, on any date, the net book value of
all assets of the Company and its Subsidiaries on that date, determined on a
consolidated basis which, in accordance with GAAP consistently applied, should
be classified on the Company's consolidated balance sheet as assets.
"Convertible Securities" means any stock or securities (directly or
indirectly) convertible into or exchangeable for Common Stock.
"Consulting Agreement" means the Consulting Agreement of even date
herewith between HIG Capital and ▇▇▇▇▇, as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms hereof.
"Dividend" means any distribution by a corporation or other entity with
respect to its capital stock or other ownership interests whether in cash,
securities (including common and preferred stock) or other property.
"EBITDA" means, for any period, Consolidated Net Income for such period
plus, or minus, as applicable, to the extent deducted or added in determining
such Consolidated Net Income, Consolidated Interest Expense, non-cash interest
expense, non-cash compensation expense, non-cash purchase accounting
adjustments, income tax expense, depreciation and amortization (including
amortization of capitalized debt issuance costs) for such period; provided,
that, notwithstanding the foregoing, for any calculation of EBITDA that is to
include all or any portion of EBITDA for the fiscal quarters ending December 31,
1999 and March 31, 2000, such portion of EBITDA shall be determined as follows:
(a) with respect to the fiscal quarter ended December 31, 1999 or any portion
thereof, EBITDA shall be deemed to equal $739,000 (or the respective portion of
such amount
-4-
determined by multiplying such amount by a fraction, the numerator of which is
the number of days during such fiscal quarter included in such calculation and
the denominator of which is ninety two (92)) and (b) with respect to the fiscal
quarter ended March 31, 2000 or any portion thereof, EBITDA shall be deemed to
equal $1,252,000 (or the respect portion of such amount determined by
multiplying such amount by a fraction, the numerator of which is the number of
days during such fiscal quarter included in such calculation and the denominator
of which is ninety one (91)).
"Environmental and Safety Requirements" means all federal, state, local
and foreign statutes, regulations, ordinances and similar provisions having the
force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including, without limitation, all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control or cleanup of any hazardous or
otherwise regulated materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or
radiation), each as amended and as now or hereafter in effect.
"Environmental Lien" means any Lien, whether recorded or unrecorded, in
favor of any governmental entity, relating to any liability of any Security
Party or any of its Subsidiaries arising under any Environmental and Safety
Requirements.
"Equity Interests" means all of the equity interests in a Person and
all warrants, options and other rights to acquire any equity interests in such
Person.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time and any
regulations promulgated thereunder.
"ERISA Affiliate" means, with respect to the Company, any trade or
business (whether or not incorporated) under common control with the Company
within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and
(o) of the Code for purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means, as to any Security Party, any Subsidiary or any
ERISA Affiliate (i) a Reportable Event as defined in Section 4043 of ERISA and
the regulations issued thereunder (other than a Reportable Event for which
notice has been waived by regulation), (ii) the withdrawal of any Security
Party, any Subsidiary thereof or any ERISA Affiliate from a Pension Plan in
which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA
or was deemed a "substantial employee" under Section 4062(e) of ERISA, (iii) the
termination of a Pension Plan, the filing of notice of intent to terminate a
Pension Plan or the treatment of a Pension Plan
-5-
amendment as a termination under Section 4041 of ERISA, (iv) the institution of
proceedings to terminate a Pension Plan by the PBGC, (v) the partial or complete
withdrawal of any Security Party, any Subsidiary thereof or any ERISA Affiliate
from a Multiemployer Plan, (vi) the imposition of a lien on any Security Party,
any Subsidiary thereof or any ERISA Affiliate pursuant to Section 412 of the
Code or Section 302 of ERISA, (vi) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan to which any Security
Party, any Subsidiary thereof or any ERISA Affiliate has any liability under
Section 4241 or Section 4245 of ERISA, respectively, and (vii) any event or
condition which results in the termination of a Multiemployer Plan, or the
institution by the PBGC of proceedings to terminate a Multiemployer Plan to
which any Security Party, any Subsidiary thereof or any ERISA Affiliate has any
liability under Section 4041A of ERISA or Section 4042 of ERISA, respectively.
"Federal Bankruptcy Code" means Title 11 of the United States Code.
"Financing" means the purchase of the Securities by the SBIC Holder
hereunder.
"Fixed Charges" means, for any period, Consolidated Interest Expense
for such period, plus required payments of principal of Funded Indebtedness (but
excluding the Revolving Loans (as such term is defined in the Senior Loan
Agreement)), plus, payments of the type described in clauses (ii)(b) and (xxii)
of Section 4.5;
"Funded Indebtedness" means, as to any Person, all Indebtedness of such
Person that matures more than one (1) year from the date of its creation (or is
renewable or extendible, at the option of such Person, to a date more than one
year from such date).
"GAAP" means generally accepted accounting principles as promulgated by
the Financial Accounting Standards Board, as in effect from time to time
(subject to the provisions of Section 1.3 hereof).
"Guarantee" means any guarantee of the payment or performance of any
Indebtedness or other obligation and any other arrangement whereby credit is
extended (or continued) to one obligor on the basis of any promise of another
Person, whether that promise is expressed in terms of an obligation to (i) pay
the Indebtedness or other liabilities of such obligor, (ii) purchase an
obligation owed by such obligor, (iii) purchase goods and services from such
obligor pursuant to a take-or-pay contract, (iv) maintain the capital, working
capital, solvency or general financial condition of such obligor, or (v)
otherwise assure any creditor of such obligor against loss (including by way of
an agreement to repurchase or reimburse), whether or not any such arrangement is
listed on the balance sheet of such other Person or referred to in a footnote
thereto, but shall not include endorsements of items for collection in the
ordinary course of business. The amount of any Guarantee shall be equal to the
amount of the obligation so guaranteed or otherwise supported or, if not a fixed
or determined amount, the maximum amount guaranteed or supported.
-6-
"Hedging Agreement" means any interest rate, currency or commodity swap
agreement, cap agreement or collar agreement, and any other agreement or
arrangement designed to protect a Person against fluctuations in interest rates,
currency exchange rates or commodity prices.
"Hedging Obligations" means, with respect to any Person, any liability
of such Person under any Hedging Agreement.
"HIG" means HIG KPI, Inc., a Cayman Island corporation.
"HIG Capital" means H.I.G. Capital, LLC, a Delaware limited liability
company.
"Indebtedness" means at a particular time, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt instrument, (iii) any indebtedness for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business which are not more than 90 days past due unless the same are being
contested in good faith by appropriate proceedings and with respect to which the
Company or one of its Subsidiaries has set aside adequate reserves therefor in
accordance with GAAP consistently applied), (iv) any commitment by which a
Person assures a creditor against loss (including, without limitation,
contingent reimbursement obligations with respect to letters of credit), (v) any
obligations for which a Person is obligated pursuant to a Guarantee, (vi) any
obligations under Capitalized Leases with respect to which a Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or with respect
to which obligations a Person assures a creditor against loss, (vii) any
indebtedness secured by a Lien on a Person's assets, (viii) any unsatisfied
obligation for Withdrawal Liability to a Multiemployer Plan, (ix) any Hedging
Obligation of a Person and (x) all indebtedness of any partnership of which such
Person is a general partner.
"Indebtedness to Be Repaid" means the Indebtedness listed on the
attached Indebtedness to Be Repaid Schedule.
"Initial Warrant Put Notes" means "Warrant Put Notes" as such term is
defined in the Initial Warrant.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, internet domain names, logos and corporate names and
registrations and applications for registration thereof, together with all of
the goodwill associated therewith, (iii) copyrights (registered or unregistered)
and copyrightable works and
-7-
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer software,
data, data bases and documentation thereof, (vi) trade secrets and other
confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information), (vii) other
intellectual property rights and (viii) copies and tangible embodiments thereof
(in whatever form or medium).
"Interest Coverage Ratio" means, for any Computation Period, the ratio
of (i) EBITDA for such Computation Period, to (ii) Consolidated Interest Expense
for such Computation Period; provided, that with respect to covenant testing
periods ending September 30 and December 31, 2000, Consolidated Interest Expense
for the purpose of the calculation of the Interest Coverage Ratio shall equal
the product obtained by multiplying, as applicable, (x) the amount of
Consolidated Interest Expense for the period commencing on the Closing Date and
ending on the last day of the respective covenant testing periods, times two and
four-thirds, respectively.
"Investment" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests, membership interests and joint venture interests) of any other Person
and (ii) any capital contribution by such Person to any other Person.
"Investment Documents" means this Agreement, the Notes, the Warrants,
the Security Party Guaranty, the Intercreditor Agreement, the Investor
Subscription Agreement, the Equityholders Agreement, the Side Letter, the
Stockholder Agreement and each of the other agreements, documents and
instruments expressly contemplated hereby and thereby (excluding the Senior Loan
Agreement).
"Investor Common Stock" means (i) the Common Stock issued pursuant to
the Investor Subscription Agreement, (ii) the Co-Invest Warrant, (iii)the Common
Stock issued or issuable upon exercise of the Co-Invest Warrant and (iv) any
Common Stock issued or issuable with respect to the securities referred to in
clauses (i) through (iii) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. For purposes of this Agreement and the Co-Invest
Warrant, any Person who holds the Co-Invest Warrant shall be deemed to be the
holder of the Investor Common Stock obtainable upon exercise of the Co-Invest
Warrant in connection with the transfer thereof or otherwise regardless of any
restriction or limitation on the exercise of the Co-Invest Warrant, such
Investor Common Stock shall be deemed to be in existence, and such Person shall
be entitled to exercise the rights of a holder of Investor Common Stock
hereunder.
"IRS" means the United States Internal Revenue Service.
-8-
"knowledge" or "aware" means and includes (i) the actual knowledge or
awareness of each Security Party and its Subsidiaries (which shall include the
actual knowledge and awareness of the officers, directors and key employees of
such Security Party and its Subsidiaries and the general managers of each
facility of such Security Party and its Subsidiaries) and (ii) the knowledge or
awareness which a prudent business person would have obtained in the conduct of
his business after making reasonable inquiry and reasonable diligence with
respect to the particular matter in question. In particular, and not in
limitation of the foregoing, the knowledge or awareness of the Sellers shall be
imputed to each Security Party and its Subsidiaries.
"▇▇▇▇▇ Earnout" means "▇▇▇▇▇ Earnout" as such term is defined in the
Acquisition Agreement.
"Liens" means any mortgage, pledge, security interest, encumbrance,
lien, charge or other restriction of any kind whatsoever (including any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against any Security Party or
Subsidiary or Affiliate of such Security Party, any filing or agreement to file
a financing statement as debtor under the Uniform Commercial Code or any similar
statute other than to reflect ownership by a third party of property leased to
any Security Party or any of its Subsidiaries under a lease which is not in the
nature of a conditional sale or title retention agreement.
"material" means any matter that, in the aggregate with all other
matters, has resulted or might result in costs, liabilities, expenses, damages
or prospects of or to, or claims by or against any Security Party or one of its
Subsidiaries involving $100,000 or more.
"Material Adverse Effect" means any matter or matters which would,
alone or in the aggregate, have a materially adverse effect on (i) the operating
results, assets, liabilities, operations, condition (financial or otherwise) or
business of the Security Parties and their Subsidiaries taken as a whole, (ii)
the ability of each of the Borrowers to repay the Notes or (c) the ability of
each Security Party to perform any of its obligations under the Securities or
any of the Investment Documents (each, a "Material Adverse Effect").
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which the Company of any ERISA Affiliate
makes, is making, or is obligated to make contributions on behalf of
participants who are or were employed by any of them or to which such person has
any current or potential liability.
"Officer's Certificate" means a certificate signed by the Company's
president or its chief financial officer on behalf of the Company, stating that
(i) the officer signing such certificate has made or has caused to be made such
investigations as are necessary in order to permit him to verify the accuracy of
the information set forth in such certificate and (ii) such certificate does not
-9-
misstate any material fact and does not omit to state any fact necessary to make
the certificate not misleading.
"Operating Cash Flow" means, for any Computation Period, EBITDA for
such period less the sum of (i) all Capital Expenditures for such period and
(ii) all income taxes paid by the Security Parties.
"Operating Lease" means for any Person any lease of property which
would not be classified as a Capitalized Lease under GAAP consistently applied,
other than a lease under which such Person is the lessor.
"Options" means any rights or options to subscribe for the purchase of
Common Stock or Convertible Securities.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the
Company or any ERISA Affiliate may have liability, including any liability by
reason of having been a substantial employer within the meaning of Section 4063
of ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under Section 4069 of ERISA.
"Permitted Indebtedness" means:
(i) the Senior Debt;
(ii) any Indebtedness incurred pursuant to the terms of
this Agreement and the Investment Documents;
(iii) Indebtedness secured by Liens permitted by clause
(iii) of the definition of Permitted Liens, and extensions, renewals
and refinancings thereof; provided, that the aggregate amount of all
such Indebtedness at any time outstanding shall not exceed $300,000 in
the aggregate for all Security Parties;
(iv) intercompany Indebtedness among the Borrowers;
(v) Hedging Obligations incurred for bona fide hedging
purposes and for speculation;
-10-
(vi) Indebtedness described on the attached Indebtedness
Schedule and any extension, renewal or refinancing thereof so long as
the principal amount thereof is not increased;
(vii) the Indebtedness to Be Repaid (so long as such
Indebtedness is repaid on the Closing Date with the proceeds of the
initial Loans hereunder);
(viii) until the earlier of (y) the making or disbursement
of the Supplemental Note in accordance with the terms hereof and (z)
May, 31, 2001, Indebtedness constituting the ▇▇▇▇▇ Earnout and
(ix) other unsecured Indebtedness, in addition to the
Indebtedness listed above, in an aggregate amount not at any time
exceeding $125,000 in the aggregate for all Security Parties and their
Subsidiaries.
"Permitted Liens" means:
(i) Liens for taxes or other governmental charges not yet
due and payable or which are being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP consistently applied;
(ii) Liens arising in the ordinary course of business
(such as (a) Liens of carriers, warehousemen, mechanics and materialmen
and other similar Liens imposed by law and (b) Liens incurred in
connection with worker's compensation, unemployment compensation and
other types of social security (excluding Liens arising under ERISA) or
in connection with surety bonds, bids, performance bonds and similar
obligations) for sums not overdue or being contested in good faith by
appropriate proceedings and not involving any deposits or advances or
borrowed money or the deferred purchase price of property or services
and, in each case, for which it maintains adequate reserves;
(iii) subject to the limitations set forth in clause (iii)
of the definition of Permitted Indebtedness, (a) Liens arising in
connection with Capitalized Lease Obligations (and attaching only to
the property being leased), (b) Liens existing on property at the tine
of the acquisition thereof by any Security Party (and not created in
contemplation of such acquisition) and (c) Liens that constitute
purchase money security interests on any property securing indebtedness
incurred for the purpose of financing all or any part of the cost of
acquiring such property, provided that any such Lien attaches to such
property within sixty (60) days of the acquisition thereof and attaches
solely to the property so acquired;
(iv) attachments, appeal bonds, judgments and other
similar Liens, for sums not exceeding $300,000 in the aggregate for all
Security Parties, arising in connection
-11-
with court proceedings, provided the execution or other enforcement of
such Liens is effectively stayed and the claims secured thereby are
being actively contested in good faith and by appropriate proceedings;
(v) easements, rights-of-way, restrictions minor defects
or irregularities in title and other similar Liens not interfering in
any material respect with the ordinary conduct of the business of each
Borrower and its Subsidiaries;
(vi) Liens securing the Senior Debt pursuant to and/or
under the Senior Loan Agreement;
(vii) Liens which are described on the Liens Schedule; and
(viii) Liens not to exceed in the aggregate at any one time
outstanding of $50,000.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof and any other entity.
"Plan" shall mean as required by the context at any time, an employee
benefit plan, as defined in Section 3(3) of ERISA, which the Company or any
ERISA Affiliate maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of them.
"Potential Event of Default" means any event or occurrence which with
the passage of time or the giving of notice or both would constitute an Event of
Default.
"Put Notes" means, collectively, the Co-Invest Put Notes, the Initial
Warrant Put Notes and the Supplemental Warrant Put Notes.
"Qualified Plan" means an employee pension benefit plan, as defined in
Section 3(2) of ERISA, which is intended to be tax-qualified under Section
401(a) of the Code, and which the Company or any ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any of them.
"Regulatory Problem" means any transaction, circumstance or situation
whereby (i) a Person and such Person's Affiliates would own, control or have
power over a quantity of securities of any kind issued by the Company or any
other entity greater than is permitted under any requirement of any governmental
authority, or (ii) it has been asserted by any governmental
-12-
regulatory agency, or such Person believes, that such Person and its Affiliates
are not entitled to hold, or exercise any significant right under or with
respect to, the Notes, the Warrants, the Investor Common Stock or the Underlying
Common Stock held by such Person.
"Regulatory Violation" means, with respect to any SBIC Holder providing
Financing under this Agreement, (i) a diversion of the proceeds of such
Financing from the use reported thereof on the SBA Form 1031 delivered at the
Closing, if such diversion was effected without obtaining the prior written
consent of the SBIC Holders (which may be withheld in their sole discretion) or
(ii) a change in the principal business activity of any Security Party and its
Subsidiaries to an ineligible business activity (within the meaning of the SBIC
Regulations) if such change occurs within one year after the date of the initial
Financing hereunder.
"Release" has the meaning set forth in CERCLA.
"Reportable Event" means any of the events listed in Section
4043(c)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Responsible Officer" means the chief executive officer, the president,
the chief financial officer, the treasurer or the corporate controller of a
Person, or any other officer having substantially the same authority and
responsibility.
"Restricted Securities" means (i) the Securities issued hereunder, (ii)
the Underlying Common Stock and (iii) any securities issued with respect to the
securities referred to in clauses (i) or (ii) above by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) become eligible
for sale pursuant to Rule 144(k) (or any similar provision then in force) under
the Securities Act or (c) been otherwise transferred and new certificates for
them not bearing the Securities Act legend set forth in Section 8.3 have been
delivered by the Company in accordance with Section 5. Whenever any particular
securities cease to be Restricted Securities, the holder thereof shall be
entitled to receive from the Company, without expense, new securities of like
tenor not bearing a Securities Act legend of the character set forth in Section
8.3.
"SBIC" means a small business investment company licensed under the
SBIC Act.
"SBIC Act" means the Small Business Investment Act of 1958, as amended.
"SBIC Holder" means Prairie and any other holder of Notes or Underlying
Common Stock which is an SBIC.
-13-
"SBIC Regulations" means the Small Business Investment Company Act of
1958, as amended, and the regulations issued by the Small Business
Administration thereunder, codified at Title 13 of the Code of Federal
Regulations ("13 CFR"), 107 and 121, as amended.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"Security Party" means collectively, the Company, each Borrower, and
any Subsidiary of any such Person which becomes a party to the Investment
Documents.
"Sellers" means, collectively, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇.
"Senior Debt" means "Senior Indebtedness" as such term is set forth in
the Intercreditor Agreement.
"Side Letter" means that certain Side Letter among the Purchaser, HIG
and HIG Capital.
"Stock Purchase" means any redemption, acquisition, purchase or other
retirement of any capital stock or ownership interest of any Security Party or
any of its Subsidiaries (including preferred stock) or of any warrants, rights
or other options to purchase such capital stock or ownership interest, other
than upon any conversion thereof into or exchange thereof for other shares of
such Security Party's or any of its Subsidiaries' capital stock.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company,
-14-
partnership, association or other business entity, a majority of the partnership
or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries of that Person
or a combination thereof. For purposes hereof, a Person or Persons shall be
deemed to have a majority ownership interest in a limited liability company,
partnership, association or other business entity if such Person or Persons
shall be allocated a majority of limited liability company, partnership,
association or other business entity gains or losses or shall be or control (or
have the power to be or control) a managing director, manager or general partner
of such limited liability company, partnership, association or other business
entity.
"Supplemental Warrant Put Notes" means "Put Notes" as such term is
defined in the Supplemental Warrant.
"Tax" or "Taxes" means any federal, state, county, local, foreign or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including
deficiencies, penalties, additions to tax, and interest attributable thereto)
whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
"Title IV Plan" means a Pension Plan which is covered by Title IV of
ERISA.
"Total Coverage Ratio" means, for any Computation Period, the ratio of
Operating Cash Flow for such Computation Period to Fixed Charges for such
Computation Period; provided, that, with respect to each of the Computation
Periods ending September 30 and December 31, 2000, Consolidated Interest Expense
and required payments of principal of Funded Indebtedness for the purpose of the
calculation of Total Coverage Ratio shall equal the product obtained by
multiplying, as applicable, (x) the amount of such items for the period
commencing on the Closing Date and ending on the last day of the respective
Computation Period, times (y) two or four-thirds, respectively.
"Total Indebtedness" means all Indebtedness of the Company and its
Subsidiaries determined on a consolidated basis.
"Total Indebtedness to EBITDA Ratio" means, as of the last day of any
fiscal quarter, the ratio of (i) Total Indebtedness as of such day, to (ii)
EBITDA for the Computation Period ending on such day.
"Transaction Documents" means, collectively, the Acquisition Documents,
the Investment Documents and the Senior Loan Agreement.
"Underlying Common Stock" means (i) the Common Stock issued or issuable
upon exercise of the Warrants and (ii) any Common Stock issued or issuable with
respect to the securities referred to in clause (i) above by way of stock
dividend or stock split or in connection with a
-15-
combination of shares, recapitalization, merger, consolidation or other
reorganization. For purposes of this Agreement and the Warrants, any Person who
holds Warrants shall be deemed to be the holder of the Underlying Common Stock
obtainable upon exercise of the Warrants in connection with the transfer thereof
or otherwise regardless of any restriction or limitation on the exercise of the
Warrants, such Underlying Common Stock shall be deemed to be in existence, and
such Person shall be entitled to exercise the rights of a holder of Underlying
Common Stock hereunder. As to any particular shares of Underlying Common Stock,
such shares shall cease to be Underlying Common Stock when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) or (c) repurchased by
the Company or any of its Subsidiaries.
"Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly-Owned Subsidiary of such
Person.
"Withdrawal Liability" means, at any time, the aggregate amount of the
liabilities, if any, pursuant to Section 4201 of ERISA, and any increase in
contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
1.2 Other Defined Terms. The following terms are defined in this
Agreement in the Section set forth below:
Term Section
---- -------
Acquisition 3.12
Acquisition Agreement 3.12
Acquisition Sub 3.12
Borrower Preamble
Borrower Obligations 8.22
CERCLA 6.23
Certificate of Incorporation 3.2
Closing 2.3
Company Preamble
Equityholders Agreement 3.6
Event of Default 7.1
Guaranty 3.8
Indemnitees 8.17
Initial Note 2.1
Initial Warrant 2.1
Intercreditor Agreement 3.17
-16-
Investor Subscription Agreement 3.5
Latest Balance Sheet 6.5
Liabilities 8.17
Material Indebtedness 7.1
Notice of Supplemental Closing 3A.1
Notes 2.1
Prairie Preamble
Purchaser Preamble
Securities 2.1
Senior Lenders 3.13
Senior Lenders' Agent 3.13
Senior Loan Agreement 3.13
Stockholders Agreement 3.7
Supplemental Closing 2.4
Supplemental Note 2.1
Supplemental Warrant 2.1
Warrants 2.1
1.3 Accounting Principles. The classification, character and
amount of all assets, liabilities, capital accounts and reserves and of all
items of income and expense to be determined, and any consolidation or other
accounting computation to be made, and the interpretation of any definition
containing any financial term, pursuant to this Agreement shall be determined
and made in accordance with GAAP consistently applied; provided, however, that
if any changes in GAAP are hereafter required or permitted and are adopted by
the Company with the agreement of its independent certified public accountants
and such changes result in a material change in the method of calculation of any
of the financial covenants, restrictions or standards herein or in the related
definitions or terms used therein ("Material Accounting Changes"), the parties
hereto agree to enter into negotiations, in good faith, in order to amend such
provisions in a credit neutral manner so as to reflect equitably such changes
with the desired result that the criteria for evaluating the Company's financial
condition shall be the same after such changes as if such changes had not been
made; provided, however, that no Material Accounting Change shall be given
effect in such calculations until such provisions are amended in a manner
reasonably satisfactory to the Purchaser. If such amendment is entered into, all
references in this Agreement to GAAP shall mean GAAP as of the date of such
amendment together with any changes in GAAP after the date hereof which are not
Material Accounting Changes.
1.4 Other Interpretive Matters. In this Agreement, the Notes, the
Warrants and each other Investment Document to which the Purchaser and each
Security Party, as applicable are the sole parties thereto, unless a clear
contrary intention appears: (i) the singular number includes the plural number
and vice versa; (ii) reference to any Person includes such Person's
-17-
successors and assigns but, if applicable, only if such successors and assigns
are permitted by this Agreement or such other Investment Document, and reference
to a Person in a particular capacity excludes such Person in any other capacity
or individually; (iii) reference to any gender includes each other gender; (iv)
reference to any agreement (including this Agreement and the Schedules hereto),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof (and without giving effect to any amendment
or modification that would not be permitted in accordance with the terms
hereof); (v) reference to any applicable law means such applicable law as
amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, including rules and regulations promulgated thereunder and
reference to any particular provision of any applicable law shall be interpreted
to include any revision of or successor to that provision regardless of how
numbered or classified; (vi) reference to any Article, Section or Exhibit means
such Article or Section hereof or such Exhibit hereto; (vii) "hereunder,"
"hereof," "hereto" and words of similar import shall be deemed references to
this Agreement as a whole and not to any particular Section or other provision
hereof; (viii) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term; (ix) relative to the determining of any period of time, "from" means "from
and including" and "to" and "through" mean "to and including"; (x) "or",
"either" and "any" are not exclusive; and (xi) references to any Subsidiary of a
Person shall be given effect only at such times as such Person has one or more
Subsidiaries.
Section 2. Authorization and Closing.
2.1 Authorization of the Securities. (i) Each Borrower
has authorized the issuance and sale to the Purchaser of its (A) 12.0% Initial
Senior Subordinated Promissory Note in an aggregate principal amount of
$2,500,000, in form and substance as set forth in Exhibit A attached hereto (the
"Initial Note") and (B) 12% Supplemental Senior Subordinated Promissory Note in
an aggregate amount of $1,000,000, in form and substance as set forth in Exhibit
A-1 attached hereto (the "Supplemental Note," together with the Initial Note,
the "Notes"), and (ii) the Company has authorized the issuance and sale to the
Purchaser of its (Y) Initial Stock Purchase Warrant and Repurchase Agreement
representing the right to acquire 41,667 shares of the Company's Common Stock,
subject to adjustment, in form and substance as set forth in Exhibit B attached
hereto (the "Initial Warrant") and (Z) Subsequent Stock Purchase Warrant and
Repurchase Agreement representing the right to acquire the greater of (1) 15,863
shares of the Company's Common Stock and (2) the number of shares of the
Company's Common Stock reflecting 1.5% of the equity of the Company on a
fully-diluted basis as of the date of the Supplemental Closing, subject to
adjustment, in form and substance as set forth in Exhibit B-1 attached hereto
(the "Supplemental Warrant," and together with the Initial Warrant and the
Co-Invest Warrant (as such term is defined herein), the "Warrants"). The Notes
and the Warrants are sometimes collectively referred to herein as the
"Securities."
-18-
2.2 Purchase and Sale of the Securities. (i) At the Closing, the
Borrowers shall sell to the Purchaser and, subject to the terms and conditions
set forth herein, the Purchaser shall purchase from the Borrowers the Initial
Note in the aggregate principal amount of $2,500,000 for a purchase price equal
to $2,450,000. At the Closing, the Company shall sell to the Purchaser and,
subject to the terms and conditions set forth herein, the Purchaser shall
purchase from the Company the Initial Warrant to purchase 41,667 shares of
Common Stock, subject to adjustment, for a purchase price equal to $50,000.
(ii) Subsequent to the Closing, the Borrowers shall sell to the
Purchaser and, subject to the terms and conditions set forth herein, the
Purchaser shall purchase from the Borrowers the Supplemental Note in the
aggregate principal amount of $1,000,000 for a purchase price equal to $985,000.
Subsequent to the Closing, the Company shall sell to the Purchaser and, subject
to the terms and conditions set forth herein, the Purchaser shall purchase from
the Company the Supplemental Warrant to purchase shares of Common Stock, subject
to adjustment, for a purchase price equal to $15,000.
2.3 The Closing. The closing of the purchase and sale of the
Initial Note and the Initial Warrant (the "Closing") shall take place at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
at 10:00 a.m. on May 17, 2000, or at such other place or on such other date as
may be mutually agreeable to the Company and the Purchaser. At the Closing, each
Security Party shall deliver to the Purchaser instruments evidencing the
Securities to be purchased by the Purchaser at the Closing, issued in the name
of the Purchaser or its nominee, upon payment of the purchase price thereof by
wire transfer of immediately available funds, to the Senior Lenders' Agent, for
further disbursement to accounts designated by the Company in writing prior to
or simultaneous with the Closing, in the aggregate amount of $2,450,000 (which
amount is net of fees payable pursuant to Section 3.14(i)).
2.4 The Supplemental Closing. The closing of the purchase and sale
of the Supplemental Note and the Supplemental Warrant (the "Supplemental
Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on the date of the Supplemental Closing, or at
such other place or on such other date as may be mutually agreeable to the
Borrowers and the Purchaser. At the Supplemental Closing, the Borrowers shall
deliver to the Purchaser the instruments evidencing the Securities to be
purchased by the Purchaser at the Supplemental Closing, issued in the name of
the Purchaser or its nominee, upon payment of the purchase price thereof by wire
transfer of immediately available funds, to an account designated by the Company
within five Business Days prior to the Supplemental Closing, in the aggregate
amount of $990,000 (which amount is net of fees payable pursuant to Section
3A.7).
Section 3. Conditions of the Purchaser's Obligation at the Closing. The
obligation of the Purchaser to purchase and pay for the Initial Note and the
Initial Warrant at the Closing is subject
-19-
to the fulfillment as of the Closing of the following conditions to the
Purchaser's satisfaction in its sole discretion:
3.1 Representations, Warranties and Covenants; No Event of
Default. The representations and warranties contained in Section 6 hereof shall
be true and correct at and as of the Closing (both immediately prior to and
immediately after giving effect to the transactions contemplated by the
Transaction Documents) as though then made, each Security Party shall have
performed all of the covenants required to be performed by it hereunder and
under the other documents, agreements and instruments executed in connection
herewith that are to be complied with or performed by such Security Party on or
prior to the Closing, and there shall not exist any Event of Default or
Potential Event of Default.
3.2 Certificate of Incorporation. (i) The Certificate of
Incorporation (the "Certificate of Incorporation") of the Company shall be in
form and substance satisfactory to the Purchaser, shall be in full force and
effect under the laws of the State of Delaware as of the Closing and shall not
have been amended or modified.
(ii) ▇▇▇▇▇'▇ Certificate of Incorporation shall be in form and
substance satisfactory to the Purchaser, shall be in full force and effect under
the laws of the State of New York as of the Closing and shall not have been
amended or modified.
3.3 Bylaws. Each Security Party's bylaws shall each be in form and
substance satisfactory to the Purchaser, shall each be in full force and effect
as of the Closing and shall not have been amended or modified.
3.4 Intentionally Omitted.
3.5 Investor Subscription Agreement. The Company and the Purchaser
shall have entered into an Investor Subscription Agreement in form and substance
satisfactory to the Purchaser (the "Investor Subscription Agreement"), pursuant
to which the Purchaser shall purchase 40,667 shares of Common Stock for the
purchase price of $4.918 per share. The Investor Subscription Agreement shall be
in full force and effect as of the Closing.
3.6 Equityholders Agreement. The Company and Purchaser shall have
entered into an Equityholders Agreement in form and substance as set forth in
Exhibit C attached hereto (the "Equityholders Agreement"), and the Equityholders
Agreement shall be in full force and effect as of the Closing.
3.7 Stockholders Agreement. The Company and each holder of Common
Stock shall have entered into a Stockholders Agreement in form and substance
satisfactory to the
-20-
Purchaser ("Stockholders Agreement"), and the Stockholders Agreement shall be in
full force and effect as of the Closing.
3.8 Guaranty. The Company shall have duly authorized, executed and
delivered a Guaranty in the form of Exhibit D attached hereto (the "Guaranty"),
and the Guaranty shall be in full force and effect as of the Closing.
3.9 Sale of Securities to the Purchaser. Each Security Party shall
have sold to the Purchaser all of the Securities to be purchased hereunder at
the Closing.
3.10 Intentionally Omitted.
3.11 Securities Law Compliance. Each Security Party shall have made
all filings under all applicable federal and state securities laws necessary to
consummate the issuance of the Securities pursuant to this Agreement and the
issuance of the Underlying Common Stock upon exercise of the Warrants in
compliance with such laws.
3.12 Acquisition Agreement. The Agreement and Plan of Merger, dated
as of May 10, 2000, among the Company, ▇▇▇▇▇ Acquisition Corporation, a New York
corporation (the "Acquisition Sub"), ▇▇▇▇▇, AHD, ▇▇▇▇ ▇▇▇▇▇▇▇▇, and the Sellers
(the "Acquisition Agreement") shall be in form and substance satisfactory to the
Purchaser, shall be in full force and effect as of the Closing and shall not
have been amended or modified. The conditions in Articles VIII and IX of the
Acquisition Agreement shall have been satisfied in full (without reliance on any
waiver by the Company or the Borrowers). The acquisition contemplated by the
Acquisition Agreement (the "Acquisition") shall have been consummated
simultaneously with the Closing hereunder in accordance with the terms of the
Acquisition Agreement and the Acquisition Sub shall have merged with and into
▇▇▇▇▇ with ▇▇▇▇▇ as the surviving entity.
3.13 Senior Loan Agreement. The Company, Acquisition Sub, the
financial institutions parties thereto from time to time (together with their
permitted successors and assigns, the "Senior Lenders") and LaSalle Bank
National Association, as agent for the Senior Lenders (together with its
successors, the "Senior Lenders' Agent") shall have entered into a credit
agreement and related documents (collectively, as amended, modified, waived,
replaced or refinanced from time to time in accordance with the provisions of
the Intercreditor Agreement, the "Senior Loan Agreement") providing for loans to
the Company and the Acquisition Sub of up to $15,650,000 (as of the Closing
Date) in form and substance satisfactory to the Purchaser, and the Senior Loan
Agreement shall be in full force and effect as of the Closing and shall not have
been amended or modified.
-21-
3.14 Closing Fees and Expenses. The Security Parties shall have (i)
paid to the Purchaser a closing fee in the aggregate amount of $50,000 and (ii)
reimbursed the Purchaser for the fees and expenses as provided in Section 8.1
hereof.
3.15 Employment Agreements. The Borrowers shall have entered into
employment, confidentiality and noncompetition agreements with each of ▇▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, (the "Employment Agreements") which Employment Agreements
shall be in form and substance satisfactory to the Purchaser and which
employment agreements shall be in full force and effect as of the Closing.
3.16 Payment of Existing Indebtedness. The outstanding amount of
the Indebtedness of each Borrower described on the attached "Use of Proceeds
Schedule" shall have been paid in full as of the Closing, and such Borrower
shall have received appropriate payoff letters, lien releases and other
documents in form and substance satisfactory to the Purchaser.
3.17 Intercreditor Agreement. The Company, each Borrower, the
Senior Lenders' Agent, and the Purchaser shall have entered into a Subordination
Agreement in form and substance satisfactory to the Purchaser (as amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof, the "Intercreditor Agreement"), and the Intercreditor
Agreement shall be in full force and effect as of the Closing.
3.18 Senior Lender Investment. Lease Plan - ▇▇▇▇▇ Products
Investors, L.P. shall have entered into an investor subscription agreement
substantially identical to the Investor Subscription Agreement.
3.19 Seller Investment. ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ jointly own
39.0% of the Common Stock (prior to dilution from the issuance of the Warrants).
3.20 Opinion of the Company's Counsel. The Purchaser shall have
received from White & Case LLP, counsel for the Security Parties, an opinion
with respect to the matters set forth in Exhibit E attached hereto, which shall
be addressed to the Purchaser, dated the date of the Closing and in form and
substance satisfactory to the Purchaser.
3.21 Opinion of Seller's Counsel. The Purchaser shall have received
from ▇▇▇▇▇ & Reade, LLP, counsel for the Seller, an opinion in form and
substance identical to the opinion delivered by ▇▇▇▇▇ & ▇▇▇▇▇, LLP pursuant to
the Acquisition Agreement, which shall be addressed to the Purchaser, dated the
date of the Closing and in form and substance satisfactory to the Purchaser.
3.22 Closing Documents. Each Security Party, as applicable, shall
have delivered to the Purchaser all of the following documents:
-22-
(i) the Initial Note in the principal amount of
$2,500,000, duly completed and executed by each Borrower;
(ii) the Initial Warrant, duly completed and executed by
the Company;
(iii) certificates evidencing issuance of 40,667 shares of
Investor Common Stock, duly and validly issued, fully paid and
nonassessable;
(iv) the warrant to purchase 1,218 shares of Common Stock
("Co-Invest Warrant"), duly completed and executed by the Company;
(v) a joint Officer's Certificate of the Security
Parties, dated the date of the Closing, stating that the conditions
specified in Sections 2.1(i)(A) and 2.1(ii), Section 2.2(i), Section
2.3, Sections 3.1 through 3.19, inclusive, and Section 3.25 have been
fully satisfied;
(vi) certified copies of the resolutions duly adopted by
the board of directors of each Security Party authorizing the
execution, delivery and performance of each of the Transaction
Documents to which it is a party, the issuance and sale of the Initial
Note, the Initial Warrant, the Co-Invest Warrant and the Investor
Common Stock, the reservation for issuance upon exercise of the Initial
Warrant of an aggregate of 41,667 shares of Common Stock, the
reservation for issuance upon exercise of the Co-Invest Warrant of
1,218 shares of Common Stock and the consummation of all other
transactions contemplated by this Agreement;
(vii) certificates of the secretaries of each Security
Party certifying the names and the signatures of the officers of such
Security Party authorized to sign this Agreement, the Securities and
each of the other agreements, documents and instruments contemplated
hereby;
(viii) certified copies of each Security Party's Certificate
of Incorporation and bylaws, each as in effect at the Closing;
(ix) certificates of good standing, dated not more than
five days prior to the date of the Closing, of (A) the Company issued
by the State of Delaware and (B) ▇▇▇▇▇ issued by the States of Florida
and New York;
(x) certified copies of the Acquisition Documents,
Employment Agreements, Consulting Agreement and the Senior Loan
Agreement, each as in effect at the Closing;
-23-
(xi) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of
the transactions hereunder (including all blue sky law filings and
waivers of all preemptive rights and rights of first refusal);
(xii) (a) duly completed and executed SBA Forms 480, 652
and 1031 from the Company and each Borrower;
(b) a five-year business plan showing the
Company's financial projections (including balance sheets and income
and cash flow statements) for such five-year period.
(c) a written certification from the Security
Parties regarding their intended use of proceeds from the Financing;
and
(d) a list after giving effect to the
transactions contemplated by this Agreement of (x) the name of each of
the directors of each Security Party, (y) the name and title of each of
the officers of each Security Party and (z) the name of each of the
stockholders setting forth the number and class of shares held of each
Security Party;
(xiii) a solvency certificate executed by the Company's
chief financial officer on behalf of the Security Parties;
(xiv) a file-stamped copy of the Articles of Merger filed
with the New York Secretary of State; and
(xv) such other documents relating to the transactions
contemplated by this Agreement as the Purchaser or its special counsel
may reasonably request.
3.23 Proceedings. All corporate and other proceedings taken or
required to be taken by each Security Party in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser and its special counsel.
3.24 Intentionally Omitted.
3.25 No Material Adverse Change. Since December 31, 1999, there
shall have been no material adverse change in the financial condition, operating
results, assets, liabilities, operations or supplier relations of each Borrower
and its Subsidiaries taken as a whole.
-24-
3.26 Compliance with Applicable Laws. The purchase of the
Securities by the Purchaser hereunder shall not be prohibited by any applicable
law or governmental rule or regulation and shall not subject the Purchaser to
any penalty, liability or, in the Purchaser's sole judgment, other onerous
condition under or pursuant to any applicable law or governmental rule or
regulation, and the purchase of the Securities by the Purchaser hereunder shall
be permitted by laws, rules and regulations of the jurisdictions and
governmental authorities and agencies to which the Purchaser is subject.
3.27 Waiver. Any condition specified in this Section 3 may be
waived if consented to by the Purchaser; provided that no such waiver shall be
effective against the Purchaser unless it is set forth in a writing executed by
the Purchaser.
Section 3A. Conditions of the Purchaser's Obligations Subsequent to
Closing. The obligation of the Purchaser to purchase and pay for the
Supplemental Note is subject to the fulfillment as of the Supplemental Closing
of the following conditions to the Purchaser's satisfaction in its sole
discretion:
3A.1 Delivery of Financial Information. The Borrowers shall deliver
to the Purchaser the audited financial statements of ▇▇▇▇▇ (or the Company and
its Subsidiaries, as the case may be) for the fiscal year ending December 31,
2000, the calculation of ▇▇▇▇▇'▇ "EBITDA" (as such term is defined in the
Acquisition Agreement) as required by Section 1.8(d) of the Acquisition
Agreement and any other information, statements, certificates and other
materials upon which the calculation of the ▇▇▇▇▇ Earnout and the determination
of whether or not the ▇▇▇▇▇ Earnout is due shall have been based.
3A.2 Notice. The Borrowers shall deliver to the Purchaser an
originally executed Notice of Supplemental Closing in form and substance
acceptable to the Purchaser (the "Notice of Supplemental Closing") at least five
(5) days prior to the date of the Supplemental Closing as provided in such
notice containing the following representations and warranties: (i) the ▇▇▇▇▇
Earnout has been earned or realized and is due and payable in accordance with
the terms of the Acquisition Agreement and (ii) the aggregate amount thereof is
$3,000,000.
3A.3 Representations and Warranties; No Event of Default. The
representations and warranties contained in Section 6 hereof shall be true and
correct at and as of the Supplemental Closing (both immediately prior to and
immediately after giving effect to the transactions contemplated by the Notice
of Supplemental Closing) as though then made, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall have been true and correct on and
as of such earlier date and there shall not exist any Event of Default or
Potential Event of Default.
-25-
3A.4 Covenant Compliance. After giving effect to issuance of the
Supplemental Note, the Borrowers shall provide an Officer's Certificate by the
Company on behalf of each Security Party setting forth in sufficient detail the
information and computations required to establish that each Security Party is
in compliance with the financial covenants set forth in Section 4.7 as
recalculated for the most recent month for which financial statements have been
delivered to the Purchaser.
3A.5 Acquisition Agreement. (i) All events and conditions required
under the terms of the Acquisition Agreement for the ▇▇▇▇▇ Earnout to be due and
payable shall have occurred and been satisfied and (ii) none of the Sellers (or
any other Person to whom payment is to be made in connection with the ▇▇▇▇▇
Earnout) is obligated for the payment of any amount to any Security Party or its
Subsidiaries which is then due and payable or is in material breach of the
Acquisition Agreement.
3A.6 Senior Lenders. The Senior Lenders shall have disbursed, or
contemporaneously with the Supplemental Closing shall have agreed to disburse,
$2,000,000 of the ▇▇▇▇▇ Earnout in accordance with the terms of the Senior Loan
Agreement and such amount shall be subject to the provisions of the
Intercreditor Agreement.
3A.7 Supplemental Closing Fees and Expenses. The Borrowers shall
have paid to the Purchaser a supplemental closing fee in the amount of one
percent (1.0%) of the aggregate principal amount of the Supplemental Note.
3A.8 Closing Documents. Each Borrower shall have delivered to the
Purchaser all of the following documents:
(i) the Supplemental Note, duly completed and executed by
each Borrower;
(ii) the Supplemental Warrant, duly completed and executed
by the Company;
(iii) a joint Officer's Certificate of the Borrowers, dated
the date of the Supplemental Closing, stating that the conditions
specified in Section 2(i)(B), Section 2.2(ii), Section 2.4 and Sections
3A.1 through 3A.7, inclusive, have been fully satisfied;
(iv) certified copies of each Borrower's Certificate of
Incorporation and bylaws, each as in effect on the Supplemental
Closing;
(v) certificates of good standing of each Borrower, dated
not more than five days prior to the date of the Supplemental Closing,
issued by the states of New York and each state where such Borrower is
qualified to do business as a foreign corporation as of the
Supplemental Closing Date; and
-26-
(vi) such other documents (including resolutions, SBA
forms, opinions of counsel and other documents of a nature required by
Section 3.22) relating to the transactions contemplated by this Section
3A as the Purchaser or its special counsel may reasonably request.
3A.9 Use of Proceeds. One hundred percent (100%) of the proceeds of
the Supplemental Note shall be used to pay up to $1,000,000 of the ▇▇▇▇▇ Earnout
and the closing fee described in Section 3A.7.
3A.10 Adjustment of Financial Covenant Levels. After receipt of the
financial statements provided pursuant to Section 3A.1, the Purchaser may, in
its sole discretion, amend the financial covenants in Section 4.7 in
anticipation of the issuance and sale of the Supplemental Note; provided, that
any amendment of such financial covenants shall maintain the same cushions,
margins and differences (on a percentage basis) between the levels, thresholds
or amounts of the financial covenants contained herein and their counterparts in
Senior Loan Agreement as in effect immediately prior to giving effect to such
amendment and any corresponding amendment to the Senior Loan Agreement; it being
understood the desired result thereof is that the criteria and thresholds for
evaluating the financial condition and performance of the Security Parties and
their Subsidiaries shall be, after giving effect to the disbursement of the
proceeds of the Supplemental Note and the Term Loans B (as such term is defined
in the Senior Loan Agreement) and the payment of the ▇▇▇▇▇ Earnout, reasonably
equivalent to the criteria and thresholds (on a percentage basis) contained in
Section 4.7 prior to any such amendments and the giving of such effect.
Section 4. Covenants.
4.1 Financial Statements and Other Information. The Company shall
deliver to the Purchaser:
(i) as soon as available but in any event within 45 days
after the end of each monthly accounting period in each fiscal year
through and including November, 2000, and 30 days after the end of each
monthly accounting period in each fiscal year thereafter (except in any
such case, that last month of each fiscal quarter), unaudited
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries for such monthly period and for the
period from the beginning of the fiscal year to the end of such month,
and unaudited consolidating and consolidated balance sheets of the
Company and its Subsidiaries as of the end of such monthly period,
setting forth in each case comparisons to the Company's and its
Subsidiaries' annual budget and to the corresponding period in the
preceding fiscal year, and all such statements shall be prepared in
accordance with GAAP consistently applied, subject to the absence of
footnote disclosures and to normal
-27-
year-end adjustments for recurring accruals, and shall be certified by
the Company's chief financial officer;
(ii) as soon as available but in any event within 45 days
after the end of each fiscal quarter in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries for such quarterly period and for the
period from the beginning of the fiscal year to the end of such
quarter, and unaudited consolidating and consolidated balance sheets of
the Company and its Subsidiaries as of the end of such quarterly
period, setting forth in each case comparisons to the Company's and its
Subsidiaries' annual budget and to the corresponding period in the
preceding fiscal year, and all such statements shall be prepared in
accordance with GAAP consistently applied, subject to the absence of
footnote disclosures and to normal year-end adjustments for recurring
accruals, and shall be certified by the Company's chief financial
officer;
(iii) accompanying the financial statements referred to in
subsection (ii) and (iv), a duly completed Officer's Certificate in the
form of Exhibit G attached hereto, with appropriate insertions, dated
that date of such financial statements and signed by the Company's
chief financial officer containing (a) a computation of each of the
financial ratios and restrictions set forth in Section 4.7 and to the
effect that such officer has not become aware of any Event of Default
or Potential Event of Default that has occurred and is continuing or,
if there is any such event, describing it and the steps, if any, being
taken to cure it and (b) a written statement of the Security Parties'
management setting forth a discussion of the Security Parties' and
their respective Subsidiaries' financial condition, changes in
financial condition and results of operations.
(iv) within 90 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth in each
case comparisons to the Company's and its Subsidiaries' preceding
fiscal year, all prepared in accordance with GAAP consistently applied,
and accompanied (a) as provided by PriceWaterhouseCoopers or other
independent accounting firms of recognized national standing
(acceptable to the holders of a majority of the outstanding principal
amount of the Notes), with respect to the consolidated portions of such
statements, an opinion containing no exceptions or qualifications of
(b) a written statement of such accountants to the effect that in
making the examination necessary for the signing of such annual audit
report by such accountants, nothing came to their attention that caused
them to believe that the Security Parties were not in compliance with
any provision of subsections 4.5(i), (ii), (xiii), (xiv), (xvi) and
(xxii) and Section 4.7 of this Agreement insofar as such provision
relates to accounting matters or, if something has come to their
attention that caused them to believe that the Security Parties were no
in compliance with any such provision, describing such non-compliance
in reasonable detail, (c)
-28-
comparisons provided by such accountants of the consolidated portions
of such statements with (1) the budget for such fiscal year and (2) the
consolidated portions of the financial statements for the previous
fiscal year, (d) certification by the chief financial officer of the
Company of the consolidating financial statements, and (e) promptly
upon receipt, a copy of such firm's annual management letter to the
Company's board of directors;
(v) promptly upon receipt thereof, any additional
reports, management letters or other detailed information concerning
significant aspects of the Company's and its Subsidiaries' operations
or financial affairs given to the Company by its independent
accountants (and not otherwise contained in other materials provided
hereunder);
(vi) promptly (but in any event within five (5) days)
after the discovery or receipt of notice of any Event of Default or
Potential Event of Default, any default under any Investment Document,
any Acquisition Document or any other material agreement to which it or
any of its Subsidiaries is a party, any investigation, notice,
proceeding or adverse determination from any governmental or regulatory
authority or agency, any condition or event that has resulted in or
could result in any material liability under any Environmental and
Safety Requirements or any other material adverse change, event or
circumstance affecting any Security Party or any of its Subsidiaries
(including the filing of any litigation against any Security Party or
any or any of its Subsidiaries that could result in any material
liability to the such Security Party or any of its Subsidiaries or the
existence of any dispute with any Person which involves a reasonable
likelihood of such litigation being commenced), an Officer's
Certificate specifying the nature and period of existence thereof and
what actions each Security Party and its Subsidiaries have taken and
propose to take with respect thereto;
(vii) at least 15 days but not more than 90 days prior to
the beginning of each fiscal year, copies of the business plan for the
Company and its Subsidiaries (including management's intentions with
regard to anticipated significant business developments or objectives
of the Company and its Subsidiaries) for each of the next three
succeeding fiscal years and projections (prepared on a quarterly basis
for the first succeeding year and on an annual basis for the second and
third successive years) of (a) the consolidated and consolidating
balance sheets at the end of each such fiscal year, (b) statements of
income and expense and of shareholders' equity for each of such fiscal
years and (c) statements of cash flow for each such fiscal year, all of
the foregoing to be in reasonable detail and certified by the Company's
president or chief financial officer to the effect that (x) such
projections were prepared by the Company and its Subsidiaries in good
faith, (y) the Company and its Subsidiaries have a reasonable basis for
the assumptions contained in such projections and (iii) such
projections have been prepared in accordance with such assumptions;
-29-
(viii) promptly upon the filing or sending but in any event
within five (5) days thereof, copies of all financial statements, proxy
statements, reports and any other general written communications which
the Company sends to its stockholders and copies of all registration
statements and all regular, special or periodic reports which it files,
or any of its officers or directors file with respect to the Company,
with the Securities and Exchange Commission or with any securities
exchange on which any of its securities are then listed, and copies of
all press releases and other statements made available generally by the
Company to the public concerning material developments in the business
of each Security Party and its Subsidiaries;
(ix) at the request of any Purchaser, copies of any
statements, reports, certificates and any other information delivered
to the Senior Lenders, the Senior Lenders' Agent or the Company's
stockholders;
(x) promptly (but in any event within five (5) days)
after the receipt by the Company or any ERISA Affiliate of notice of
the occurrence of any of the following, written notice thereof which
describes the same and the intended course of action of each Security
Party and its Subsidiaries with respect thereto: (i) the occurrence or
expected occurrence of any ERISA Event; (ii) the occurrence of any
non-exempt prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code; (iii) the filing of any funding
waiver request with the IRS with respect to any Pension Plan or the
failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a lien under Section 302 of
ERISA; (iv) the occurrence of any material increase in the benefits
provided under any existing Plan or the establishment of any new Plan
or the commencement of contributions to any Plan to which a Security
Party or ERISA Affiliate was not previously contributing resulting in
the incurrence by such Security Party or ERISA Affiliate of a material
liability; or (v) the occurrence of any other event with respect to any
Plan which could result in the incurrence by a Security Party or ERISA
Affiliate of any material liability, fine or penalty;
(xi) promptly (but in any event within five (5) days)
after becoming aware of any of the following, written notice thereof
which describes the same and the intended course of action of each
Security Party and its Subsidiaries with respect thereto: (i) any
cancellation or material change in any insurance maintained by any
Security Party, (ii) any other event (including (a) any violation of
any Environmental and Safety Requirement or the assertion of any claim
with respect to a violation thereof or (b) the enactment or
effectiveness of any law, rule or regulation) which might reasonably be
expected to have a Material Adverse Effect, or (iii) the occurrence of
any default of or event of default in respect of the Senior Loan
Agreement or any other Indebtedness;
-30-
(xii) immediately after the receipt of notice (oral or
written) of the acceleration of any Indebtedness; and
(xiii) with reasonable promptness, such other information
and financial data concerning any Security Party and its Subsidiaries
as any Purchaser may reasonably request.
Each of the financial statements referred to in subsections (i), (ii) and (iv)
shall be true and correct in all material respects as of the dates and for the
periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end adjustments for recurring
accruals (none of which would, alone or in the aggregate, have a Material
Adverse Effect).
4.2 Inspection of Property. Each Security Party and its
Subsidiaries shall permit any representatives designated by any Purchaser, upon
reasonable notice and during normal business hours and at such other times as
any such holder may reasonably request, to (i) visit and inspect any of the its
properties, (ii) examine its corporate and financial records and make copies
thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of such corporation with its directors, officers, key employees and
independent accountants. The presentation of an executed copy of this Agreement
by any Purchaser to the Security Parties' independent accountants shall
constitute the Security Parties' permission to its independent accountants to
participate in discussions with such Persons.
4.3 Attendance at Board Meetings. The Company shall give the
Purchaser written notice of each meeting of its board of directors (which shall
be held at least quarterly) and each committee thereof at the same time and in
the same manner as notice is given to the directors (which notice shall be
promptly confirmed in writing to the Purchaser), and the Company shall permit a
representative of the Purchaser to attend as an observer all meetings of its
board of directors and all committees thereof. Each representative shall be
entitled to receive all written materials and other information (including
copies of meeting minutes) given to directors in connection with such meetings
at the same time such materials and information are given to the directors. If
the Company proposes to take any action by written consent in lieu of a meeting
of its board of directors or of any committee thereof, the Company shall give
written notice thereof to the Purchaser prior to the effective date of such
consent describing in reasonable detail the nature and substance of such action.
The Company shall pay the reasonable out-of-pocket expenses of each
representative incurred in connection with attending such board and committee
meetings.
4.4 Affirmative Covenants. So long as any of the Notes, Put Notes,
Warrants or Underlying Common Stock remain outstanding, each Security Party
shall, and shall cause each of its Subsidiaries to:
(i) Cause to be done all things necessary to maintain,
preserve and renew its corporate existence, rights, franchises,
privileges and qualifications (except in those
-31-
instances in which the failure to be qualified to do business or in
good standing in a jurisdiction does not have a Material Adverse
Effect) and all material licenses, authorizations and permits necessary
to the conduct of its businesses;
(ii) Maintain and keep its material properties in good
repair, working order and condition (ordinary wear and tear excepted),
and from time to time make all necessary or desirable repairs, renewals
and replacements, so that its businesses may be properly and
advantageously conducted in all material respects at all times;
(iii) Pay and discharge when payable all Taxes, assessments
and governmental charges imposed upon its properties or upon it or its
income or profits (in each case before the same becomes delinquent and
before penalties accrue thereon) and all claims for labor, materials or
supplies which if unpaid would by law become a Lien upon any of its
property, unless and to the extent that the same are being contested in
good faith, diligently and by appropriate proceedings and adequate
reserves (as determined in accordance with GAAP consistently applied)
have been established on its books with respect thereto and such
contest operates to suspend collections of the same;
(iv) Comply with all other material obligations which it
incurs pursuant to any contract or agreement (other than the Senior
Loan Agreement), whether oral or written, express or implied, as such
obligations become due, unless and to the extent that the same are
being contested in good faith, diligently and by appropriate
proceedings and adequate reserves (as determined in accordance with
GAAP consistently applied) have been established on its books with
respect thereto;
(v) Comply with all applicable laws, rules and
regulations of all governmental authorities (including Environmental
and Safety Requirements), the violation of which would reasonably be
expected to have a Material Adverse Effect;
(vi) Comply with all material Environmental and Safety
Requirements and all material permits, licenses or other authorizations
issued thereunder; respond immediately to any Release or threatened
Release of any hazardous material, substance or waste in a manner which
complies with all Environmental and Safety Requirements and reasonably
mitigates any risk to human health or the environment; and provide such
documents or information, or conduct at its own cost such studies or
assessments, relating to matters arising under the Environmental and
Safety Requirements as any Purchaser may reasonably request;
(vii) Apply for and continue in force with good and
responsible insurance companies adequate insurance covering risks of
such types and covering casualties, risks and contingencies of such
types and in such amounts as are customary for prudent companies of
-32-
similar size engaged in similar lines of business (but in no event less
than such amounts that were maintained as of the Closing); and
(viii) Maintain proper books of record and account which
present fairly in all material respects its financial condition and
results of operations and make provisions on its financial statements
for all such proper reserves as in each case are required in accordance
with GAAP consistently applied.
4.5 Note Negative Covenants. So long as any of the Notes or Put
Notes remain outstanding, no Security Party shall, without the prior written
consent of the holders of a majority of the outstanding principal amount of the
Notes:
(i) directly or indirectly declare, pay or make any
Dividends, except for Dividends payable in shares of Common Stock
issued upon the outstanding shares of Common Stock and except for
Dividends by Wholly-Owned Subsidiaries of ▇▇▇▇▇ paid or made to ▇▇▇▇▇;
(ii) directly or indirectly make, or permit any of its
Subsidiaries to make, any Stock Purchase or directly or indirectly
redeem, purchase or make, or permit any of its Subsidiaries to redeem,
purchase or make any payments with respect to any stock appreciation
rights, phantom stock plans or similar rights or plans, except (a)
pursuant to the terms of the Warrants and (b) so long as no Event of
Default or Potential Event of Default exists or would result therefrom,
the Borrowers may make a distribution to the Company solely and to the
extent that the Company uses such distribution to redeem employee owned
capital stock not to exceed $125,000 in any fiscal year provided that
after giving effect to such redemption, the Security Parties are in
compliance on a pro forma basis with the covenants set forth in Section
4.7, recomputed for the most recent month for which financial
statements have been delivered and such repurchase if permitted under
the Senior Loan Agreement;
(iii) authorize, issue or enter into any agreement
providing for the issuance (contingent or otherwise) of any notes or
debt securities containing equity features (including any notes or debt
securities convertible into or exchangeable for capital stock or other
equity securities, issued in connection with the issuance of capital
stock or other equity securities or containing profit participation
features);
(iv) make, or permit any of its Subsidiaries to make, any
loans or advances to, Guarantees for the benefit of, or Investments in,
any Person except for (a) reasonable advances to employees in the
ordinary course of business consistent with past practices, (b)
acquisitions permitted pursuant to subsection (viii) below, (c)
Investments having a stated maturity no greater than one year from the
date the Company or any of its Subsidiaries
-33-
makes such Investment in (1) obligations of the United States
government or any agency thereof or obligations guaranteed by the
United States government, (2) certificates of deposit of commercial
banks having combined capital and surplus of at least $50 million or
(3) commercial paper with a rating of at least "Prime-1" by ▇▇▇▇▇'▇
Investors Service, Inc., (d) intercompany loans, advances and
guaranties by any Borrower in any other Borrower in the ordinary course
of business, (e) securities of account debtors received pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such account debtors (f) contributions by any Security
Party to the capital of any other Security Party (other than the
Company), (g) bank deposits in the ordinary course of business; (h)
Guarantees by the Borrowers' Subsidiaries of the obligations under the
Senior Loan Agreement but only to the extent such Subsidiaries also
guarantee the obligations under the Investment Documents and (i) the
Security Party Guaranty;
(v) merge or consolidate with any Person or, except as
permitted by subsection (viii) below, permit any of its Subsidiaries to
merge or consolidate with any Person (other than a merger or
consolidation between or among Wholly-Owned Subsidiaries or a merger or
consolidation of a Wholly-Owned Subsidiary into the Company);
(vi) sell, lease or otherwise dispose of, or permit any of
its Subsidiaries to sell, lease or otherwise dispose (other than Equity
Interests of any Subsidiary of the Company), more than 5% of the
Consolidated Total Assets of the Borrowers and their respective
Subsidiaries in any twelve month period (other than sales of inventory
in the ordinary course of business) or sell or permanently dispose of
any of its or any of its Subsidiaries' Intellectual Property Rights
other than such purchase or other acquisition by any Borrower of the
assets or capital stock (to the extent permitted under (viii) of this
Section 4.5) of another Borrower;
(vii) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including any reorganization
into a limited liability company, a partnership or any other
non-corporate entity which is treated as a partnership for federal
income tax purposes and any reorganization after which the Company
becomes a Subsidiary of any other Person) or otherwise alter, or permit
any of its Subsidiaries to alter, its legal status other than the
merger, consolidation, acquisition, sale, transfer, conveyance, lease
or assignment of or by any Borrower with any other Borrower;
(viii) acquire, or permit any of its Subsidiaries to
acquire, any interest in any company or business (whether by a purchase
of assets, purchase of stock, merger or otherwise), or enter into any
joint venture, involving an aggregate consideration (including the
assumption of liabilities whether direct or indirect) exceeding
$500,000 in any twelve month period; provided, however, if no Event of
Default or Potential Event of Default has
-34-
occurred and is continuing or would occur as a result thereof, any
Borrower may purchase or acquire the capital stock of any other
Borrower;
(ix) enter into, or permit any of its Subsidiaries to
enter into, the ownership, active management or operation of any
business other than the direct marketing of products including, without
limitation, septic maintenance products, to customers and the
distribution of direct to consumer card packages to consumers and,
notwithstanding the other provisions herein contained, the Company
shall not engage in any business or other activities, or own any
material assets or property, other than the ownership and management of
its Subsidiaries;
(x) enter into, become subject to, amend, modify or
waive, or permit any of its Subsidiaries to enter into, become subject
to, amend, modify or waive, any agreement or instrument which by its
terms would (under any circumstances) restrict (a) the right of any of
its Subsidiaries to make loans or advances or pay dividends to,
transfer property to, or repay any Indebtedness owed to, the Company or
another Subsidiary of the Company, or (b) any Security Party's right to
perform any of the provisions of any of the Investment Documents, the
Acquisition Documents, the Securities or its Certificate of
Incorporation (including provisions relating to the exercise of any of
the Warrants, the exercise of the put provisions of any of the Warrants
or the Investor Common Stock, the payment of principal and interest on
the Notes and the payment of the Warrant Put Price and Co-Invest Put
Price (as such terms are defined in the Initial Warrant) and the Put
Price (as such term is defined in the Supplemental Warrant)), except in
any such case for entering into the Senior Loan Agreement (it being
understood that no such prohibition or limitation on such actions
exist) or the Intercreditor Agreement and amending, modifying or
supplementing such agreements in accordance with the terms of the
Intercreditor Agreement;
(xi) enter into, amend, modify or supplement, or permit
any of its Subsidiaries to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or
any of its Subsidiaries' officers, directors, employees, stockholders,
partners or Affiliates or with any individual related by blood,
marriage or adoption to any such individual or with any entity in which
any such Person or individual owns a beneficial interest, except for
(a) customary employment arrangements and benefit programs on
reasonable terms, (b) the Consulting Agreement as in effect on the date
hereof and (c) as otherwise expressly contemplated by this Agreement;
(xii) establish or acquire (a) any Subsidiaries other than
the establishment of any Wholly-Owned Subsidiaries of ▇▇▇▇▇ so long as
the provisions of Section 4.16 are satisfied, or (b) any Subsidiaries
organized outside of the United States and its territorial possessions;
-35-
(xiii) create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist,
any Indebtedness other than Permitted Indebtedness or any Liens other
than Permitted Liens;
(xiv) enter into any Operating Leases under which the
amount of the aggregate lease payments for all such agreements exceeds
$300,000 on a consolidated basis for any twelve- month period;
(xv) change its fiscal year;
(xvi) prepay, redeem, purchase, defeat or otherwise satisfy
in any manner any principal or interest on any Indebtedness other than
Senior Debt and the Indebtedness under this Agreement and the Notes;
(xvii) amend or modify any stock option plan or employee
stock ownership plan as in existence as of the Closing or adopt any new
stock option plan or employee stock ownership plan, in any such case
which would provide for the redemption or put of any stock or options
or other rights by any Person or which would be adverse to the
Purchaser;
(xviii) issue or sell any shares of the capital stock or
rights to acquire shares of the capital stock of any of its
Subsidiaries to any Person other than the Company or a Wholly-Owned
Subsidiary of the Company;
(xix) Intentionally Omitted;
(xx) use the proceeds from the sale of the Securities
other than as set forth on the Use of Proceeds Schedule;
(xxi) make any amendment to its Certificate of
Incorporation or bylaws, or file any resolution of the board of
directors with its jurisdiction of incorporation containing any
provisions, which would adversely affect or otherwise impair in any
respect any rights or remedies of any Purchaser or the rights or
relative priority of the holders of the Underlying Common Stock or the
Investor Common Stock under this Agreement, its Certificate of
Incorporation or bylaws;
(xxii) directly or indirectly pay management fees or other
amounts to HIG or HIG Capital or any of their respective Affiliates,
except to the extent that no Event of Default or Potential Event of
Default exists or would result therefrom, the Security Parties may pay
management fees to HIG Capital, on a quarterly basis in arrears,
pursuant to the terms of the Consulting Agreement (as in effect on the
date hereof) in an aggregate amount not exceeding $200,000 in any
fiscal year;
-36-
(xxiii) amend, modify or waive any provision of the
Acquisition Documents or the Investment Documents (other than any
amendment to the Acquisition Documents which is not adverse to the
Purchaser), to which it is a party, and each Security Party shall
enforce the provisions of the Acquisition Documents and the Investment
Documents, to which it is a party, and shall exercise all of its rights
and remedies thereunder;
(xxiv) amend, modify or waive, or permit any of its
Subsidiaries to amend, modify or waive, any provision of (a) the Senior
Loan Agreement except to the extent permitted by the Intercreditor
Agreement, (b) the Consulting Agreement or (c) the provisions of the
Acquisition Agreement relating to the ▇▇▇▇▇ Earnout;
(xxv) take any action, or fail to take any action, which
would result in the invalidity, abandonment, misuse or unenforceability
of such Intellectual Property Rights or which would infringe upon or
misappropriate any rights of other Persons;
(xxvi) cancel any claim or debt owing to it, except for
reasonable consideration or in the ordinary course of business, and
except for the cancellation of debts or claims not to exceed $125,000
in any fiscal year; or
(xxvii) enter into or be a party to, or permit any of its
Subsidiaries to enter into or be a party to, any contract for the
purchase of materials, supplies or other property or services if such
contract requires that payment be made by a Security Party regardless
of whether delivery is ever made of such materials, supplies or other
property or services.
4.6 Equity Negative Covenants. So long as any of the Warrants or
shares of Underlying Common Stock or Investor Common Stock remain outstanding,
no Security Party shall, without the prior written consent of the holders of a
majority of the Underlying Common Stock and Investor Common Stock:
(i) enter into, or permit any of its Subsidiaries to
enter into, the ownership, active management or operation of any
business other than the direct marketing of products to customers and
the distribution of direct to consumer card packages to consumers and,
notwithstanding the other provisions herein contained, the Company
shall not engage in any business or other activities, or own any
material assets or property, other than the ownership and management of
its Subsidiaries;
(ii) liquidate, dissolve or effect a reorganization in any
form of transaction (including any reorganization into a limited
liability company, a partnership or any other non- corporate entity
which is treated as a partnership for federal income tax purposes and
any reorganization after which the Company becomes a Subsidiary of any
other Person) or otherwise alter, or permit any of its Subsidiaries to
alter, its legal status other than the
-37-
merger, consolidation, acquisition, sale, transfer, conveyance, lease
or assignment of or by any Borrower with any other Borrower;
(iii) enter into, become subject to, amend, modify or
waive, or permit any of its Subsidiaries to enter into, become subject
to, amend, modify or waive, any agreement or instrument which by its
terms would (under any circumstances) restrict any Security Party's
right to perform any of the provisions of any of the Investment
Documents, the Securities or its Certificate of Incorporation
(including provisions relating to the exercise of any of the Warrants,
the exercise of any of the put provisions for any of the Warrants or
the Investor Common Stock, the payment of the payment of the Warrant
Put Price and the Co-Invest Put Price (as such terms are defined in
the Initial Warrant) and the Put Price (as such term is defined in the
Supplemental Warrant), except in any such case for entering into the
Senior Loan Agreement (it being understood that no such prohibition or
limitation on such actions exist) or the Intercreditor Agreement and
amending, modifying or supplementing such agreements in accordance with
the terms of the Intercreditor Agreement;
(iv) enter into, amend, modify or supplement, or permit
any of its Subsidiaries to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or
any of its Subsidiaries' officers, directors, employees, stockholders,
partners or Affiliates or with any individual related by blood,
marriage or adoption to any such individual or with any entity in which
any such Person or individual owns a beneficial interest, except for
(a) customary employment arrangements and benefit programs on
reasonable terms, (c) the Consulting Agreement as in effect on the date
hereof and (c) as otherwise expressly contemplated by this Agreement;
(v) make any amendment to its Certificate of
Incorporation or bylaws, or file any resolution of the board of
directors with its jurisdiction of incorporation containing any
provisions, which would adversely affect or otherwise impair in any
respect any rights or remedies of any Purchaser or the rights or
relative priority of the holders of the Underlying Common Stock under
this Agreement, its Certificate of Incorporation or bylaws;
(vi) issue or sell any shares of the capital stock, or
rights to acquire shares of the capital stock, of any of its
Subsidiaries to any Person other than the Company or a Wholly-Owned
Subsidiary of the Company;
(vii) directly or indirectly pay management fees or other
amounts to HIG or HIG Capital or any of their respective Affiliates,
except to the extent that no Event of Default or Potential Event of
Default exists or would result therefrom, the Security Parties may pay
management fees to HIG Capital, on a quarterly basis in arrears,
pursuant to the terms of the Consulting Agreement (as in effect on the
date hereof) in an aggregate amount not exceeding $200,000 in any
fiscal year; or
-38-
(viii) amend, modify or waive, or permit any of its
Subsidiaries to amend, modify or waive, any provision of the Consulting
Agreement.
4.7 Financial Covenants. So long as any of the Notes remain
outstanding, the Company shall, and shall cause each of its Subsidiaries to:
(i) Interest Coverage Ratio. Not permit the Interest
Coverage Ratio for any Computation Period set forth below to be less
than the applicable ratio set forth below for such Computation Period:
Computation Interest Coverage
Period Ending Ratio
------------- -----------------
09/30/00 1.80 to 1.00
12/31/00 1.80 to 1.00
03/31/01 1.80 to 1.00
06/30/01 1.80 to 1.00
09/30/01 2.25 to 1.00
12/31/01 2.25 to 1.00
03/31/02 2.25 to 1.00
06/30/02 2.25 to 1.00
09/30/02 2.70 to 1.00
12/31/02 2.70 to 1.00
03/31/03 2.70 to 1.00
06/30/03 2.70 to 1.00
09/30/03 2.70 to 1.00
12/31/03 2.70 to 1.00
03/31/04 2.70 to 1.00
06/30/04 2.70 to 1.00
09/30/04 2.70 to 1.00
12/31/04 2.70 to 1.00
03/31/05 2.70 to 1.00
06/30/05 2.70 to 1.00
09/30/05 2.70 to 1.00
12/31/05 2.70 to 1.00
03/31/06 2.70 to 1.00
06/30/06 and each
quarter ending thereafter 2.70 to 1.00
-39-
(ii) Total Coverage Ratio. Not permit the Total Coverage
Ratio for any Computation Period set forth below to be less than the applicable
ratio set forth below for such Computation Period:
Computation Total Coverage
Period Ending Ratio
------------- --------------
09/30/00 0.95 to 1.00
12/31/00 0.95 to 1.00
03/31/01 1.00 to 1.00
06/30/01 1.00 to 1.00
09/30/01 1.00 to 1.00
12/31/01 1.00 to 1.00
03/31/02 1.00 to 1.00
06/30/02 1.00 to 1.00
09/30/02 1.00 to 1.00
12/31/02 1.05 to 1.00
03/31/03 1.05 to 1.00
06/30/03 1.05 to 1.00
09/30/03 1.05 to 1.00
12/31/03 1.05 to 1.00
03/31/04 1.05 to 1.00
06/30/04 1.05 to 1.00
09/30/04 1.05 to 1.00
12/31/04 1.05 to 1.00
03/31/05 1.05 to 1.00
06/30/05 1.05 to 1.00
09/30/05 1.05 to 1.00
12/31/05 1.05 to 1.00
03/31/06 1.05 to 1.00
06/30/06 and each
quarter ending thereafter 1.05 to 1.00
(iii) Capital Expenditures. Not permit the
aggregate amount of Capital Expenditures made by the Borrowers in any
fiscal year to exceed $275,000 in the aggregate for all Security
Parties and their respective Subsidiaries.
(iv) Total Indebtedness to EBITDA Ratio. Not
permit the Total Indebtedness to EBITDA Ratio as of the last day of any
Computation Period set forth below to exceed the applicable ratio set
forth below for such Computation:
-40-
Computation Total Debt to
Period Ending EBITDA Ratio
------------- ------------
09/30/00 4.00 to 1.00
12/31/00 3.90 to 1.00
03/31/01 3.90 to 1.00
06/30/01 3.70 to 1.00
09/30/01 3.55 to 1.00
12/31/01 3.40 to 1.00
03/31/02 3.30 to 1.00
06/30/02 3.10 to 1.00
09/30/02 2.90 to 1.00
12/31/02 2.70 to 1.00
03/31/03 2.55 to 1.00
06/30/03 2.40 to 1.00
09/30/03 2.10 to 1.00
12/31/03 2.05 to 1.00
03/31/04 1.90 to 1.00
06/30/04 1.75 to 1.00
09/30/04 1.60 to 1.00
12/31/04 1.45 to 1.00
03/31/05 1.35 to 1.00
06/30/05 1.20 to 1.00
09/30/05 1.05 to 1.00
12/31/05 0.90 to 1.00
03/31/06 0.80 to 1.00
06/30/06 and each
quarter ending thereafter 0.80 to 1.00
4.8 Compliance with Agreements. Each Security Party shall
perform and observe all of its obligations, and shall cause each of its
Subsidiaries to perform and observe all of their respective obligations, as
applicable, (i) to each holder of the Notes and all of its obligations to each
holder of Underlying Common Stock and Investor Common Stock set forth in the
Company's Certificate of Incorporation and bylaws, (ii) to each holder of the
Warrants and Underlying Common Stock set forth herein and therein, (iii) to each
holder of Stockholder Shares (as defined in the Stockholders Agreement) as set
forth in the Stockholders Agreement, (iv) to each holder of Registrable
Securities (as defined in the Equityholders Agreement) as set forth in the
Equityholders Agreement and (iv) under each of the other Investment Documents.
4.9 Use of Proceeds. Neither Borrower shall, and shall
not permit any of its Subsidiaries to, use any proceeds from the sale of the
Notes hereunder, directly or indirectly, for the
-41-
purposes of purchasing or carrying any "margin securities" within the meaning of
Regulation U promulgated by the Board of Governors of the Federal Reserve Board
or for the purpose of arranging for the extension of credit secured, directly or
indirectly, in whole or in part by collateral that includes any "margin
securities."
4.10 SBIC Regulatory Provisions.
(i) Shareholders. As long as any SBIC Holder
holds any Securities, Investor Common Stock or any securities issued by the
Company with respect thereto, the Company shall notify such SBIC Holder (a) at
least 15 days prior to taking any action after which the number of record
holders of the Company's voting stock would be increased from fewer than 50 to
50 or more, and (b) of any other action or occurrence after which the number of
record holders of the Company's voting stock was increased (or would increase)
from fewer than 50 to 50 or more, as soon as practicable after the Company
becomes aware that such other action or occurrence has occurred or is proposed
to occur.
(ii) Use of Proceeds. At such times as any SBIC
Holder reasonably requests, the Company shall deliver to each SBIC Holder a
written statement on behalf of each Security Party certified by the Company's
president or chief financial officer describing in reasonable detail the use of
the proceeds of the Financing hereunder by the Security Parties. In addition to
any other rights granted hereunder, the Company shall grant such SBIC Holder and
the SBA access to the Company's books, and records for the purpose of verifying
the use of such proceeds and verifying the certifications made by the Security
Parties in SBA Forms 480 and 652 delivered pursuant to Section 3.22(xii) and for
the purpose of determining whether the principal business activity of each
Security Party and its Subsidiaries continues to constitute an eligible business
activity (within the meaning of the SBIC Regulations).
(iii) Regulatory Violation. Upon the occurrence of
a Regulatory Violation or in the event that any SBIC Holder determines in its
good faith judgment that a Regulatory Violation has occurred, in addition to any
other rights and remedies to which it may be entitled as a holder of Notes,
Underlying Common Stock or Investor Common Stock (whether under this Agreement,
the Notes, the Warrants, the Intercreditor Agreement, any Security Party's
Certificate of Incorporation or otherwise), each SBIC Holder shall have the
right to the extent required under the SBIC Regulations to demand the immediate
repurchase of all of the outstanding Securities and Investor Common Stock owned
by such SBIC Holder at a price equal to the purchase price paid for such
Securities and Investor Common Stock, plus all accrued interest on the Notes, by
delivering written notice of such demand to the Company. The Company or the
Borrowers, as applicable, shall pay the purchase price for such Securities and
Investor Common Stock by a cashier's or certified check or by wire transfer of
immediately available funds to each SBIC Holder demanding repurchase within 30
days after the Company's receipt of the demand notice, and upon such payment,
each such
- 42 -
SBIC Holder shall deliver the certificates evidencing the Securities and
Investor Common Stock to be repurchased duly endorsed for transfer or
accompanied by duly executed forms of assignment.
(iv) Regulatory Compliance Cooperation. In the
event that any SBIC Holder believes that it has a Regulatory Problem, such SBIC
Holder shall have the right to transfer its Securities and Investor Common Stock
without regard to any restrictions on transfer set forth in this Agreement or
the Equityholders Agreement other than the securities law restrictions set forth
in Section 5 hereof (provided that the transferee agrees to become a party to
this Agreement, the Equityholders Agreement and the Stockholders Agreement), and
each Security Party shall take all such actions as are reasonably requested by
such SBIC Holder in order to (a) effectuate and facilitate any transfer by such
SBIC Holder of any securities of such Security Party then held by such SBIC
Holder to any Person designated by such SBIC Holder (b) permit such SBIC Holder
(or any or its Affiliates) to exchange all or any portion of the Common Stock
then held by it on a share-for-share basis for shares of a class of nonvoting
common stock of the Company, which nonvoting common stock shall be identical in
all respects to such Common Stock, except that such common stock shall be
nonvoting and shall be convertible into Common Stock on such terms as are
requested by such SBIC Holder in light of regulatory considerations then
prevailing, and (c) amend this Agreement, the Certificate of Incorporation and
the bylaws of such Security Party, as applicable, and related agreements and
instruments to effectuate and reflect the foregoing.
(v) Economic Impact Information. Promptly after
the end of each calendar year (but in any event prior to February 28 of each
year), the Company on behalf of each Security Party shall deliver to each SBIC
Holder a written assessment of the economic impact of each SBIC Holder's
investment in the Security Parties, specifying the full-time equivalent jobs
created or retained in connection with the investment, the impact of the
Investment on the businesses of the each Security Party and its Subsidiaries and
on taxes paid by the Security Parties and their employees.
4.11 Intentionally Omitted.
4.12 Intentionally Omitted.
4.13 Intellectual Property Rights. So long as any of the
Notes or Put Notes remain outstanding, each Security Party shall, and shall
cause each of its Subsidiaries to, possess and maintain all material
Intellectual Property Rights necessary to the conduct of their respective
businesses and own all right, title and interest in and to, or have a valid
license for, all such Intellectual Property Rights.
4.14 Preemptive Rights.
- 43 -
(i) If the Borrowers authorize the issuance or
sale of any notes or debt securities that are subordinate and junior to the
prior payment in full of all Senior Debt, the Borrowers shall first offer to
sell to each holder of Notes a portion of such notes or debt securities equal to
the quotient determined by dividing (1) the aggregate principal amount of Notes
held by such holder by (2) the sum of the aggregate principal amount of the
Notes held by all holders of Notes. Each holder of Notes shall be entitled to
purchase such notes or debt securities at the most favorable price and on the
most favorable terms as such notes or debt securities are to be offered to any
other Persons.
(ii) In order to exercise its purchase rights
hereunder, a holder of the Notes must within 15 days after receipt of written
notice from the Company or the Borrowers describing in reasonable detail the
notes or debt securities being offered, the purchase price thereof, the payment
terms and such holder's percentage allotment deliver a written notice to the
Company describing its election hereunder. If all of the notes and debt
securities offered to holders of the Notes is not fully subscribed by such
holders, the remaining notes and debt securities shall be reoffered by the
Company or the Borrowers to the holders purchasing their full allotment upon the
terms set forth in this Section 4.14, except that such holders must exercise
their purchase rights within five days after receipt of such reoffer.
(iii) Upon the expiration of the offering periods
described above, the Company or the Borrowers shall be entitled to sell such
notes or debt securities which the holders of the Notes have not elected to
purchaser during the 120 days following such expiration of the terms and
conditions no more favorable to the purchasers thereof than those offered to
such holders. Any notes or debt securities offered or sold by the Company or the
Borrowers after such 120-day period must be reoffered to the holders of the
Notes pursuant to the terms of this Section 4.14.
4.15 ▇▇▇▇▇ Earnout; Amended Financial Covenants. (i) The
Security Parties shall deliver to the Purchaser, no later than fifteen (15)
Business Days prior to the date the Security Parties shall pay, or shall be
obligated to pay, the ▇▇▇▇▇ Earnout, the materials and information described in
Section 3A.1 and such other financial information and materials as the Purchaser
shall reasonably request, and enter into good faith negotiations with the
Purchaser, in each such case to effectuate the provisions of Section 3A10.
(ii) The Security Parties shall enter into,
execute and deliver, no later than ten (10) Business Days prior to the date on
which the Security Parties shall pay, or shall be obligated to pay, the ▇▇▇▇▇
Earnout, such agreements, documents and instruments as may be required by the
Purchaser to effectuate the provisions hereof and of Section 3A.10, including,
without limitation, the amendment of the financial covenants contained in
Section 4.7 consistent with the terms hereof and of Section 3A.10.
-44-
4.16 Additional Subsidiaries. With respect to any new
Subsidiary of ▇▇▇▇▇ established after the Closing, ▇▇▇▇▇ shall promptly cause
such new Subsidiary (i) to become a party to the Security Party Guaranty and
(ii) to deliver to the Purchaser the same documents required to be delivered by
the Security Parties pursuant to subsections 3.22(vi) through (ix), (xi),
(xii)(a), (xii)(d) and (xv) for such new Subsidiary, and if requested by the
Purchaser, deliver to the Purchaser legal opinions with respect to such new
Subsidiary, which opinions shall be in form and substance, and from counsel,
satisfactory to the Purchaser.
4.17 Further Assurances. At any time and from time to
time, upon the request of the Purchaser, each Security Party shall execute,
deliver and acknowledge or cause to be executed, delivered and acknowledged,
such further documents and instruments and do such other acts and things as so
requested in order to fully effect the purposes of this Agreement, the other
Investment Documents and any other agreements, instruments and documents
delivered pursuant hereto or in connection with the Securities, the Put Notes,
the Underlying Common Stock and the Investor Common Stock. In addition, if
requested by the Purchaser, each Security Party shall obtain and promptly
furnish to the Purchaser evidence of all governmental approvals as may be
required to enable such Security Party to comply with its obligations under the
Investment Documents and to continue in business as conducted on the date hereof
without material interruption or interference.
Section 5. Transfer of Restricted Securities.
5.1 General Provisions. Restricted Securities are
transferable only pursuant to (i) public offerings registered under the
Securities Act, (ii) Rule 144 or Rule 144A of the Securities and Exchange
Commission (or any similar rule or rules then in force) if such rule is
available and (iii) subject to compliance with applicable security laws, any
other legally available means of transfer.
5.2 Opinion Delivery. In connection with the transfer of
any Restricted Securities (other than a transfer described in Section 5.1(i) or
(ii) above), the holder thereof shall deliver to the Company or the Borrowers,
as applicable, an opinion of counsel to the effect that such transfer of
Restricted Securities may be effected without registration of such Restricted
Securities under the Securities Act. In addition, if the holder of the
Restricted Securities delivers to the Company or the Borrowers, as applicable,
an opinion of such counsel that no subsequent transfer of such Restricted
Securities shall require registration under the Securities Act, the Company or
the Borrowers, as applicable shall deliver certificates for such securities that
do not bear clause (a) of the legend set forth in Section 8.3. If the Company or
the Borrowers, as applicable, are not required to deliver new certificates for
such Restricted Securities not bearing such legend, the holder thereof shall not
transfer the same until the prospective transferee has confirmed to the Company
or the Borrowers, as applicable, in writing its agreement to be bound by the
conditions contained in this Section 5.2 and Section 8.3.
-45-
5.3 Information Requests. Upon the request of any
Purchaser, each Security Party and its Subsidiaries shall promptly supply to the
Purchaser or its prospective transferees all information regarding the such
Security Party and its Subsidiaries required to be delivered in connection with
a transfer hereof.
5.4 Legend Removal. If any Restricted Securities become
eligible for sale pursuant to Rule 144(k), the Company or the Borrowers, as
applicable, shall, upon the request of the holder of such Restricted Securities,
remove the legend set forth in Section 8.3 from the certificates for such
Restricted Securities.
Section 6. Representations and Warranties of the Security
Parties. As a material inducement to the Purchaser to enter into this Agreement
and purchase the Securities hereunder, each Security Party hereby represents and
warrants to the Purchaser that each of the following statements are true,
complete and correct as of the date of this Agreement and will be true, complete
and correct as of the Closing after giving effect to the Acquisition and the
other transactions contemplated by the Transaction Documents to occur on the
date of the Closing:
6.1 Organization, Corporate Power and Licenses.
Each Security Party is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and is qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to qualify. Each Security Party
possesses all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to carry
on its businesses as now conducted and presently proposed to be conducted and to
carry out the transactions contemplated by this Agreement. The copies of each
Security Party's charter documents and bylaws which have been furnished to the
Purchaser's special counsel reflect all amendments made thereto at any time
prior to the date of this Agreement and are correct and complete.
6.2 Capital Stock and Related Matters.
(i) The attached Capitalization Schedule
accurately sets forth the following information with respect to the Company's
capitalization as of the Closing and immediately thereafter: (1) the authorized
capital stock of the Company, (2) the number of shares of each class of capital
stock issued and outstanding, (3) the number of shares of each class of capital
stock reserved for issuance upon exercise of options, warrants (including the
Warrants), convertible securities, etc., (4) the name of each holder of capital
stock and the amount of stock owned by each such holder and (5) with respect to
all outstanding options and rights to acquire the Company's capital stock: the
holder, the number of shares covered, the exercise price and the expiration
date. As of the Closing, neither the Company nor any of its Subsidiaries shall
have outstanding any stock or securities convertible or exchangeable for any
shares of its capital stock or containing any profit
-46-
participation features, nor shall it have outstanding any rights or options to
subscribe for or to purchase its capital stock or any stock or securities
convertible into or exchangeable for its capital stock or any stock appreciation
rights or phantom stock plans, except for the Warrants and except as set forth
on the Capitalization Schedule. As of the Closing, neither the Company nor any
of its Subsidiaries shall be subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any shares of its capital stock or
any warrants, options or other rights to acquire its capital stock, except as
set forth on the Capitalization Schedule and except pursuant to the Warrants,
the Equityholders Agreement and the Stockholders Agreement. As of the Closing,
all of the outstanding shares of the Company's capital stock shall be validly
issued, fully paid and nonassessable and the Common Stock issuable upon exercise
of the Warrants will, when issued, be duly authorized and validly issued, fully
paid and nonassessable.
(ii) There are no statutory or, to the best each
Security Party's knowledge, contractual stockholders preemptive rights or rights
of refusal with respect to the issuance of the Securities hereunder or the
issuance of the Common Stock upon exercise of the Warrants. The Company has not
violated any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer, sale and
issuance of the Securities hereunder and the issuance of the Common Stock upon
exercise of the Warrants does not require registration under the Securities Act
or any applicable state securities laws. To the best of the Company's knowledge,
there are no agreements between the Company's stockholders with respect to the
voting or transfer of the Company's capital stock or with respect to any other
aspect of the Company's affairs, except for the Equityholders Agreement and the
Stockholders Agreement.
6.3 Subsidiaries; Investments. The attached Subsidiary
Schedule correctly sets forth the name of each of the Security Party's
Subsidiaries, the jurisdiction of its incorporation and the Persons owning the
outstanding capital stock of such Subsidiary. Each Subsidiary of the each
Security Party is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, possesses all requisite
corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted and is qualified
to do business in every jurisdiction in which its ownership of property or the
conduct of business requires it to qualify. All of the outstanding shares of
capital stock of each Subsidiary of each Security Party are validly issued,
fully paid and nonassessable, and all such shares are owned by such Security
Party or another Subsidiary of such Security Party, free and clear of all Liens
and not subject to any option or right to purchase any such shares. Except as
set forth on the Subsidiary Schedule, no Security Party or any of its
Subsidiaries owns or holds the right to acquire any shares of stock or any other
security or interest in any other Person.
6.4 Authorization; No Breach. The execution, delivery and
performance of each of the Transaction Documents and all other agreements and
instruments contemplated hereby and thereby to which each Security Party is a
party have been duly authorized by such Security Party.
-47-
Each of the Transaction Documents, such Person's Certificate of Incorporation
and all other agreements and instruments contemplated hereby and thereby to
which a Security Party is a party each constitutes a valid and binding
obligation of such Security Party, enforceable in accordance with its terms.
Except as set forth on the attached Restrictions Schedule, the execution and
delivery by each Security Party of each of the Transaction Documents and all
other agreements and instruments contemplated hereby and thereby to which it is
a party, the offering, sale and issuance of the Securities hereunder, the
issuance of the Common Stock upon exercise of the Warrants and the fulfillment
of and compliance with the respective terms hereof and thereof by such Security
Party, do not and shall not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any Lien upon such Security Party's or any of its
Subsidiaries' capital stock or assets pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency pursuant to, the charter or bylaws
of such Security Party or any of its Subsidiaries, or any law, statute, rule or
regulation to which such Security Party or any of its Subsidiaries is subject
(including any usury laws applicable to the Notes), or any agreement,
instrument, order, judgment or decree to which such Security Party or any of its
Subsidiaries is subject. Except as set forth on the Restrictions Schedule, none
of the Subsidiaries are subject to any restrictions upon making loans or
advances or paying dividends to, transferring property to, or repaying any
Indebtedness owed to, a Security Party or another Subsidiary of a Security
Party.
6.5 Financial Statements. (i) Attached hereto as the
Financial Statements Schedule are the following financial statements:
(a) (i) the compiled balance sheets of ▇▇▇▇▇ as
of December 31, 1996, 1997 and 1998, and the related statements of
income and cash flows (or the equivalent) for the respective twelve
month periods then ended and (ii) the compiled balance sheets of AHD as
of December 31, 1997 and 1998, and the related statements of income and
cash flows (or the equivalent) for the respective twelve month periods
then ended; and
(b) the unaudited consolidated balance sheet of
the Company and ▇▇▇▇▇ as of December 31, 1999 (the "Latest Balance
Sheet"), and the related statements of income and cash flows (or the
equivalent) for the 12-month period then ended.
(ii) Each of the foregoing financial statements (including
in all cases the notes thereto, if any) (a) is accurate and complete in all
material respects, is consistent with the books and records of the Borrowers
(which, in turn, are accurate and complete in all material respects) (b) has
been prepared in accordance with GAAP consistently applied, subject in the case
of the unaudited financial statements to the absence of footnote disclosure and
changes resulting from normal year-end adjustments for recurring accruals (none
of which would, alone or in the aggregate, has had
-48-
or will have a Material Adverse Effect) and (c) presents fairly the consolidated
financial condition, results of operations and cash flows of the Borrowers in
accordance with GAAP consistently applied as of the dates and for the periods
set forth therein.
6.6 Projections and Pro Forma Financial Statements.
(i) Attached hereto as Exhibit H is a true and complete
copy of the latest projections of the consolidated income and cash flows of the
Company and its Subsidiaries for the fiscal years ending December 31, 2000
through December 31, 2006. Such projections are based on underlying assumptions
of the Company which provide a reasonable basis for the projections contained
therein. Such projections have been prepared on the basis of the assumptions set
forth therein, which the Company reasonably believes are fair and reasonable in
light of the historical financial performance of the Borrowers and of current
and reasonably foreseeable business conditions and reflect the reasonable
estimate of the Company of the results of operations and other information
projected therein.
(ii) The pro forma consolidated balance sheet of the
Company and its Subsidiaries as of May 15, 2000, attached hereto as Exhibit I,
is complete and correct in all material respects and presents fairly in all
material respects the consolidated financial condition of the Company and its
Subsidiaries as of such date as if the transactions contemplated by this
Agreement and the other Transaction Documents had occurred immediately prior to
such date, and such balance sheet contains all pro forma adjustments necessary
in order to fairly reflect such assumption.
6.7 Absence of Undisclosed Liabilities. No Security Party
or its Subsidiaries has any obligation or liability (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known to such Security
Party or any of its Subsidiaries, whether due or to become due and regardless of
when asserted) arising out of transactions entered into at or prior to the
Closing, or any action or inaction at or prior to the Closing, or any state of
facts existing at or prior to the Closing other than: (i) liabilities set forth
on the Latest Balance Sheet (including any notes thereto), (ii) liabilities and
obligations which have arisen after the date of the Latest Balance Sheet in the
ordinary course of business (none of which is a liability resulting from breach
of contract, breach of warranty, tort, infringement, claim or lawsuit) (iii)
other liabilities and obligations expressly disclosed on the attached
Liabilities Schedule and (iv) immaterial liabilities not requiring disclosure
under GAAP.
6.8 No Material Adverse Change. Since the date of the
Latest Balance Sheet, there has been no change in the operating results, assets,
liabilities, operations, business, condition (financial or otherwise) or
supplier relations of each Security Party and its Subsidiaries taken as a whole
which has had or could reasonably be expected to have a Material Adverse Effect.
-49-
6.9 Absence of Certain Developments.
(i) Except as expressly contemplated by this Agreement or
as set forth on the attached Developments Schedule, since the date of the Latest
Balance Sheet, no Security Party or its Subsidiaries has:
(a) issued any notes, bonds or other debt
securities or any capital stock or other equity securities or any
securities convertible, exchangeable or exercisable into any capital
stock or other equity securities;
(b) borrowed any amount or incurred or become
subject to any liabilities, except current liabilities incurred in the
ordinary course of business and liabilities under contracts entered
into in the ordinary course of business;
(c) discharged or satisfied any Lien or paid any
obligation or liability, other than current liabilities paid in the
ordinary course of business;
(d) declared or made any payment or distribution
of cash or other property to its stockholders with respect to its
capital stock or other equity securities or purchased or redeemed any
shares of its capital stock or other equity securities (including any
warrants, options or other rights to acquire its capital stock or other
equity securities);
(e) mortgaged or pledged any of its properties
or assets or subjected them to any Lien, except Liens for current
property taxes not yet due and payable;
(f) sold, assigned or transferred any of its
tangible assets, except in the ordinary course of business, or canceled
any debts or claims;
(g) sold, assigned or transferred any
Intellectual Property Rights or other intangible assets, or disclosed
any proprietary confidential information to any Person;
(h) suffered any extraordinary losses or waived
any rights of value, whether or not in the ordinary course of business
or consistent with past practice;
(i) made Capital Expenditures or commitments
therefor that aggregate in excess of $200,000;
(j) made any loans or advances to, guarantees
for the benefit of, or any Investments in, any Persons in excess of
$50,000 in the aggregate;
-50-
(k) suffered any damage, destruction or casualty
loss exceeding in the aggregate $100,000, whether or not covered by
insurance;
(l) made any Investment in or taken steps to
incorporate any Subsidiary; or
(m) agreed to do any of the foregoing.
6.10 Assets. Except as set forth on the attached Assets
Schedule, each Security Party and its Subsidiaries have good and marketable
title to, or a valid leasehold interest in, the material properties and assets
used by them, located on their premises or shown on the Latest Balance Sheet or
acquired thereafter, free and clear of all Liens, except for Permitted Liens and
except for properties and assets disposed of in the ordinary course of business
since the date of the Latest Balance Sheet or as contemplated by the Acquisition
Agreement. Except as described on the Assets Schedule, each Security Party's and
its Subsidiaries' buildings, equipment and other tangible assets are in good
operating condition (ordinary wear and tear excepted) and are fit for use in the
ordinary course of business. Each Security Party and its Subsidiaries own, or
have a valid leasehold interest in, all assets necessary for the conduct of
their respective businesses as presently conducted and as presently proposed to
be conducted and as conducted by such Security Party or Subsidiary for the past
twelve (12) months.
6.11 Tax Matters. Except as set forth on the attached
Taxes Schedule:
(i) Each Security Party and its Subsidiaries have filed
all federal and other material Tax Returns which they are required to file under
applicable laws and regulations; all such Tax Returns are complete and correct
in all material respects and have been prepared in compliance with all
applicable laws and regulations in all material respects; each Security Party,
each of its Subsidiaries and each Affiliated Group in all material respects have
paid all Taxes due and owing by them (whether or not such Taxes are required to
be shown on a Tax Return) and have withheld and paid over to the appropriate
taxing authority all Taxes which they are required to withhold from amounts paid
or owing to any employee, stockholder, creditor or other third party; no
Security Party, any of its Subsidiaries or any Affiliated has waived any statute
of limitations with respect to any material Taxes or agreed to any extension of
time with respect to any material Tax assessment or deficiency; the accrual for
Taxes on the Latest Balance Sheet would be adequate to pay all Tax liabilities
of such Security Party if their current tax year were treated as ending on the
date of the Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax income); since
the date of the Latest Balance Sheet, no Security Party or any its Subsidiaries
has incurred any material liability for Taxes other than in the ordinary course
of business; the assessment of any additional Taxes for periods for which Tax
Returns have been filed by each Security Party, each of its Subsidiaries and
each Affiliated Group shall not exceed the recorded liability therefor on the
Latest Balance Sheet (excluding any amount recorded which is attributable solely
to timing differences between book and Tax income); with respect to
-51-
each taxable period of the Borrowers and their Subsidiaries ending on or before
December 31, 1999, either such taxable period has been audited by the relevant
taxing authority or the time for assessing or collecting income Tax with respect
to each such taxable period has closed and such taxable period is not subject to
review by any relevant taxing authority; no foreign, federal, state or local tax
audits or administrative or judicial proceedings are pending or being conducted
with respect to any Security Party, any of its Subsidiaries or any Affiliated
Group, no information related to Tax matters has been requested by any foreign,
federal, state or local taxing authority and no written notice indicating an
intent to open an audit or other review has been received by any Security Party
from any foreign, federal, state or local taxing authority; and there are no
material unresolved questions or claims concerning any Security Party's, any of
its Subsidiaries' or any Affiliated Group's Tax liability.
(ii) No Security Party or any of its Subsidiaries has made
an election under ss.341(f) of the Code. No Security Party or any of its
Subsidiaries is liable for the Taxes of another Person that is not a Subsidiary
of a Security Party (a) under Treas. Reg. ss. 1.1502-6 (or comparable provisions
of state, local or foreign law), (b) as a transferee or successor, (c) by
contract or indemnity or (d) otherwise. No Security Party or any of its
Subsidiaries is a party to any tax sharing agreement. Each Security Party, each
of its Subsidiaries and each Affiliated Group have disclosed on their federal
income Tax Returns any position taken for which substantial authority (within
the meaning of Code ss.6662(d)(2)(B)(i)) did not exist at the time the return
was filed. No Security Party or any of its Subsidiaries has made any payments,
is obligated to make payments or is a party to an agreement that could obligate
it to make any payments that would not be deductible under Code ss.280G.
(iii) No Security Party has been a member of an Affiliated
Group other than the one of which such the Company was the common parent, or
filed or been included in a combined, consolidated or unitary income Tax Return,
other than one filed by the Company.
6.12 Contracts and Commitments.
(i) Except as expressly contemplated by this Agreement or
as set forth on the attached Contracts Schedule or the attached Employee
Benefits Schedule, no Security Party or any of its Subsidiaries is a party to or
bound by any written or oral:
(a) pension, profit sharing, stock option,
employee stock purchase or other plan or arrangement providing for
deferred or other compensation to employees or any other employee
benefit plan or arrangement, or any collective bargaining agreement or
any other contract with any labor union, or severance agreements,
programs, policies or arrangements;
(b) contract for the employment of any officer,
individual employee or other Person on a full-time, part-time,
consulting or other basis providing annual
-52-
compensation in excess of $100,000 or contract relating to loans to
officers, directors or Affiliates;
(c) contract under which a Security Party or its
Subsidiaries has advanced or loaned any other Person amounts in the
aggregate exceeding $25,000;
(d) agreement or indenture relating to borrowed money
or other Indebtedness or the mortgaging, pledging or otherwise placing
a Lien on any material asset or material group of assets of a Security
Party or its Subsidiaries;
(e) Guarantee of any obligation in excess of
$50,000;
(f) lease or agreement under which a Security
Party or any of its Subsidiaries is lessee or lessor of any property,
real or personal, except for any lease of real or personal property
under which the aggregate annual rental payments do not exceed $50,000;
(g) assignment, license, indemnification or
agreement with respect to any intangible property (including any
Intellectual Property Rights);
(h) warranty agreement with respect to its
services rendered or its products sold or leased;
(i) agreement under which it has granted any
Person any registration rights (including demand and piggyback
registration rights);
(j) sales, distribution or franchise agreement;
(k) material agreement with a term of more than
six months which is not terminable by a Security Party or any of its
Subsidiaries upon less than 30 days notice without penalty; or
(l) contract or agreement prohibiting it from
freely engaging in any business or competing anywhere in the world.
(ii) All of the contracts, agreements and instruments set
forth on the Contracts Schedule are valid, binding and enforceable against each
Security Party or any of its Subsidiaries party thereto and to the best of its
knowledge, against any other party thereto, in each case in accordance with
their respective terms. Each Security Party and its Subsidiaries have performed
all material obligations required to be performed by them and are not in default
under or in breach of nor in receipt of any claim of default or breach under any
material contract, agreement or instrument
-53-
to which such Security Party or any of its Subsidiaries is subject; no event has
occurred which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance by such Security Party or
any of its Subsidiaries under any material contract, agreement or instrument to
which such Security Party or any of its Subsidiaries is subject; no Security
Party or any of its Subsidiaries has any present expectation or intention of not
fully performing all such obligations; no Security Party or any of its
Subsidiaries has knowledge of any breach or anticipated breach by the other
parties to any material contract, agreement, instrument or commitment to which
it is a party; no Security Party or any of its Subsidiaries has delivered or
received written notice or oral notice to a Responsible Officer of, or has
knowledge that any other party intends to deliver any notice of, termination or
non-renewal of term under any material contract, agreement or instrument to
which such Security Party or any of its Subsidiaries is subject; and no Security
Party or any of its respective Subsidiaries is a party to any contract requiring
it to purchase or sell goods or services or lease property above or below (as
the case may be) prevailing market prices and rates or any other materially
adverse contract or commitment in excess of $100,000 in the aggregate for all
such contracts or commitments.
6.13 Intellectual Property Rights.
(i) The attached Intellectual Property Schedule contains
a complete and accurate list of all (a) patented or registered Intellectual
Property Rights owned or used by each Security Party or any of its Subsidiaries,
(b) pending patent applications and applications for registrations of other
Intellectual Property Rights filed by each Security Party or any of its
Subsidiaries, (c) unregistered trade names and corporate names owned or used by
each Security Party or any of its Subsidiaries and (d) unregistered trademarks,
service marks, internet domain names, copyrights, mask works and computer
software owned or used by each Security Party or any of its Subsidiaries. The
Intellectual Property Schedule also contains a complete and accurate list of all
licenses and other rights granted by each Security Party or any of its
Subsidiaries to any third party with respect to any Intellectual Property Rights
and all licenses and other rights granted by any third party to each Security
Party or any of its Subsidiaries with respect to any Intellectual Property
Rights, in each case identifying the subject Intellectual Property Rights.
Except as set forth on the Intellectual Property Schedule, each Security Party
or one of its Subsidiaries owns all right, title and interest to, or has the
right to use pursuant to a valid license, all Intellectual Property Rights
necessary for the operation of the business of such Security Party and its
Subsidiaries as presently conducted and as presently proposed to be conducted,
free and clear of all Liens (other than Permitted Liens). Except as set forth on
the Intellectual Property Schedule, the loss or expiration of any Intellectual
Property Right or related group of Intellectual Property Rights owned or used by
each Security Party or any of its Subsidiaries has not had and would not
reasonably be expected to have a Material Adverse Effect, and no such loss or
expiration is pending, reasonably foreseeable or, to our knowledge, threatened.
Each Security Party and its Subsidiaries have taken all reasonable actions to
maintain and protect the Intellectual Property Rights which they own. To the
best of each Security Party's knowledge, the owners of any Intellectual Property
Rights licensed to any Security Party or its Subsidiaries have taken all
-54-
necessary actions to maintain and protect the Intellectual Property Rights which
are subject to such licenses.
(ii) Except as set forth on the attached Intellectual
Property Schedule, (a) each Security Party and its Subsidiaries own all right,
title and interest in and to all of the Intellectual Property Rights listed on
such schedule, free and clear of all Liens (other than Permitted Liens), (b)
there have been no claims made against any Security Party or its Subsidiaries
asserting the invalidity, misuse or unenforceability of any of such Intellectual
Property Rights, and there are no valid grounds for the same, (c) no Security
Party or any of its Subsidiaries has received any notices of, and, to the best
of such Security Party's knowledge, is not aware of any facts which indicate a
likelihood of, any infringement or misappropriation by, or conflict with, any
third party with respect to such Intellectual Property Rights (including any
demand or request that any Security Party or its Subsidiaries license any rights
from a third party), (d) the conduct of each Security Party's and each of its
Subsidiaries' business has not infringed, misappropriated or conflicted with and
does not infringe, misappropriate or conflict with any Intellectual Property
Rights of other Persons, and (e) to the best of each Security Party's knowledge,
the Intellectual Property Rights owned by or licensed to such Security Party or
any of its Subsidiaries have not been infringed, misappropriated or conflicted
by other Persons. Except as set forth in the Intellectual Property Schedule, the
transactions contemplated by this Agreement shall have no material adverse
effect on any Security Party's or its Subsidiaries' right, title and interest in
and to the Intellectual Property Rights listed on the Intellectual Property
Schedule.
6.14 Intentionally Omitted.
6.15 Litigation, etc. Except as set forth on the attached
Litigation Schedule, there are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of each Security Party's
knowledge, threatened against or affecting any Security Party or its
Subsidiaries or any of their respective assets, or pending or threatened by any
Security Party or its Subsidiaries against any third party, at law or in equity,
or before or by any governmental department, commission, board, bureau, agency
or instrumentality (including any actions, suit, proceedings or investigations
with respect to the transactions contemplated by this Agreement); no Security
Party or any of its Subsidiaries is subject to any arbitration proceedings under
collective bargaining agreements or otherwise or, to the best of each Security
Party's knowledge, any governmental investigations or inquiries (including
inquiries as to the qualification to hold or receive any license or permit). No
Security Party or any of its Subsidiaries is subject to any judgment, order or
decree of any court or other governmental agency.
6.16 Product Warranty. All products manufactured by each
Borrower and its Subsidiaries have in all material respects been manufactured in
conformity with all applicable contractual commitments and all express or
implied warranties. To the best of each Security Party's knowledge, no such
products contain any latent design defect.
-55-
6.17 Brokerage. Except as set forth on the attached
Brokerage Schedule, there are no claims for brokerage commissions, finders' fees
or similar compensation in connection with the transactions contemplated by this
Agreement and the other Transaction Documents based on any arrangement or
agreement binding upon any Security Party or its Subsidiaries. Each Security
Party shall pay, and hold the Purchaser harmless against, any liability, loss or
expense (including reason able attorneys' fees and out-of-pocket expenses)
arising in connection with any such claim.
6.18 Governmental Consent, etc. No permit, consent,
approval or authorization of, or declaration to or filing with, any governmental
authority is required in connection with the execution, delivery and performance
by each Security Party of this Agreement, the other Transaction Documents or the
other agreements contemplated hereby or thereby, or the consummation by such
Security Party of any other transactions contemplated hereby or thereby, except
as set forth on the attached Consents Schedule.
6.19 Insurance. No Security Party or any of its
Subsidiaries is in default with respect to its obligations under any insurance
policy maintained by such Person. The insurance coverage of each Security Party
and its Subsidiaries is customary for prudent corporations of similar size
engaged in similar lines of business. Except as set forth on the Insurance
Schedule, no Security Party or any of its Subsidiaries has any self-insurance or
co-insurance programs, and the reserves set forth on the Latest Balance Sheet
are adequate to cover all anticipated liabilities with respect to any such
self-insurance or co-insurance programs.
6.20 Employees. No Security Party is aware that any
executive or key employee of any Security Party or its Subsidiaries or any group
of employees of any Security Party or its Subsidiaries has any plans to
terminate employment with any Security Party or its Subsidiaries. Each Security
Party and its Subsidiaries have complied in all material respects with all laws
relating to the employment of labor (including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
security and other taxes), and no Security Party is aware that any Security
Party or its Subsidiaries has any material labor relations problems (including
any union organization activities, threatened or actual strikes or work
stoppages or material grievances). No Security Party, any of its Subsidiaries
or, to the best of such Security Party's knowledge, any of their employees is
subject to any noncompete, nondisclosure, confidentiality, employment,
consulting or similar agreements relating to, affecting or in conflict with the
present or proposed business activities of any Security Party or its
Subsidiaries, except for agreements between the such Security Party and its
present and former employees.
6.21 ERISA. Except as set forth on the attached Employee
Benefits Schedule:
(i) Multiemployer Plans. No Security Party has any
obligation to contribute to (or any other liability, including current or
potential withdrawal liability, with respect to) any Multiemployer Plan.
-56-
(ii) Retiree Welfare Plans. No Security Party has any
obligation to contribute to (or any other liability with respect to) any plan or
arrangement whether or not terminated, which provides medical, health, life
insurance or other welfare-type benefits for current or future retired or
terminated employees (except for limited continued medical benefit coverage
required to be provided under Section 4980B of the Code or as required under
applicable state law).
(iii) Defined Benefit Plans. No Security Party maintains,
contributes to or has any liability under (or with respect to) any employee plan
which is a tax-qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA), whether or not terminated.
(iv) Defined Contribution Plans. No Security Party
maintains, contributes to or has any liability under (or with respect to) any
employee plan which is a tax-qualified "defined contribution plan" (as defined
in Section 3(34) of ERISA), whether or not terminated.
(v) Other Plans. No Security Party maintains, contributes
to or has any liability under (or with respect to) any plan or arrangement
providing benefits to current or former employees, including any bonus plan,
plan for deferred compensation, employee health or other welfare benefit plan or
other arrangement, whether or not terminated and whether or not subject to
ERISA.
(vi) Unfunded Liability. No Plan maintained by a Security
Party or to which such Security Party has an obligation to contribute, or with
respect to which such Security Party has any other liability, has any material
unfunded liability.
(vii) Plan Qualification and Compliance. Each employee
benefit plan set forth on the Employee Benefits Schedule that is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS as to the qualification of such plan and, to
the best knowledge of the Company after due inquiry, nothing has occurred since
the date of such determination letter that could reasonably be expected to
adversely affect the qualification of such plan. Each employee benefit plan set
forth on the Employee Benefits Schedule and all related trusts, insurance
contracts and funds have been maintained, funded and administered in compliance
in all material respects with their respective terms and with all applicable
Laws.
(viii) The Company and each Borrower. For purposes of this
Section 6.21, the term "Security Party" includes all organizations under common
control with the Company or each Borrower pursuant to Section 414(b), (c), (m)
or (o) of the Code.
6.22 Compliance with Laws. No Security Party or any of its
Subsidiaries has violated any law or any governmental regulation or requirement
which violation has had or would reasonably be expected to have a Material
Adverse Effect, and no Security Party or any of its Subsidiaries has received
notice of any such violation.
-57-
6.23 Environmental and Safety Matters. Except as set forth
on the attached Environmental and Safety Matters Schedule:
(i) Each Security Party and its Subsidiaries have
complied and are in compliance in all material respects with all Environmental
and Safety Requirements.
(ii) Without limiting the generality of the foregoing,
each Security Party and its Subsidiaries have obtained and complied with, and
are in compliance with, in all material respects, all permits, licenses and
other authorizations that may be required pursuant to Environmental and Safety
Requirements for the occupation of their facilities and the operation of their
business; a list of all such permits, licenses and other authorizations is set
forth on the Environmental and Safety Matters Schedule.
(iii) No Security Party or any of its Subsidiaries has
received any written or oral notice, report or other information regarding any
actual or alleged material violation of Environmental and Safety Requirements,
or any material liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to such Security Party or any of
its Subsidiaries or their facilities arising under Environmental and Safety
Requirements.
(iv) None of the following exists at any property or
facility owned or operated by each Security Party and its Subsidiaries : (1)
underground storage tanks; (2) asbestos-containing material in any form or
condition; (3) materials or equipment containing polychlorinated biphenyls; or
(4) landfills, surface impoundments, or disposal areas.
(v) No Security Party or any of its Subsidiaries has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including any hazardous
substance, or owned or operated any property or facility (and no such property
or facility is contaminated by any such substance) in a manner that has given or
could give rise to material liabilities of such Security Party or its
Subsidiaries, including any liability for response costs, corrective action
costs, personal injury, property damage, natural resources damages or attorney
fees, pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA") or the Solid Waste Disposal Act, as
amended or any other Environmental and Safety Requirements.
(vi) No facts, events or conditions relating to the past
or present facilities, properties or operations of each Security Party or its
Subsidiaries will prevent, hinder or limit continued compliance in all material
respects with Environmental and Safety Requirements, give rise to any
investigatory, remedial or corrective obligations pursuant to Environmental and
Safety Requirements, or give rise to any other material liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental and Safety Requirements, including any
-58-
relating to onsite or offsite releases or threatened releases of hazardous
materials, substances or wastes, personal injury, property damage or natural
resources damage.
(vii) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any obligations
for site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental and
Safety Requirements.
(viii) No Security Party or its Subsidiaries has, either
expressly or by operation of law, assumed or undertaken any liability, including
any obligation for corrective or remedial action, of any other person relating
to Environmental and Safety Requirements.
6.24 Small Business Matters. Each Security Party
acknowledges that Prairie is a federally licensed SBIC under the SBIC Act. The
Company, together with its "affiliates" (as that term is defined in 13 CFR
ss.121.103), is a "small business concern" within the meaning of the SBIC
Regulations, including 13 CFR ss.121.103. After giving effect to the
transactions contemplated by the Transaction Documents, the Company and its
affiliates will have 500 or fewer full-time equivalent employees. The
information regarding the Company and its affiliates set forth in the Small
Business Administration Form 480, Form 652 and Form 1031 delivered at the
Closing is accurate and complete. Copies of such forms have been completed and
executed by the Company and delivered to the Purchaser at the Closing together
with a written statement of the Company on behalf of each Security Party
regarding its planned use of the proceeds from the sale of the Notes and the
Warrants. No Security Party or any of its Subsidiaries presently engages in, and
it shall not hereafter engage in, any activities, nor shall any Security Party
or its Subsidiaries use directly or indirectly the proceeds of the Financing for
any purpose, for which an SBIC is prohibited from providing funds by the SBIC
Regulations (including 13 CFR ss.107.720).
6.25 Affiliated Transactions. Except as set forth on the
attached Affiliated Transactions Schedule, no officer, director, employee,
stockholder or Affiliate of any Security Party or any of its Subsidiaries or any
individual related by blood, marriage or adoption to any such individual or any
entity in which any such Person or individual owns any beneficial interest, is a
party to any agreement, contract, commitment, transaction or arrangement with
any Security Party of any of its Subsidiaries or has any material interest in
any material property used by any Security Party or any of its Subsidiaries,
except for (i) employment arrangements and compensation in the ordinary course
of business and (b) transactions which in the aggregate shall not exceed
$100,000.
6.26 Solvency, etc. Each Security Party is solvent as of
the date of this Agreement and shall not become insolvent as a result of the
consummation of the transactions contemplated by this Agreement. Each Security
Party is, and after giving effect to the transactions contemplated by this
Agreement shall be, able to pay its debts as they become due, and each Security
Party's property now has, and after giving effect to the transactions
contemplated hereby shall have, a fair
-59-
salable value greater than the amounts required to pay its debts (including a
reasonable estimate of the amount of all contingent liabilities). Each Security
Party has adequate capital to carry on its business, and after giving effect to
the transactions contemplated by this Agreement, each Security Party shall have
adequate capital to conduct its business. No transfer of property is being made
and no obligation is being incurred in connection with the transactions
contemplated by this Agreement with the intent to hinder, delay or defraud
either present or future creditors of any Security Party.
6.27 Investment Company. No Security Party or any of its
Subsidiaries is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended, or is any
Security Party or any of its Subsidiaries, directly or indirectly, controlled by
or acting on behalf of any Person which is an "investment company" within the
meaning of such act. The purchase of the Securities, the application of the
proceeds and repayment thereof by each Security Party and the consummation of
the transactions contemplated by this Agreement will not violate any provision
of such act or any rule, regulation or order issued by the Securities and
Exchange Commission thereunder.
6.28 Margin Regulations. No Security Party owns any
"margin stock," as the term is defined in Regulation U of the Federal Reserve
Board, and the proceeds of the Securities will be used only for the purposes
contemplated hereunder. None of the proceeds of the Securities will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause the loans hereunder to be considered "purpose credit"
within the meaning of Regulations U or X of the Federal Reserve Board. The
purchase of the Securities will not constitute a violation of such Regulations U
or X.
6.29 Public Utility Holding Company Act. No Security Party
is a "holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company," or an "affiliate" of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
6.30 Acquisition Agreement and Senior Loan Agreement
Representations. The representations and warranties made by the Sellers and the
Security Parties in Articles III and IV of the Acquisition Agreement and by the
Security Parties in Section 10 of the Senior Loan Agreement are true and correct
in all material respects, and the representations and warranties made by the
Security Parties in Article IV of the Acquisition Agreement and Section 10 of
the Senior Loan Agreement are true and correct in all material respects, in each
case regardless of any limitation on survival set forth therein.
6.31 Disclosure. Neither this Agreement nor any of the
schedules, attachments, written statements, documents, certificates or other
items prepared or supplied to any Purchaser by
-60-
or on behalf of each Security Party with respect to the transactions
contemplated hereby contain any untrue statement of a material fact or omit a
material fact necessary to make each statement contained herein or therein not
misleading. There is no fact which any Security Party has disclosed to the
Purchaser in writing and of which any of its officers, directors or executive
employees is aware (other than general economic conditions) and which has had or
would reasonably be expected to have a Material Adverse Effect.
6.32 Closing Date. The representations and warranties of
each Security Party contained in this Section 6 and elsewhere in this Agreement
and all information contained in any exhibit, schedule or attachment hereto or
in any certificate or other writing delivered by, or on behalf of, each Security
Party to any Purchaser shall be true and correct in all material respects on the
date of the Closing as though then made, both immediately prior to and
immediately after giving effect to the transactions contemplated by this
Agreement and the other Transaction Documents.
6.33 Business of the Company. The Company has no assets
other than all of the outstanding capital stock of each Borrower. The Company
has not conducted and does not conduct any business other than holding the
capital stock of each Borrower.
Section 7. Events of Default.
7.1 Definition. An Event of Default shall be deemed to
have occurred if:
(i) the Borrowers fail to pay when due and payable
(whether at maturity or otherwise) the full amount of interest then accrued on
any Notes and the continuance thereof for five (5) days, or the full amount of
any principal payment (together with any applicable premium) on any Notes or any
other amounts payable under this Agreement or the Notes;
(ii) any Security Party:
(a) breaches, fails to perform or observe any of
the covenants contained in Sections 4.5, 4.6 and 4.7; or
(b) breaches, fails to perform or observe any
other provision contained herein or in the Notes or the Warrants or any
other instrument delivered pursuant hereto or thereto and (1) if such
failure has had or could have a Material Adverse Effect, such failure
continues uncured for 15 days or (2) if such failure has not had and
could not have a Material Adverse Effect, if such failure continues
uncured for 60 days or the Security Parties are not proceeding
diligently to cure such failure;
(iii) any representation, warranty or information contained
herein or required to be furnished to any holder of the Notes pursuant to this
Agreement, or any writing furnished by any
-61-
Security Party to any holder of the Notes, is false or misleading in any
material respect on the date made, repeated or furnished;
(iv) any Security Party or its Subsidiaries makes an
assignment for the benefit of creditors or admits in writing its inability to
pay its debts generally as they become due; or an order, judgment, decree or
injunction is entered adjudicating such Security Party or any of its
Subsidiaries bankrupt or insolvent or requiring the dissolution or split up of
such Security Party or any of its Subsidiaries or preventing such Security Party
or any of its Subsidiaries from conducting all or any part of its business; or
any order for relief with respect to any Security Party or its Subsidiaries is
entered under the Federal Bankruptcy Code; or any Security Party or its
Subsidiaries petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of such Security Party or any of its
Subsidiaries, or of any substantial part of the assets of such Security Party or
any of its Subsidiaries, or commences any proceeding (other than a proceeding
for the voluntary liquidation of its and dissolution of any of its Subsidiaries)
relating to such Security Party or any of its Subsidiaries under any bankruptcy
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar laws of any jurisdiction now or hereafter in effect; or
any such petition or application is filed, or any such proceeding is commenced,
against such Security Party or any of its Subsidiaries and either (a) such
Security Party or any such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein or (b) such petition, application or
proceeding is not dismissed within 60 days;
(v) a final judgment in excess of $300,000 is rendered
against any Security Party or its Subsidiaries and, within 60 days after entry
thereof, such judgment is not discharged in full or execution thereof stayed
pending appeal, or within 60 days after the expiration of any such stay, such
judgment is not discharged in full;
(vi) any Security Party's or its Subsidiaries' assets are
attached, seized, subjected to a writ or distress warrant, or are levied upon,
or come within the possession of any receiver, trustee, custodian or assignee
for the benefit of creditors in connection with any obligations or liabilities
of the Security Parties and their Subsidiaries and such attachment, seizure,
warrant, levy or possession could reasonably be expected to have a Material
Adverse Effect;
(vii) any Security Party or its Subsidiaries defaults in
the payment when due, or in performance or observance of, any material
obligation of, or condition agreed to by, any Security Party or its Subsidiaries
with respect to any material purchase or lease of goods or services where such
default, singly or in the aggregate with all other such defaults, might
reasonably be expected to have a Material Adverse Effect;
(viii) (a) any Security Party or its Subsidiaries defaults
(1) in payment when due (after taking into account any applicable grace period)
of any amounts (whether by upon scheduled payment, required prepayment, required
cash collection, acceleration, demand or otherwise) under
-62-
any indenture, loan agreement, note or other instrument under which any evidence
of Indebtedness of such Security Party or its Subsidiaries exceeding $200,000 in
principal amount has been or hereafter may be issued or outstanding (excluding
any evidence of Indebtedness issued by the such Security Party or its
Subsidiaries in connection with the Senior Debt) ("Material Indebtedness") or
(2) in compliance with the terms, covenants or other provisions of any such
indenture, loan agreement, note or other instrument, if the effect of such
default in compliance is to accelerate or to permit the acceleration of the
stated maturity of such Material Indebtedness (whether or not actually
accelerated) or (in the case of demand obligations) results in demand for
payment of such Material Indebtedness, or (b) any other event shall occur or
conditions shall exist with respect to such Material Indebtedness, if the effect
of such event or condition is to cause, or to permit the holders thereof to
cause, such Material Indebtedness to become due and payable prior to its
scheduled maturity dates (other than refinancing of such Material Indebtedness
permitted herein);
(ix) Intentionally Omitted;
(x) there shall occur an acceleration of any of the
Senior Debt following an "Event of Default" as defined in the Senior Loan
Agreement;
(xi) any of this Agreement, the Notes or the Warrants
shall cease to be in full force and effect or declared to be null and void by a
court of competent jurisdiction;
(xii) a Change in Control shall occur;
(xiii) the employment of ▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇ is
terminated for any reason and no replacement reasonably satisfactory to the
holders of a majority of the outstanding principal amount of the Notes is
employed by any Borrower within 90 days after such termination;
(xiv) the institution of any steps by any Security Party or
any ERISA Affiliate or any other Person to terminate a Pension Plan if, as a
result of such termination, such Security Party or any such ERISA Affiliate
could be required to make a contribution to such Pension Plan, or could
reasonably expect to incur a liability or obligation to such Pension Plan, and
in the opinion of the holders of the Notes holding a majority of the aggregate
unpaid principal amount of the Notes, such contribution, liability or obligation
would reasonably be expected to have a Material Adverse Effect; or
(xv) (a) with respect to any Plan, a prohibited
transaction within the meaning of Section 4975 of the Code or Section 406 of
ERISA occurs which in the reasonable determination of the holders of the Notes
holding a majority of the unpaid principal amount of the Notes could result in
liability to any Security Party or its Subsidiaries; (b) with respect to any
Title IV Plan, the filing of a notice to voluntarily terminate any such plan in
a distress termination; (c) with respect to any Multiemployer Plan, any Security
Party, any of its Subsidiaries or any ERISA Affiliate shall
-63-
incur any Withdrawal Liability; (d) with respect to any Qualified Plan, any
Security Party, any of its Subsidiaries or any ERISA Affiliate shall incur an
accumulated funding deficiency or request a funding waiver from the IRS; or (e)
with respect to any Title IV Plan or Multiemployer Plan which has an ERISA Event
not described in clauses (b) through (d) hereof, in the reasonable determination
of the holders of the Notes holding a majority of the unpaid principal amount of
the Notes there is a reasonable likelihood for termination of any such plan by
the PBGC; provided, however, that the events listed in clauses (a) through (e)
hereof shall constitute Events of Default only if the liability, deficiency or
waiver request of any Security Party or any ERISA Affiliate, whether or not
assessed, could, in the opinion of the holders of a majority of the outstanding
principal amount or the Notes, reasonably be expected to have a Material Adverse
Effect.
The foregoing shall constitute Events of Default whatever the
reason or cause for any such Event of Default and whether it is voluntary or
involuntary or is effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body.
7.2 Consequences of Events of Default.
(i) If any Event of Default has occurred and continued
for a period of 30 days thereafter, then the interest rate on the Notes shall
increase immediately by an increment of two (2) percentage points (or, if less,
the highest rate permitted by law). If any such Event of Default has occurred
and continues for a period of 360 days thereafter, then the interest rate on the
Notes shall increase by a further increment of two (2) percentage points (for a
total increase of four (4) percentage points) (or, if less, the highest rate
permitted by law). Any increase of the interest rate resulting from the
operation of this subparagraph shall terminate as of the close of business on
the date on which no Events of Default exist (subject to subsequent increases
pursuant to this subparagraph).
(ii) If an Event of Default of the type described in
Section 7.1(iv) has occurred, then the aggregate outstanding principal amount of
all of the Notes (together with all accrued interest thereon and all other
amounts due and payable with respect thereto) shall become immediately due and
payable without any action on the part of the holders of the Notes, and the
Borrowers shall immediately pay to the holders of the Notes all amounts due and
payable with respect to the Notes.
(iii) If an Event of Default (other than under Section
7.1(iv)) has occurred and is continuing, then the holder or holders of Notes
representing a majority of the aggregate principal amount of Notes then
outstanding may declare all or any portion of the outstanding principal amount
of the Notes (together with all accrued interest thereon and all other amounts
due and payable with respect thereto) to be immediately due and payable and may
demand immediate payment of all or any portion of the outstanding principal
amount of the Notes (together with all such other amounts then due and payable)
owned by such holder or holders. The Borrowers shall give prompt written
-64-
notice of any such demand to the other holders of Notes, each of which may
demand immediate payment of all or any portion of such holder's Note. If any
holder or holders of the Notes demand immediate payment of all or any portion of
the Notes, the Borrowers shall immediately pay to such holder or holders all
amounts due and payable with respect to such Notes.
Section 8. Miscellaneous.
8.1 Expenses. Each Security Party shall pay, and hold the
Purchaser and all holders of Securities and Underlying Common Stock harmless
against liability for the payment of, and reimburse on demand as and when
incurred from and against, (i) all costs and expenses incurred by each of them
in connection with their due diligence review of each Security Party and its
Subsidiaries, the preparation, negotiation, execution and interpretation of this
Agreement, the Notes, the Warrants and the agreements contemplated hereby and
thereby, and the consummation of all of the transactions contemplated hereby and
thereby (including all fees and expenses of legal counsel, environmental
consultants and accountants), which costs and expenses shall be payable at the
Closing or, if the Closing does not occur, payable upon demand, (ii) all fees
and expenses incurred with respect to any amendments or waivers (whether or not
the same become effective) under or in respect of each of the Transaction
Documents, the Certificate of Incorporation of each Security Party and the other
agreements and instruments contemplated hereby and thereby, (including all
expenses incurred in connection with any proposed merger, sale or
recapitalization of any Security Party), (iii) all recording and filing fees,
stamp and other taxes which may be payable in respect of the execution and
delivery of this Agreement or the issuance, delivery or acquisition of any
Securities or any shares of Common Stock issuable upon exercise of the Warrants,
(iv) the reasonable fees and expenses incurred with respect to the
interpretation and enforcement of the rights granted under this Agreement, the
Securities, the Underlying Common Stock, the Intercreditor Agreement, the
Equityholders Agreement, the Stockholders Agreement, the other Investment
Documents, the Certificate of Incorporation of each Security Party and the
agreements or instruments contemplated hereby and thereby (including costs of
collection), and (v) the reasonable fees and expenses incurred by each such
Person in any filing with any governmental agency with respect to its investment
in any Security Party or in any other filing with any governmental agency with
respect to the any Security Party which mentions such Person. If the Security
Parties fail to pay when due any amounts due the Purchaser or fails to comply
with any of its obligations pursuant to this Agreement or any other agreement,
document or instrument executed or delivered in connection herewith, the
Security Parties shall, upon demand by the Purchaser, pay to the Purchaser such
further amounts as shall be sufficient to cover the cost and expense (including,
but not limited to attorneys' fees) incurred by or on behalf of the Purchaser in
collecting all such amounts due or in otherwise enforcing the Purchaser's rights
and remedies hereunder. The Security Parties also agree to pay to the Purchaser
all costs and expenses incurred by them, including reasonable compensation to
their attorneys for all services rendered, in connection with the investigation
of any Event of Default and enforcement of their rights hereunder or under the
other Investment Documents.
-65-
8.2 Remedies. Each holder of Securities and Underlying
Common Stock shall have all rights and remedies set forth in this Agreement, the
Securities, the Equityholders Agreement, the Stockholders Agreement, the other
Investment Documents and the Certificate of Incorporation of each Security Party
and all rights and remedies which such holders have been granted at any time
under any other agreement or contract and all of the rights which such holders
have under any law. No remedy hereunder or thereunder conferred is intended to
be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or
thereunder or now or hereafter existing at law or in equity or by statute or
otherwise. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law.
8.3 Purchaser's Investment Representations. The Purchaser
hereby represents that it is acquiring the Restricted Securities purchased
hereunder or acquired pursuant hereto for its own account with the present
intention of holding such securities for purposes of investment, and that it has
no intention of selling such securities in a public distribution in violation of
the federal securities laws or any applicable state securities laws; provided
that nothing contained herein shall prevent the Purchaser and subsequent holders
of Restricted Securities from transferring such securities in compliance with
the provisions of Section 5 hereof. Each certificate or instrument representing
Restricted Securities shall be imprinted with a legend in substantially the
following form:
(a) "The securities represented by this certificate were
originally issued on May 17, 2000, and have not been registered under
the Securities Act of 1933, as amended. The transfer of the securities
represented by this certificate is subject to the conditions specified
in the Note and Warrant Purchase Agreement, dated as of May 17, 2000
and as amended and modified from time to time, among the Company,
the Borrowers, the initial holder hereof and certain investors, who
from time to time become parties thereto in accordance with the
provisions thereof, and the [Company] [Borrowers] reserve[s] the right
to refuse the transfer of such security until such conditions have been
fulfilled with respect to such transfer. Upon written request, a copy
of such conditions shall be furnished by the [Company][Borrowers] to
the holder hereof without charge."
(b) "The securities represented by this certificate were
originally issued on May 17, 2000, and have not been registered under
the Securities Act of 1933, as amended. The transfer of the securities
represented by this certificate is subject to the conditions specified
in the Equityholders Agreement, dated as of May 17, 2000 and as amended
and modified from time to time, among the Company and the stockholders
party thereto, and the [Company] [Borrowers] reserve[s] the right to
refuse the transfer of such security until such conditions have been
fulfilled with
-66-
respect to such transfer. Upon written request, a copy of such
conditions shall be furnished by the [Company][Borrowers] to the holder
hereof without charge."
8.4 Amendments and Waivers. Except as otherwise expressly
provided herein, the provisions of this Agreement and the provisions of the
Notes may be amended and each Security Party may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if such Security Party has obtained the written consent of the holders of a
majority of the outstanding principal amount of the Notes; provided that no such
action shall change (i) the rate at which or the manner in which interest
accrues on the Notes or the time at which such interest becomes payable or (ii)
any provision relating to the scheduled payments or prepayments of principal on
the Notes, without the written consent of the holders of at least 80% of the
outstanding principal amount of the Notes; provided further, that if there are
no Notes outstanding, the provisions of this Agreement may be amended or waived
by the Security Parties and each Security Party may take any action herein
prohibited, only if such Security Party has obtained the written consent of the
holders of a majority of the Underlying Common Stock. No other course of dealing
between any Security Party and the holder of any Warrant or Underlying Common
Stock or any delay in exercising any rights hereunder or under the Notes or the
Certificate of Incorporation of any Security Party shall operate as a waiver of
any rights of any such holders. For purposes of this Agreement, Notes or
Underlying Common Stock held by any Security Party or its Subsidiaries shall not
be deemed to be outstanding. If any Security Party pays any consideration to any
holder of Notes or Underlying Common Stock for such holder's consent to any
amendment, modification or waiver hereunder, such Security Party shall also pay
each other holder granting its consent hereunder equivalent consideration
computed on a pro rata basis.
8.5 Survival of Agreement. All covenants, representations
and warranties contained in this Agreement, the Notes and/or the Warrants and/or
the other Investment Documents or made in writing by each Security Party in
connection herewith or therewith shall survive the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
regardless of any investigation made by any Purchaser or on its behalf. In
addition, the obligations of each Security Party pursuant to Sections 8.1, 8.14,
8.17 and 8.18 shall survive the repayment of all amounts payable pursuant to
this Agreement, the Notes and the Warrants.
8.6 No Setoffs, etc. All payments hereunder and under the
Notes and the Warrants shall be made by each Security Party without setoff,
offset, deduction or counterclaim, free and clear of all taxes, levies, imports,
duties, fees and charges, and without any withholding, restriction or conditions
imposed by any governmental authority. If any Security Party shall be required
by any law to deduct, setoff or withhold any amount from or in respect of any
payment to any Purchaser hereunder or under the Notes or the Warrants, then the
amount so payable to the Purchaser shall be increased as may be necessary so
that, after making all required deductions,
-67-
setoffs and withholdings, the Purchaser shall receive an amount equal to the sum
they would have received had no such deductions, setoffs or withholding been
made.
8.7 Successors and Assigns. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether or not so expressed; provided that no Security Party
shall be permitted to assign its rights or obligations under this Agreement, the
Notes or the Warrants. In addition, and whether or not any express assignment
has been made, the provisions of this Agreement which are for any Purchaser's
benefit as a purchaser or holder of Securities or Underlying Common Stock are
also for the benefit of, and enforceable by, any subsequent holder of such
Securities or such Underlying Common Stock. Except as otherwise expressly
provided herein, nothing expressed in or implied from this Agreement, the Notes,
the Warrants, the Equityholders Agreement or the holders Agreement is intended
to give, or shall be construed to give, any Person, other than the parties
hereto and thereto and their permitted successors and assigns, any benefit or
legal or equitable right, remedy or claim under or by virtue of this Agreement
or any such other document.
8.8 Aggregation. For purposes of this Agreement and the
Equityholders Agreement, all holdings of Notes and Underlying Common Stock by
Persons who are Affiliates of each other shall be aggregated for purposes of
meeting any threshold tests under this Agreement and the Equityholders
Agreement.
8.9 Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
8.10 Counterparts. This Agreement may be executed in two
or more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together shall constitute one
and the same Agreement.
8.11 Descriptive Headings; Interpretation. The descriptive
headings of this Agreement, the Notes and the Warrants are inserted for
convenience only and do not constitute a substantive part of this Agreement.
8.12 GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF
DELAWARE SHALL GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS
AND OBLIGATIONS OF THE COMPANY AND ITS STOCKHOLDERS. ALL OTHER ISSUES AND
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT AND THE SCHEDULES HERETO AND (EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED THEREIN) THE EXHIBITS HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
-68-
ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF
ILLINOIS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF ILLINOIS. IN FURTHERANCE OF THE
FOREGOING, THE INTERNAL LAW OF THE STATE OF ILLINOIS SHALL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND
EXHIBITS HERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR
CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD
ORDINARILY APPLY.
8.13 Notices. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid), mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid or sent via
facsimile to the number set forth below with a copy mailed to the recipient as
set forth above. Such notices, demands and other communications shall be sent to
the Purchaser and to each Security Party at the addresses indicated below:
To each Security Party:
c/o Krane Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copies to:
H.I.G. Capital, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
White & Case LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
-69-
To The Purchaser:
Prairie Capital Mezzanine Fund, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: C. ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
8.14 Consideration for Warrants and Underlying Common
Stock; Treatment of Fees. The Purchaser and each Security Party acknowledge and
agree that the fair market value of the Initial Note issued hereunder is
$2,450,000, the fair market value of the Supplemental Note proposed to be issued
hereunder is $985,000, the fair market value of the Initial Warrant issued
hereunder is $50,000 and the fair market value of the Supplemental Warrant
proposed to be issued hereunder is $15,000 and that, for all purposes (including
tax and accounting), the consideration for the issuance of the Initial Warrant
shall be allocated as set forth in Section 2.2(i) hereof and the consideration
for the issuance of the Supplemental Warrant shall be allocated as set forth in
Section 2.2(ii). The Purchaser and each Security Party shall file their
respective federal, state and local Tax Returns in a manner which is consistent
with such valuation and allocation and shall not take any action or position
(whether in preparation of Tax Returns, financial statements or otherwise) which
is inconsistent with any of the above.
8.15 Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. The parties intend that
each representation, warranty, and covenant contained herein shall have
independent significance. If any party has breached any representation,
warranty, or covenant contained herein in any respect or any Event of
-70-
Default shall occur, the fact that there exists another representation,
warranty, or covenant or Event of Default relating to the same subject matter
(regardless of the relative levels of specificity) which such party has not
breached shall not detract from or mitigate the fact that such party is in
breach of the first representation, warranty, or covenant or that the first
Event of Default shall have occurred.
8.16 Complete Agreement. This Agreement, those documents
expressly referred to herein, and the other documents of even date herewith
delivered or executed in connection with the transactions contemplated hereby
embody the complete agreement and understanding among the parties and supersede
any prior agreements or representations by or among the parties, written or
oral, which may have related to the subject matter hereof in any way.
8.17 Indemnification. In consideration of each Purchaser's
execution and delivery of this Agreement and purchase the Securities hereunder
and in addition to all of each Security Party's other obligations under this
Agreement and in addition to all other rights and remedies available at law or
in equity, each Security Party shall defend, protect and indemnify the Purchaser
and each other holder of Securities or Underlying Common Stock and all of their
officers, directors, shareholders, partners, affiliates, employees, agents,
representatives, successors and assigns (including those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees"), and save and hold each of them harmless from and against, and
pay on behalf of or reimburse such party on demand as and when incurred, any and
all actions, causes of action, suits, claims, losses (including diminutions in
value and consequential damages), costs, penalties, fees, liabilities and
damages and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), including reasonable attorneys' fees and disbursements, interest and
penalties and all amounts paid in investigation, defense or settlement of any of
the foregoing and claims relating to any of the foregoing (the "Liabilities"),
incurred by the Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities, (b)
the execution, delivery, performance or enforcement of this Agreement and any
other instrument, document or agreement executed pursuant hereto by any of the
Indemnitees, except to the extent any such Liabilities are caused by the
particular Indemnitee's gross negligence or willful misconduct and (c) the past,
present or future environmental condition of any property owned, operated or
used by any Security Party, any of its Subsidiaries, their predecessors or
successors or of any offsite treatment, storage or disposal location associated
therewith, including the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, release, or threatened release into, onto or
from, any such property or location of any toxic, chemical or hazardous
substance, material or waste (including any losses, liabilities, damages,
injuries, penalties, fees, costs, expenses or claims asserted or arising under
any Environmental and Safety Requirement) regardless of whether caused by, or
within the control of, such Security Party or any of its Subsidiaries. To the
extent that the foregoing undertaking by each Security Party may be
unenforceable for any reason, each Security Party shall
-71-
make the maximum contribution to the payment and satisfaction of each of the
Liabilities which is permissible under applicable law.
8.18 Payment Set Aside. To the extent that any Security
Party makes a payment or payments to the Purchaser hereunder or under the Notes
or the Purchaser enforces its rights or exercises its right of setoff hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to such Security Party, a
trustee, receiver or any other Person under any law (including any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
8.19 Jurisdiction and Venue. Each of the parties (i)
submits to the jurisdiction of any state or Federal court sitting in Chicago,
Illinois in any legal suit, action or proceeding arising out of or relating to
this Agreement, the Notes or the Warrants, (ii) agrees that all claims in
respect of the action or proceeding may be heard or determined in any such court
and (iii) agrees not to bring any action or proceeding arising out of or
relating to this Agreement, the Notes or the Warrants in any other court. Each
of the parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other party with respect thereto. Any
party may make service on any other party by sending or delivering a copy of the
process to the party to be served at the address and in the manner provided for
the giving of notices in Section 8.13. Each party agrees that a final judgment
in any action or proceeding so brought shall be conclusive and may be enforced
by suit on the judgment or in any other manner provided by law. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of the Purchaser or holders of Underlying Common Stock to
bring proceedings against the company in the courts of any other jurisdiction.
To the extent provided by law, should any Security Party, after being so served,
fail to appear or answer to any summons, complaint, process or papers so served
within the number of days prescribed by law after the mailing thereof, the such
Security Party shall be deemed in default and an order and/or judgment may be
entered by the court against such Security Party as demanded or prayed for in
such summons, complaint, process or papers. The exclusive choice of forum for
each Security Party set forth in this Section 8.19 shall not be deemed to
preclude the enforcement by the Purchaser or any holder of Notes or Underlying
Common Stock of any judgment obtained in any other forum or the taking by the
Purchaser or any holder of Notes or Underlying Common Stock of any action to
enforce the same in any other appropriate jurisdiction, and each Security Party
hereby waives the right to collaterally attack any such judgment or action.
8.20 Waiver of Right to Jury Trial. EACH SECURITY PARTY AND
EACH HOLDER OF NOTES AND WARRANTS HEREBY WAIVES, TO THE EXTENT PERMITTED
-72-
BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO,
IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE NOTES OR THE WARRANTS
THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
EACH SECURITY PARTY AGREES THAT THIS SECTION 8.20 IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT THE PURCHASER WOULD NOT PURCHASE
THE NOTES OR WARRANTS HEREUNDER IF THIS SECTION 8.20 WERE NOT PART OF THIS
AGREEMENT.
8.21 Certain Waivers. Each Borrower hereby waives
diligence, presentment, protest and demand and notice of protest and demand,
dishonor and nonpayment of the Notes, and expressly agrees that the Notes, or
any payment thereunder, may be extended from time to time and that the holder
thereof may accept security for the Notes or release security for the Notes, all
without in any way affecting the liability of such Borrower thereunder.
8.22 Joint and Several Liability of the Borrowers. Each
Borrower shall be jointly and severally liable hereunder and under each of the
Investment Documents to which it is a party with respect to all obligations
thereunder (the "Borrower Obligations"), regardless of which Borrower actually
receives the proceeds of the Notes, or the manner in which the Company, any
other Borrower or the Purchaser account therefor in their respective books and
records. Notwithstanding the foregoing, (i) each Borrower's obligations and
liabilities with respect tot he proceeds of the Notes which it receives, and
related fees, costs and expenses, and (ii) each Borrower's obligations and
liabilities arising as a result of the joint and several liability of a Borrower
hereunder with respect to proceeds of the Notes received by any other Borrower,
together with the related fees, costs and expenses, shall be separate and
distinct obligations, both of which are primary obligations of such Borrower.
Neither the joint and several liability of any Borrower shall be impaired or
released by (A) the failure of the Purchaser, any successor or assigns thereof,
or any holder of any Note or any of the Borrower Obligations to assert any claim
or demand or to exercise or enforce any right, power or remedy against any
Borrower or its Subsidiaries, any other Person or otherwise; (B) any extension
or renewal for any period (whether or not longer than the original period) or
exchange of any of the Borrower Obligations or the release or compromise of any
obligations of any nature of any Person with respect thereto; (C) the surrender,
release or exchange of all or any part of any property securing payment,
performance and/or observance of any of the Borrower Obligations or the
compromise or extension or renewal for any period (whether or not longer than
the original period) of any obligations of any nature of any Person with respect
to any such property; (D) any action or inaction on the part of the Purchaser,
or any other event or condition with respect to any other Borrower, including
any such action or inaction or other event or condition, which might otherwise
constitute a defense available to, or a discharge of, such other Borrower, or a
guarantor or surety of or for any or all of the Borrower Obligations or (E) any
other act, matter or thing (other than payment or performance of the Borrower
Obligations) which would or might, in
-73-
the absence of this provision, operate to release, discharge or otherwise
prejudicially affect the obligations of such or any other Borrower.
[remainder of page intentionally left blank;
signature page follows]
-74-
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
▇▇▇▇▇ HOLDINGS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Its: President
--------------------------------------
▇▇▇▇▇ PRODUCTS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Its: Vice President
--------------------------------------
PRAIRIE CAPITAL MEZZANINE FUND, L.P.
By: ▇▇▇▇▇▇▇ & ▇▇▇▇ Capital, L.L.C.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Its: Managing Member
Purchase Agreement
LIST OF EXHIBITS
Exhibit A - Form of Initial Note
Exhibit A-1 - Form of Supplemental Note
Exhibit B - Form of Initial Warrant
Exhibit B-1 - Form of Supplemental Warrant
Exhibit C - Equityholders Agreement
Exhibit D - Guaranty
Exhibit E - Opinion of Counsel
Exhibit F - Intentionally Omitted
Exhibit G - Officer's Certificate
Exhibit H - Projections
Exhibit I - Pro Formas
Purchase Agreement
LIST OF DISCLOSURE SCHEDULES
Continuing Members Schedule
Indebtedness to be Repaid Schedule
Indebtedness Schedule
Liens Schedule
Use of Proceeds Schedule
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Contracts Schedule
Employee Benefits Schedule
Intellectual Property Schedule
Litigation Schedule
Brokerage Schedule
Consents Schedule
Insurance Schedule
Environmental and Safety Matters Schedule
Affiliated Transactions Schedule
Purchase Agreement
FIRST AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT AND
OTHER INVESTMENT DOCUMENTS
THIS FIRST AMENDMENT TO THE NOTE AND WARRANT PURCHASE AGREEMENT AND
OTHER INVESTMENT DOCUMENTS (this "Amendment"), dated as of December ___, 2001,
is by and among ▇▇▇▇▇ HOLDINGS, INC., a Delaware corporation ("Holdings"), ▇▇▇▇▇
PRODUCTS, INC., a New York corporation (the "Borrower") and PRAIRIE CAPITAL
MEZZANINE FUND, L.P., a Delaware limited partnership ("Prairie").
RECITALS:
A. Holdings, Borrower and Prairie are parties to that certain
Note and Warrant Purchase Agreement, dated as of May 17, 2000 (the "Existing
Purchase Agreement"), pursuant to which Prairie made certain loans to Borrower.
B. Holdings and Borrower requested Prairie (i) to waive certain
existing Events of Default and (ii) agree to amend the Existing Purchase
Agreement in certain respects.
C. Prairie agrees to accommodate such requests of Holdings and
Borrower, on the terms and subject to the conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used but not elsewhere defined
herein shall have the respective meanings ascribed to such terms in the Existing
Purchase Agreement, as amended hereby.
2. Amendment to the Existing Purchase Agreement.
2.1 Existing Purchase Agreement - Section 1.1. Section
1.1 of the Existing Purchase Agreement is amended by adding the
following terms and respective definitions to such Section 1.1 in the
appropriate alphabetical order:
(a) "Agent" has the same meaning assigned to
such term under the Senior Facility.
(b) "Make-Well Agreement" means that certain
Make Well Agreement, dated as of December ___, 2001, to which Agent,
H.I.G. KPI, Inc., HIG Investment Group II, L.P., HIG Partners II, L.P.,
H.I.G. GP-II, Inc., Holdings and the Borrower are parties.
(c) "Senior Facility" means that certain Credit
Agreement, dated as of May 17, 2000, to which Holdings, the Borrower
and LaSalle Bank National Association, as agent, and other lenders are
parties, as amended, modified, supplemented, restated or
refinanced in accordance with the terms of the Subordination Agreement,
as defined therein.
2.2 Existing Purchase Agreement - Section 4.5(xiv).
Section 4.5(xiv) of the Existing Purchase Agreement is deleted in its
entirety and the following is substituted in lieu thereof:
(xiv) enter into any Operating Leases under which
the amount of the aggregate lease payments (made or scheduled to be
made) by the Borrower and its Subsidiaries for all such agreements
exceeds (i) during the fiscal years of the Borrower and its
Subsidiaries ending December 31, 2001 and December 31, 2002, $525,000
in either such fiscal year or (ii) during any fiscal year thereafter,
$575,000, in each such case in the aggregate for the Borrower and its
Subsidiaries.
2.3 Existing Purchase Agreement - Section 4.5(xxiv).
Section 4.5(xxiv)of the Existing Purchase Agreement is hereby amended
to add subpart (d) set forth below:
or (d) the Make-Well Agreement;
2.4 Existing Purchase Agreement - Section 4.7(iii).
Section 4.7(iii) of the Existing Purchase Agreement is deleted in its
entirety and the following is substituted in lieu thereof:
(iii) Capital Expenditures. Not permit the
aggregate amount of all Capital Expenditures made by the Borrower and
its Subsidiaries to exceed (i) during the fiscal year of the Borrower
and its Subsidiaries ending December 31, 2001, $750,000, or (ii) during
any fiscal year thereafter, $450,000, in each case in the aggregate for
the Borrower and its Subsidiaries.
2.5 Section 4.7(ii). Section 4.7(ii) of the Existing
Purchase Agreement is amended by adding the following proviso to the
end of such Section 4.7(ii):
;provided, that, if the Total Coverage Ratio for any
Computation Period, commencing with the Computation Period ending
December 31, 2001, is less than the applicable ratio set forth above
and no "Unmatured Event of Default" or "Event of Default" (each as
defined in the Senior Loan Agreement) exists under Section 13.1.13 of
the Senior Loan Agreement as in effect on December ___, 2001, no Event
of Default shall occur in respect of this Section 4.7(ii) if (a) HIG
makes a cash equity contribution to Holdings (which is immediately
contributed to the Borrower) in accordance with the terms of the
Make-Well Agreement, (b) the dollar amount of such cash equity
contribution, when added to the numerator of the Total Coverage Ratio
for such Computation Period, causes the Total Coverage Ratio to equal
or exceed such applicable ratio set forth above and (c) the Borrower
immediately makes any mandatory prepayment of Senior Debt with the
proceeds thereof in accordance with Section 6.2.2(v) of the Senior
Facility as in effect on December ___, 2001; provided, that, from and
after the date HIG receives a demand by the Agent for any payment under
the Make-Well
2
Agreement, which either Holdings or the Borrower shall promptly notify
Prairie of in writing, until the date on which the Agent receives the
proceeds of such payment to apply as a mandatory prepayment under the
Senior Debt in accordance with Section 6.2.2(v) of the Senior Facility
as in effect on December ___, 2001, Prairie may charge default interest
in accordance with Section 7.2(I) of the Existing Purchase Agreement.
2.6 Additional Representations, Warranties and Covenants.
(a) Each Security Party hereby (i) represents
and warrants to Prairie that all obligations, liabilities and
Indebtedness of each Security Party in respect of the ▇▇▇▇▇ Earnout
have been fully paid, performed and satisfied in full and no Security
Party has any further payment obligations in respect thereof and (ii)
agrees and acknowledges that Prairie has no further obligation to make
any loans or advance any funds to any Security Party.
(b) Holdings hereby covenants and agrees to
deliver to Prairie, on or before the sixtieth (60th) day after the date
hereof, a copy of the annual audit report of Holdings and its
Subsidiaries for the fiscal year ended December 31, 2000, including
therein consolidated balance sheets and statements of earnings and cash
flows of Holdings and its Subsidiaries as at the end of such fiscal
year, certified without qualification by PriceWaterhouseCoopers,
together with all other deliveries required by Section 4.1(iii) and
(iv) of the Existing Purchase Agreement to the extent not previously
delivered to Prairie.
(c) The parties hereto hereby agree that the
Security Parties may resume payments of management fees to HIG, HIG
Capital and their respective Affiliates in accordance with, and subject
to the terms of, Sections 4.5(xxii) and 4.6(vii) of the Existing
Purchase Agreement; it being agreed and understood that the Security
Parties shall not be permitted to make, and none of HIG, HIG Capital,
nor any of their respective Affiliates shall be permitted to receive or
retain, any payments in respect of accrued management fees that were
not paid in cash to HIG, HIG Capital or their respective Affiliates due
to the operation of such Sections 4.5(xxii) and 4.6(vii) of the
Existing Purchase Agreement (and the Security Parties hereby represent
and warrant to Prairie that no payments of management fees previously
were made to HIG, HIG Capital or any of their respective Affiliates in
violation of such Sections 4.5(xxii) and 4.6(vii) of the Existing
Purchase Agreement).
(c) The Security Parties agree and acknowledge
that any failure to comply with the terms of clauses (b) or (c) of this
Section 2.6 shall constitute an immediate Event of Default, without
further notice by or on behalf of Prairie.
3. Conditions to Effectiveness. The effectiveness of this
Amendment shall be subject to the satisfaction of all of the following
conditions in a manner, form and substance satisfactory to Prairie:
3
(a) Representations and Warranties. All of the
representations and warranties of the Security Parties set forth in the
Existing Purchase Agreement, as amended, and the other Investment
Documents to the extent such Persons are parties thereto shall be true
and correct in all material respects, except for the representations
and warranties qualified by the terms "material", "materially",
"Material Adverse Effect" or other similar terms which shall be true
and correct in all respects.
(b) Delivery of Documents. The following shall
have been delivered to Prairie, each duly authorized and executed in
form and substance satisfactory to Prairie:
(1) this Amendment;
(2) that certain Reaffirmation of
Subordination Agreement, dated the date hereof, among Holdings,
Borrower, Prairie and Agent;
(3) that certain Reaffirmation of
Security Party Guaranty, dated the date hereof, between Holdings and
Prairie;
(4) a copy of the Make-Well Agreement;
(5) such evidence of the authority of
each party to this Amendment and each agreement, document and
instrument described herein (other than Prairie) to execute and deliver
this Amendment and all other agreements, documents and instruments
delivered in connection herewith as Prairie may require, including but
not limited to (i) a copy of resolutions duly adopted by the board of
directors (or other governing authority) of each such Person,
authorizing the execution and performance by each such Person of this
Amendment and the other agreements, documents and instruments to be
executed and performed by each such Person pursuant to this Amendment
(collectively, the "Other Amendment Documents"), certified as complete
and correct by the corporate secretary or similar officer of each such
Person, and (ii) a certificate of the secretary of each Security Party
and their respective Subsidiaries certifying that neither the articles
of incorporation or bylaws of such Person has been amended or modified
since the date on which certified copies of such documents were
previously delivered to Prairie;
(6) a certificate signed by the
Secretary or a Vice President of each Security Party dated as of the
date hereof stating that the conditions to the effectiveness of this
Amendment have been fully satisfied; and
(7) such other instruments, documents,
certificates, consents, waivers and opinions (including opinions from
White & Case, counsel to the Security Parties and HIG Capital) as
Prairie may request.
(c) Senior Amendment. Prairie shall have
received evidence satisfactory to Prairie of Agent's consent to this
Amendment and the transactions
4
contemplated hereby and the Senior Amendment shall be completely
executed and in full force and effect and in form and substance
reasonably satisfactory to Prairie.
(d) Payment of Fees and Expenses. The Security
Parties shall have paid (i) a closing fee in the amount of $25,000,
which shall be fully earned and due and payable on the date hereof,
which payment shall be refunded to the Borrower if, and only if, (A)
Holdings consummates a merger with Thane International, Inc., or any of
its subsidiaries, on terms reasonably acceptable to Prairie and Prairie
actually receives a net cash payment of at least $950,000 in respect of
the conversion of all of its equity interest in Holdings no later than
5:00 p.m. Central Standard Time on December 15, 2001, and (B) in
connection with the consummation of such merger each of Holdings and
the Borrower executes and delivers to Prairie an amendment to the
Existing Purchase Agreement and other Investment Documents in form and
substance satisfactory to Prairie; and (ii) all fees and expenses of
Prairie in connection with this Amendment, including, without
limitation, reasonable attorneys' fees and expenses.
(e) Performance; No Default. Each Security Party
shall have performed and complied with all agreements and conditions
contained in Transaction Documents to be performed by or complied with
by such Persons prior to the date hereof, and after giving effect to
this Amendment no Potential Event of Default or Event of Default shall
exist or be created hereby.
(f) No Material Adverse Effect. No Material
Adverse Effect shall have occurred since the date of the most recent
financial statements for Holdings and its Subsidiaries received by
Prairie.
(g) Approvals. The approval and/or consent shall
have been obtained from all Persons whose approval or consent is
necessary or required to enable each Security Party and each other
Person a party to this Amendment and the Other Amendment Documents to
enter into this Amendment and the Other Amendment Documents and to
perform their respective obligations hereunder and thereunder.
(h) Satisfaction of Prairie's Counsel. All legal
matters incident to the transactions contemplated hereby shall be
satisfactory to counsel for Prairie.
4. References. From and after the date hereof, all references in
the Existing Purchase Agreement and the other Investment Documents to the
"Purchase Agreement", the "Note and Warrant Purchase Agreement" or any similar
term designating the Existing Purchase Agreement shall be deemed to refer to the
Existing Purchase Agreement, as amended hereby. This Amendment shall constitute
an "Investment Document" under the terms of the Existing Purchase Agreement.
5. Waiver of Certain Events of Default. Borrower has notified
Prairie that the Events of Default described on Schedule I hereto have occurred
and are existing (collectively, the "Designated Defaults"). From and after the
date hereof, Prairie shall be deemed to have waived the Designated Defaults and
its rights to pursue the remedies available to it on account of
5
the Designated Defaults. This waiver shall not be deemed a waiver of any other
Potential Event of Default or Event of Default which has occurred or exists
under the Existing Purchase Agreement or hereafter may occur under the Existing
Purchase Agreement, as amended hereby, or to establish a custom or course of
dealing among the Security Parties and Prairie or any of them. Except as
specifically set forth herein, Prairie hereby expressly reserves all of its
rights and remedies under the Existing Purchase Agreement, as amended hereby,
the other Investment Documents and applicable law.
6. Representations and Warranties. Each Security Party hereby
confirms to Prairie that the representations and warranties set forth in the
Existing Purchase Agreement, as amended hereby, and the other Investment
Documents are true and correct in all material respects as of the date hereof,
except for the representations and warranties qualified by the terms "material",
"materially", "Material Adverse Effect" or other similar terms which shall be
true and correct in all respects as of the date hereof, and except to the extent
such representations and warranties expressly relate to an earlier date, in
which case such representations and warranties shall have been true and correct
in all material respects as of such earlier date. Each Security Party further
represents and warrants to Prairie that (a) it has full power and authority to
execute and deliver this Amendment and the Other Amendment Documents and to
perform its obligations hereunder and thereunder, (b) upon the execution and
delivery hereof and thereof, this Amendment and the Other Amendment Documents
will be valid, binding and enforceable upon it in accordance with their
respective terms, (c) the execution, delivery and performance of this Amendment
and the Other Amendment Documents do not and will not contravene, conflict with,
violate or constitute a default under (i) the certificate or articles of
incorporation or bylaws of such Security Party, or (ii) any applicable law, rule
or regulation, or any judgment, decree or order, of which a Security Party has
knowledge or any material agreement, indenture or instrument to which such
Security Party is a party or is bound or which is binding upon or applicable to
all or any portion of its property and (d) no Potential Event of Default or
Event of Default presently exists not expressly waived hereby.
7. Closing Fee; Costs and Expenses. The Security Parties, jointly
and severally, agree to: (i) pay a closing fee in the amount of $25,000, which
shall be fully earned and due and payable on the date hereof, which payment
shall be refunded to the Borrower if, and only if, Holdings consummates a merger
with Thane International, Inc., or any of its subsidiaries, on terms reasonably
acceptable to Prairie and Prairie actually receives a net cash payment of at
least $950,000 in respect of the conversion of all of its equity interest in
Holdings no later than 5:00 p.m. Central Standard Time on December 31, 2001; and
(ii) reimburse Prairie for all out of pocket expenses incurred in the
preparation, negotiation and execution of this Amendment and the Other Amendment
Documents and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, reasonable expenses and fees of counsel
for Prairie.
8. No Further Amendments; Ratification of Liability; Waiver;
Release. Except as amended or terminated hereby or pursuant hereto, the Existing
Purchase Agreement and each of the other Investment Documents shall remain in
full force and effect in accordance with their respective terms. Each Security
Party, as a debtor, grantor, guarantor or assignor, or in any similar capacity
in which it has acted as an accommodation party or guarantor, as the case may
6
be, hereby ratifies, confirms and reaffirms its liabilities, its payment and
performance obligations (contingent or otherwise) and its agreements under the
Existing Purchase Agreement and the other Investment Documents to the extent
such Person is a party thereto, all as amended by this Amendment, and agrees and
acknowledges that (a) it has no defenses, claims or set-offs to the enforcement
of such liabilities, obligations and agreements, (b) Prairie has fully performed
all obligations to such Person which Prairie may have had prior to, or have on
and as of, the date hereof and (c) other than as specifically set forth herein,
Prairie does not waive, diminish or limit any term or condition contained in the
Existing Purchase Agreement or any other Investment Document. Prairie's
agreement to the terms of this Amendment or any other amendment of the Existing
Purchase Agreement or any other Investment Document shall not be deemed to
establish or create a custom or course of dealing among the Security Parties or
Prairie, or any of them. This Amendment and the Other Amendment Documents
contain the entire agreement among the Security Parties and Prairie contemplated
by this Amendment. In consideration of Prairie's agreements herein contained,
each Security Party, jointly and severally, hereby irrevocably releases and
forever discharges Prairie and its Affiliates and their respective subsidiaries,
successors, assigns, participants, directors, officers, employees, agents,
consultants and attorneys (each, a "Released Person") of and from all damages,
losses, claims, demands, liabilities, obligations, actions and causes of action
whatsoever which such Security Party or any of its Affiliates may now have or
claim to have against Prairie or any other Released Person on account of or in
any way touching, concerning, arising out of or founded upon the Existing
Purchase Agreement, as amended hereby, the Investment Documents and the
transactions contemplated or otherwise evidenced thereby, whether presently
known or unknown and of every nature and extent whatsoever.
9. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
10. Further Assurances. Each Security Party covenants and agrees
that it will at any time and from time to time do, execute, acknowledge and
deliver, or will cause to be done, executed, acknowledged and delivered, all
such further acts, documents and instruments as reasonably may be required by
Prairie in order to effectuate fully the intent of this Amendment.
11. Severability. If any term or provision of this Amendment or
the application of this Amendment to any party or circumstance shall be held to
be invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, the validity, legality and enforceability of the remaining terms
and provisions of this Amendment shall not in any way be affected or impaired
thereby, and the affected term or provision shall be modified to the minimum
extent permitted by law so as most fully to achieve the intention of this
Amendment.
12. Captions. The captions in this Amendment are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Amendment or any provisions hereof.
13. Governing Law. This Amendment shall be a contract made under
and governed by the laws of the State of Illinois, without regard to conflict of
laws principles.
7
*****
8
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the date first written above.
▇▇▇▇▇ HOLDINGS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Title: President
------------------------------
▇▇▇▇▇ PRODUCTS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
-------------------------------
Title:
------------------------------
PRAIRIE CAPITAL MEZZANINE FUND, L.P.
By: ▇▇▇▇▇▇▇ & ▇▇▇▇ Capital, L.L.C.
---------------------------------
Its: General Partner
--------------------------------
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------
Title: Managing Member
------------------------------
SCHEDULE I
Existing Events of Default
The following Events of Default have occurred and are continuing under
the Existing Purchase Agreement:
1. Events of Default have occurred and are continuing under
Section 7.1(ii)(b) of the Existing Purchase Agreement due to the
failure of the Security Parties to timely comply with the provisions of
Section 4.1 of the Existing Purchase Agreement in respect of the fiscal
year ended December 31, 2000 because of the failure to deliver Prairie
the annual audit report of Holdings and its Subsidiaries for the fiscal
year ended December 31, 2000.
2. Events of Default have occurred and are continuing under
Section 7.1(ii)(a) and (b) of the Existing Purchase Agreement due to
the failure of the Security Parties to timely comply with the
provisions of Sections 3A.1, 4.5(xxiv) and 4.15 because of the failure
to deliver Prairie the annual audit report of Holdings and its
Subsidiaries for the fiscal year ended December 31, 2000 and other
materials upon which the calculation of the ▇▇▇▇▇ Earnout and the
determination of whether or not the ▇▇▇▇▇ Earnout was due was based and
because the parties to the Acquisition Agreement agreed to an amendment
of the Acquisition Agreement relating to the ▇▇▇▇▇ Earnout.
3. Events of Default have occurred and are continuing under
Section 7.1(ii)(b) of the Existing Purchase Agreement due to the
failure of the Security Parties to comply with the provisions of
Section 4.3 of the Existing Purchase Agreement because Prairie has not
been notified of any meeting of the Company's board of directors or any
committee thereof or of any actions proposed to be taken at any
meetings or in lieu of meetings, has not been allowed to send a
representative to any such meetings and has not received any materials
or information provided to members of the Company's board of directors.
Reference to the foregoing Events of Default shall not be deemed to
waive, or otherwise construed as waiving or otherwise addressing, any other
Event of Default that has occurred, may exist or hereafter may occur or to
establish a custom or course of dealing.
SECOND AMENDMENT TO NOTE AND WARRANT
PURCHASE AGREEMENT AND OTHER INVESTMENT DOCUMENTS
THIS SECOND AMENDMENT TO THE NOTE AND WARRANT PURCHASE
AGREEMENT AND OTHER INVESTMENT DOCUMENTS (this "Amendment"), dated as of March
15, 2002, is by and among ▇▇▇▇▇ HOLDINGS, INC., a Delaware corporation and
successor by merger with ▇▇▇▇▇ HOLDINGS Acquisition Corporation, a Delaware
corporation (the "Company"), ▇▇▇▇▇ PRODUCTS, INC., a New York corporation (the
"Borrower"), ▇▇▇▇▇ ACQUISITION CORPORATION, a Delaware corporation and
wholly-owned subsidiary of Thane (the "Parent") and PRAIRIE CAPITAL MEZZANINE
FUND, L.P., a Delaware limited partnership ("Prairie").
RECITALS:
A. Company, Borrower and Prairie are parties to that certain Note
and Warrant Purchase Agreement, dated as of May 17, 2000 (the "Existing Purchase
Agreement"), as amended by that certain First Amendment to Note and Warrant
Purchase Agreement and Other Investment Documents, dated as of December 19, 2001
by and among Company, Borrower and Prairie (the "First Amendment") (the Existing
Purchase Agreement, as amended by the First Amendment and as may be further
amended, restated, supplemented or otherwise modified from time to time, the
"Purchase Agreement"), pursuant to which Prairie made certain loans to Borrower.
B. Parent, Company and Borrower requested Prairie to consent to
certain transactions and agree to amend the Purchase Agreement in certain
respects.
C. Prairie agrees to accommodate such request of Company and
Borrower, on the terms and subject to the conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used but not elsewhere defined
herein shall have the respective meanings ascribed to such terms in the Purchase
Agreement, as amended hereby.
2. Amendment to the Purchase Agreement. Purchase Agreement -
Section 1.1. Section 1.1 of the Purchase Agreement is amended by (i) adding the
following definitions in the proper alphabetical order:
""HIG Subordinated Notes" means collectively those certain
unsecured, unguaranteed subordinated notes to be issued to HIG by the
Borrower in consideration of making any required fundings under the
Make-Well Agreement, with the terms and subordination provisions
consistent with those set forth for "Subordinated Loans" under and as
defined in the Make-Well Agreement and in form and substance
satisfactory to the Purchaser, as amended with the consent of the
Purchasers.
"Merger" means the merger of the Merger Sub with and into
Company with Company as the surviving entity pursuant to the terms and
provisions of the Merger Agreement.
"Merger Agreement" means that certain Agreement and Plan of
Merger, dated as of March 15, 2002 by and among Company, the Merger
Sub, the Parent, Thane, Prairie and each of the other stockholders of
the Company listed on the signature pages thereto, as the same may be
amended, restated, supplemented or otherwise modified from time in
accordance with the provisions hereof.
"Merger Documents" means, collectively, the Merger Agreement,
the Redemption Agreement and all other instruments, documents and
agreements executed and delivered in connection with the consummation
of the Merger, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the provisions
hereof.
"Merger Sub" means ▇▇▇▇▇ Holdings Acquisition Corporation, a
Delaware corporation.
"Parent" means ▇▇▇▇▇ Acquisition Corporation, a Delaware
corporation.
"Redemption Agreement" means that certain Redemption Agreement
dated as of March 15, 2002 by and among Thane, Lease Plan - ▇▇▇▇▇
Product Investors, L.P. and the Purchaser.
"Second Amendment Closing Date" means March 15, 2002.
"Security Party Guaranty" means, collectively, (i) the
Security Party Guaranty executed and delivered by the Company in the
form of Exhibit D hereto, (ii) the Security Party Guaranty executed and
delivered by the Parent in the form of Exhibit D hereto and (iii) the
Security Party Guaranty executed and delivered by each other Security
Party (other than the Borrower).
"Thane" means Thane International, Inc., a Delaware
corporation.
"Thane/▇▇▇▇▇ Intercreditor Agreement" means that certain
Intercreditor Agreement dated as of the Second Amendment Closing Date
among the Purchaser, the Borrower, the Parent, the Company, Thane, the
Senior Lenders' Agent, certain subsidiaries of Thane and Congress
Financial Corporation (Florida) as agent for Thane's lenders."
(ii) deleting the definition of "Change in Control" in its
entirety and substituting the following therefor:
""Change in Control" means (A) any sale, transfer or issuance
or series of sales or issuances of Thane's capital stock by Thane or
any holder or holders thereof, or any merger, consolidation or other
transaction involving Thane, immediately after which (x) HIG no longer
possesses the voting power to elect a
- 2 -
majority of Thane's board of director or (y) HIG no longer holds direct
record and beneficial ownership of at least fifty-one percent (51%) of
the capital stock of Thane, (B) any sale, transfer or issuance or
series of sales or issuance of the Parent's capital stock by the Parent
or any holder or holders hereof, or any merger, consolidation or other
transaction involving the Parent, immediately after which Thane no
longer holds direct record and beneficial ownership of 100% of the
Parent's outstanding capital stock, (C) any sale, transfer or issuance
or series of sales or issuances of the Company's capital stock by the
Company or any holder or holders thereof, or any merger, consolidation
or other transaction involving the Company, immediately after which the
Parent no longer holds direct record and beneficial ownership of 100%
of the Company's outstanding capital stock, (D) any sale, transfer or
issuance or series of sales or issuances of any Borrower's capital
stock by such Borrower or any holder or holders thereof, or any merger,
consolidation or other transaction involving such Borrower, immediately
after which the Company no longer holds direct record and beneficial
ownership of 100% of such Borrower's outstanding capital stock, (E) any
sale of all or substantially all of the Company's and its Subsidiaries'
assets on a consolidated basis, (F) after the Closing, any Person or
group of Persons (within the meaning of Section 13 or 14 of the
Securities Exchange Act of 1934, but excluding any Specified Person (as
defined below)) shall acquire beneficial ownership (within the meaning
of Rule 13d-3 promulgated under such Act) of more than twenty-five
percent (25%) of the outstanding securities (on a fully diluted basis
and taking into account any securities or contract rights exercisable,
exchangeable or convertible into equity securities) of Thane having
voting rights in the election of directors under normal circumstances,
(G) any Security Party (other than the Parent) shall cease to be a
Wholly-Owned Subsidiary of the Parent, (H) a majority of the members of
the Board of Directors of the Company shall cease to be Continuing
Members (as defined below), (I) a period of thirty (30) consecutive
days shall have elapsed during which any two of the individuals named
on the attached Continuing Members Schedule shall have ceased to hold
executive offices with the Company at least equal in seniority and
responsibility to such individuals' present offices described as set
out in such schedule, excluding any individual who has been replaced by
another individual or individuals reasonably satisfactory to the
Purchaser (it being understood that any such replacement individual
shall be deemed added to the Continuing Members Schedule on the date or
approval thereof by the Purchaser); for purposes of the foregoing
"Continuing Members" means a member of the Board of Directors of the
Company who either (1) was member of the Company's Board of Directors
on the day before the Closing or (2) became a member of such Board of
Directors after the day before the Closing and whose election or
nomination for election was approved by a vote of the majority of the
Continuing Members then members of the Company's Board of Directors;
and "Specified Person" means HIG."
(iii) adding to the definition of "Investment Documents"
the following text "the Thane/▇▇▇▇▇ Intercreditor Agreement, the HIG
Subordinated Notes, if any," immediately following the text "the Intercreditor
Agreement" appearing therein.
- 3 -
(iv) deleting the definition of "Make-Well Agreement" in
its entirety and substituting the following therefor:
""Make-Well Agreement" means the Amended and Restated
Make-Well Agreement dated as of March 15, 2002 to which the Agent, HIG
KPI, Inc., HIG Investment Group II, L.P., HIG Partners II, L.P., HIG
GP-II, Inc., Holdings and the Borrower are parties."
(v) deleting the period appearing at the end of clause
(ix) thereof, and adding to the definition of "Permitted Indebtedness" the
following clause to the end thereof:
"and (x) HIG Subordinated Notes in an aggregate principal
amount not to exceed $500,000 plus accrued interest thereon, whether or
not capitalized."
(vi) deleting the definition of "Security Party" in its
entirety and substituting the following therefor:
""Security Party" means collectively, the Parent, the Company,
each Borrower and each Person which becomes a party to a Security Party
Guaranty and any Subsidiary of any such Person which becomes a party to
an Investment Document."
(vii) deleting the definition of "Transaction Documents" in
its entirety and substituting the following therefor:
""Transaction Documents" means, collectively, the Acquisition
Documents, the Make-Well Agreement, the Investment Documents, the
Senior Loan Documents and, after consummation of the Merger, the Merger
Documents."
2.2. Purchase Agreement - Section 2.1. Section 2.1 of the
Purchase Agreement is amended by deleting the term "12.0%" and substituting the
term "15.0%" therefor.
2.3. Purchase Agreement - Section 4.1. Section 4.1 of the
Purchase Agreement is hereby amended by deleting the period appearing at the end
of clause (xiii) thereof and inserting the following new clauses at the end
thereof:
"and (xiv) promptly from time to time, (a) copies of any and
all amendments and supplements to, and modifications of, and any
waivers and other notices delivered under, the credit agreement and
credit documents evidencing the senior secured credit accommodations
made from time to time to Thane by certain financial institutions, and
(b) notice (in reasonable detail) of any substitute, replacement or
additional lender to Thane thereunder; and"
2.4. Purchase Agreement - Section 4.3. Section 4.3 of the
Purchase Agreement is hereby amended by deleting each reference to "the Company"
appearing therein and inserting in lieu thereof "each of the Parent and the
Company".
- 4 -
2.5. Purchase Agreement - Section 4.4. Section 4.4 of the
Purchase Agreement is hereby amended by deleting subsection (i) in its entirety
and substituting the following therefor:
"(i) Cause to be done all things necessary to maintain,
preserve and renew its corporate existence, rights, franchises,
privileges and qualifications (except in those instances in which the
failure to be qualified to do business or in good standing in a
jurisdiction does not have a Material Adverse Effect or as permitted
under Section 4.5(v)) and all material licenses, authorizations and
permits necessary to the conduct of its businesses; "
2.6. Purchase Agreement - Section 4.5. Section 4.5 of the
Purchase Agreement is hereby amended by (i) deleting subsection (v) in its
entirety and substituting the following therefor:
"(v) except for the Merger, merge or consolidate with any
Person or, except as permitted by subsection (viii) below, permit any
of its Subsidiaries to merge or consolidate with any Person (other than
a merger or consolidation between or among Wholly-Owned Subsidiaries or
a merger or consolidation of a Wholly-Owned Subsidiary into the
Company);"
(ii) deleting the text "the Company shall not" appearing
in subsection (ix) thereof and inserting in lieu thereof the following new text
"neither the Parent nor the Company shall";
(iii) adding to subsection (xi) thereof the following new
text:
"provided, that for the avoidance of doubt, any transaction,
arrangement or contract with Thane and any of its subsidiaries (other
than the Company and its Subsidiaries), shall require the prior written
consent of the Purchasers;"
(iv) deleting subsection (xxiii) in its entirety and
substituting the following therefor:
"(xxiii) amend, modify or waive any provision of the
Acquisition Documents, the Merger Documents (in the form agreed to on
the Second Amendment Closing Date) or the Investment Documents (other
than any amendment to the Acquisition Documents which is not adverse to
the Purchaser), to which it is a party, and each Security Party shall
enforce the provisions of the Acquisition Documents, the Merger
Documents and the Investment Documents, to which it is a party, and
shall exercise all of its rights and remedies thereunder;"
2.7. Purchase Agreement - Section 4.6. Section 4.6 of the
Purchase Agreement is amended by deleting such Section in its entirety and
inserting the following therefor:
"4.6 Intentionally omitted."
- 5 -
2.8. Purchase Agreement - Section 4.7. Section 4.7 of the
Purchase Agreement is hereby amended by (i) deleting subsection (i) in its
entirety and substituting the following therefor:
"(i) Interest Coverage Ratio. Not permit the Interest
Coverage Ratio for any Computation Period set forth below to be less
than the applicable ratio set forth below for such Computation Period:
Computation Interest Coverage
Period Ending Ratio
-------------------------- -----------------
09/30/00 1.80 to 1.00
12/31/00 1.80 to 1.00
03/31/01 1.80 to 1.00
06/30/01 1.80 to 1.00
09/30/01 2.25 to 1.00
12/31/01 2.25 to 1.00
03/31/02 2.25 to 1.00
06/30/02 2.25 to 1.00
09/30/02 and each 2.70 to 1.00 "
quarter ending thereafter
(ii) deleting subsection (ii) in its entirety and
substituting the following therefor:
"(i) Total Coverage Ratio. Not permit Total Coverage Ratio
for any Computation Period set forth below to be less than the applicable ratio
set forth below for such Computation Period:
Computation Interest Coverage
Period Ending Ratio
-------------------------- -----------------
09/30/00 0.95 to 1.00
12/31/00 0.95 to 1.00
03/31/01 1.00 to 1.00
06/30/01 1.00 to 1.00
09/30/01 1.00 to 1.00
12/31/01 1.00 to 1.00
03/31/02 1.00 to 1.00
06/30/02 1.00 to 1.00
09/30/02 1.00 to 1.00
12/31/02 and each 1.05 to 1.00 "
quarter ending thereafter
(iii) deleting subsection (iv) in its entirety and
substituting the following therefor:
- 6 -
"(iv) Total Indebtedness to EBITDA Ratio. Not permit the
Total Indebtedness to EBITDA Ratio as of the last day of any
Computation Period set forth below to exceed the applicable ratio set
forth below for such Computation Period:
Computation Interest Coverage
Period Ending Ratio
-------------------------- -----------------
09/30/00 4.00 to 1.00
12/31/00 3.90 to 1.00
03/31/01 3.90 to 1.00
06/30/01 3.70 to 1.00
09/30/01 3.55 to 1.00
12/31/01 3.40 to 1.00
03/31/02 3.30 to 1.00
06/30/02 3.10 to 1.00
09/30/02 2.90 to 1.00
12/31/02 2.70 to 1.00
03/31/03 2.55 to 1.00 "
2.9. Purchase Agreement - Section 6.2. Section 6.2 of the
Purchase Agreement is hereby amended by deleting each reference in
subsection (i) therein to the word "Closing" and substituting the words
"Second Amendment Closing Date" therefor.
2.10. Purchase Agreement - Section 6.30. Section 6.30 of
the Purchase Agreement is hereby amended by deleting such Section in
its entirety and substituting the following therefor:
"6.30 Acquisition Agreement, Merger Agreement and Senior
Loan Agreement Representations. The representations and warranties made
by the Sellers and the Security Parties in Articles III and IV of the
Acquisition Agreement, by the Company, the Borrower, Thane and Merger
Sub in Sections 3 and 4 of the Merger Agreement and by the Security
Parties in Section 10 of the Senior Loan Agreement are true and correct
in all material respects, and the representations and warranties made
by the Security Parties in Article IV of the Acquisition Agreement, by
the Company in Article III of the Merger Agreement and by the Secured
Parties in Section 10 of the Senior Loan Agreement are true and correct
in all material respects, in each case regardless of any limitation on
survival set forth therein."
2.11. Purchase Agreement - Section 7.1. Section 7.1 of the
Purchase Agreement is hereby amended by the following:
(i) inserting into clause (ii)(b) thereof the text ", any
Security Party Guaranty" immediately following the text "in the Notes" appearing
therein;
- 7 -
(ii) deleting clause (iv) thereof in its entirety and
inserting in lieu thereof the following:
"(iv) any Security Party or its Subsidiaries or Thane makes
an assignment for the benefit of creditors or admits in writing its
inability to pay its debts generally as they become due; or an order,
judgment, decree or injunction is entered adjudicating such Security
Party or any of its Subsidiaries or Thane bankrupt or insolvent or
requiring the dissolution or split up of such Security Party or any of
its Subsidiaries or Thane or preventing such Security Party or any of
its Subsidiaries or Thane from conducting all or any party of its
business; or any order for relief with respect to any Security Party or
its Subsidiaries or Thane is entered under the Federal Bankruptcy Code;
or any Security Party or its Subsidiaries or Thane petitions or applies
to any tribunal for the appointment of a custodian, trustee, receiver
or liquidator of such Security Party or any of its Subsidiaries or
Thane, or of any substantial part of the assets of such Security Party
or any of its Subsidiaries or Thane, or commences any proceeding (other
than a proceeding for the voluntary liquidation of its and dissolution
of any of its Subsidiaries) relating to such Security Party or any of
its Subsidiaries or Thane under any bankruptcy reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar laws of any jurisdiction now or hereafter in
effect; or any such petition or application is filed, or any such
proceeding is commenced, against such Security Party or any of its
Subsidiaries or Thane and either (a) such Security Party or any such
Subsidiary or Thane by any act indicates its approval thereof, consent
thereto or acquiescence therein or (b) such petition, application or
proceeding is not dismissed within 60 days;"
(iii) inserting into clause (xi) thereof the text "or any
Security Party Guaranty" immediately following the text "the Notes" appearing
therein and deleting the text "or the Warrants" appearing therein;
(iv) deleting the period appearing at the end of clause
(x)(v) thereof and inserting in lieu thereof the following text "; or";
(v) inserting the following new clause at the end
thereof:
"(xvi) (a) Any subordination provision in any document or
instrument governing the HIG Subordinated Notes, shall cease to be in
full force and effect, or any Security Party or any other Person
(including the holder of any of the HIG Subordinated Notes) shall
contest in any manner the validity, binding nature or enforceability of
any such provision, or (b) any provision in the Thane/▇▇▇▇▇
Intercreditor Agreement shall cease to be in full force and effect, or
any Security Party or any other Person (including Thane or any of its
Subsidiaries) shall contest in any manner the validity, binding nature
of enforceability of any such provision."
- 8 -
2.12. Purchase Agreement - Section 7.2. Section 7.2 of the
Purchase Agreement is hereby amended by deleting subsection (i) in its entirety
and substituting the following therefor:
"7.2 Consequences of Events of Default.
(i) If any Event of Default (other than an Event
of Default under Section 7.1(i) occurring due to the failure by the
Borrower to pay the full amount of principal on any Note on the final
maturity date (the "Maturity Payment")) has occurred and continued for
a period of 30 days thereafter, then the interest rate on the Notes
shall increase immediately by an increment of two (2) percentage points
(or, if less, the highest rate permitted by law). If any such Event of
Default has occurred and continues for a period of 360 days thereafter,
then the interest rate on the Notes shall increase by a further
increment of two (2) percentage points (for a total increase of four
(4) percentage points) (or, if less, the highest rate permitted by
law). If an Event of Default has occurred due to the Borrower's failure
to pay the Maturity Payment, then the interest rate on the Notes shall
increase immediately by an increment of five (5) percentage points (or,
if less, the highest rate permitted by law). Any increase of the
interest rate resulting from the operation of this subparagraph shall
terminate as of the close of business on the date on which no Events of
Default exist (subject to subsequent increases pursuant to this
subparagraph)."
2.13. Purchase Agreement - Exhibit A. Exhibit A to the
Purchase Agreement is hereby deleted in its entirety and Exhibit A attached
hereto is substituted therefor.
2.14. Purchase Agreement - Capitalization Schedule. The
Capitalization Schedule to the Purchase Agreement is hereby deleted in its
entirety and Exhibit B attached hereto is substituted therefor.
3. Conditions to Effectiveness. The effectiveness of this
Amendment shall be subject to the satisfaction of all of the following
conditions in a manner, form and substance satisfactory to Prairie:
3.1. Representations and Warranties. All of the
representations and warranties of the Security Parties set forth herein
and in the Purchase Agreement and the other Investment Documents to the
extent such Persons are parties thereto shall be true and correct in
all material respects, except for the representations and warranties
qualified by the terms "material", "materially", "Material Adverse
Effect" or other similar terms which shall be true and correct in all
respects.
3.2. Delivery of Documents. The following shall have been
delivered to Prairie, each duly authorized and executed in form and
substance satisfactory to Prairie:
(i) this Amendment;
(ii) the Initial Note in the form of Exhibit A
attached hereto;
- 9 -
(iii) that certain Reaffirmation of Security Party
Guaranty, dated the date hereof, between Holdings and Prairie;
(iv) the Security Party Guaranty, dated the date
hereof, between the Parent and Prairie;
(v) the Thane/▇▇▇▇▇ Intercreditor Agreement and
the Make-Well Agreement;
(vi) such evidence of the authority of each party
to this Amendment, all other Investment Documents and each
agreement, document and instrument described herein (other
than Prairie) to execute and deliver this Amendment, all other
Investment Documents and all other agreements, documents and
instruments delivered in connection herewith as Prairie may
require, including but not limited to (i) a copy of
resolutions duly adopted by the board of directors (or other
governing authority) of each such Person, authorizing the
execution and performance by each such Person of this
Amendment and the other agreements, documents and instruments
to be executed and performed by each such Person pursuant to
this Amendment (collectively, the "Other Amendment
Documents"), certified as complete and correct by the
corporate secretary or similar officer of each such Person,
and (ii) a certificate of the secretary of each Security Party
and their respective Subsidiaries certifying that neither the
articles of incorporation or bylaws of such Person has been
amended or modified since the date on which certified copies
of such documents were previously delivered to Prairie;
(vii) a certificate executed by a Vice President
of the Security Parties pursuant to which such Person
represents and warrants to the Purchasers that the Merger has
been consummated in accordance with the Merger Documents and
applicable law and to other circumstances requested by the
Purchasers;
(viii) a certificate executed by a Vice President
of the Security Parties certifying the occurrence of the
closing of the Merger and that such transaction has been
consummated in accordance wit the terms of the Merger
Documents without waiver of any material condition thereof;
together with evidence satisfactory to the Purchasers that (i)
all necessary governmental, regulatory, creditor, shareholder,
partner and other material consents, approvals and exemptions
required to be obtained by Thane, the Parent and the Company
and the Borrower in connection with such transactions have
been duly obtained and are in full force and effect and (ii)
all material and necessary permits have been obtained;
(ix) a certificate signed by the Secretary or a
Vice President of each Security Party dated as of the date
hereof stating that the conditions to the effectiveness of
this Amendment have been fully satisfied; and
(x) such other instruments, documents,
certificates, consents, waivers and opinions (including
opinions from White & Case, counsel to the Security Parties,
HIG Capital and Thane, each in form and substance satisfactory
to Prairie) as Prairie may request.
- 10 -
3.3. Senior Amendment. Prairie shall have received
evidence satisfactory to Prairie of Senior Lenders' Agent's consent to
the Merger, this Amendment and the transactions contemplated hereby and
the amendment to the Senior Loan Agreement shall be completely executed
and in full force and effect and in form and substance reasonably
satisfactory to Prairie. The Purchasers hall have received a copy of
such amendments certified by a Vice President or Secretary of the
Borrower as true, correct and complete in all respects.
3.4. Payment of Expenses. The Security Parties shall have
paid all fees and expenses of Prairie in connection with this
Amendment, including, without limitation, reasonable attorneys' fees
and expenses.
3.5. Merger. The Purchasers shall have received evidence
(including, without limitation, a file-stamped certificate of merger
issued by the Secretary of State of the State of Delaware), reasonably
satisfactory to the Purchasers, that the Merger shall have been
completed in accordance with the terms of the Merger Documents and
applicable law. Prairie, in its individual capacity, shall have
received a cash payment of $950,000 in accordance with the Redemption
Agreement in respect of the conversion into cash of all equity
securities in the Company owned by Prairie immediately prior to the
effectiveness of the Merger. Further, the Purchasers shall have
received a copy of all of the Merger Documents certified by a Vice
President or Secretary of the Borrower as true, correct and complete in
all respects.
3.6. Performance; No Default. Each Security Party shall
have performed and complied with all agreements and conditions contained in
Transaction Documents to be performed by or complied with by such Persons prior
to the date hereof, and after giving effect to this Amendment no Potential Event
of Default or Event of Default shall exist or be created hereby.
3.7. No Material Adverse Effect. No Material Adverse
Effect shall have occurred since the date of the most recent financial
statements for Holdings and its Subsidiaries received by Prairie.
3.8. Approvals. The approval and/or consent shall have
been obtained from all Persons whose approval or consent is necessary or
required to enable each Security Party and each other Person a party to this
Amendment, the Other Amendment Documents and the Merger Agreement to enter into
this Amendment, the Other Amendment Documents and the Merger Agreement and to
perform their respective obligations hereunder and thereunder.
3.9. Satisfaction of Prairie's Counsel. All legal matters
incident to the transactions contemplated hereby shall be satisfactory to
counsel for Prairie.
4. References. From and after the date hereof, all references in
the Purchase Agreement and the other Investment Documents to the "Purchase
Agreement", the "Note and Warrant Purchase Agreement" or any similar term
designating the Purchase Agreement shall be deemed to refer to the Purchase
Agreement, as amended hereby. This Amendment shall constitute an "Investment
Document" under the terms of the Purchase Agreement.
- 11 -
5. Representations and Warranties.
5.1 Each Security Party hereby confirms to Prairie that
the representations and warranties set forth in the Purchase Agreement, as
amended hereby, and the other Investment Documents (other than the Equityholders
Agreement) are true and correct in all material respects as of the date hereof,
except for the representations and warranties qualified by the terms "material",
"materially", "Material Adverse Effect" or other similar terms which shall be
true and correct in all respects as of the date hereof, and except to the extent
such representations and warranties expressly relate to an earlier date, in
which case such representations and warranties shall have been true and correct
in all material respects as of such earlier date.
5.2 Each Security Party further represents and warrants
to Prairie that (a) it has full power and authority to execute and deliver this
Amendment and the Other Amendment Documents and to perform its obligations
hereunder and thereunder, (b) upon the execution and delivery hereof and
thereof, this Amendment and the Other Amendment Documents will be valid, binding
and enforceable upon it in accordance with their respective terms, (c) the
execution, delivery and performance of this Amendment and the Other Amendment
Documents do not and will not contravene, conflict with, violate or constitute a
default under (i) the certificate or articles of incorporation or bylaws of such
Security Party, or (ii) any applicable law, rule or regulation, or any judgment,
decree or order, of which a Security Party has knowledge or any material
agreement, indenture or instrument to which such Security Party is a party or is
bound or which is binding upon or applicable to all or any portion of its
property and (d) no Potential Event of Default or Event of Default presently
exists not expressly waived hereby.
5.3 Each Security Party hereby further represents and
warrants to Prairie that:
(i) Each Security Party has heretofore furnished the
Purchaser true and correct copies of the Merger Documents.
(ii) Each Security Party and, to the Security Parties'
knowledge, each other party to the Merger Documents, has duly taken all
necessary corporate, partnership or other organizational action to
authorize the execution, delivery and performance of the Merger
Documents to which it is a party and the consummation of transactions
contemplated thereby.
(iii) The Merger Documents will comply with all applicable
legal requirements, and all necessary governmental, regulatory,
creditor, shareholder, partner and other material consents, approvals
and exemptions required to be obtained by the Security Parties and, to
the Security Parties' knowledge, each other party to the Merger
Documents, have been duly obtained and will be in full force and
effect. As of the Second Amendment Closing Date, all applicable waiting
periods with respect to the Merger Documents have expired without any
action being taken by any competent governmental authority which
restrains, prevents or imposes material adverse conditions upon the
consummation of the respective Related Transactions.
- 12 -
(iv) The execution and delivery of the Merger Documents
did not, and the consummation of the Merger will not, violate any
statute or regulation of the United States (including any securities
law) or of any state or other applicable jurisdiction, or any order,
judgment or decree of any court or governmental body binding on any
Security Party or, to the Security Parties' knowledge, any other party
to the Merger Documents, or result in a breach of, or constitute a
default under, any material agreement, indenture, instrument or other
document, or any judgment, order or decree, to which any Security Party
is a party or by which any Security Party is bound or, to the Security
Parties' knowledge, to which any other party to the Merger Documents is
a party or by which any such party is bound.
(v) No statement or representation made in the Merger
Documents by any Security Party nor, to the Security Parties'
knowledge, any other Person, contains any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading.
5.4 Each Security Party hereby further represents and
warrants to Prairie that: (i) the Capitalization Schedule sets forth the
authorized equity securities of the Parent, the Company and the Borrower as of
the Second Amendment Closing Date; (ii) all issued and outstanding equity
securities of each Parent, the Company and the Borrower are duly authorized and
validly issued, fully paid, nonassessable, and free and clear of all Liens other
than, in the case of the Company and the Borrower, those in favor of the Senior
Lenders' Agent, for the benefit of the Senior Lenders; (iii) all such securities
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities; (iv) all of the issued and outstanding equity
securities of the Parent are owned by Thane; (v) the Parent owns all of the
issued and outstanding equity securities of the Company and the Company owns all
of the issued and outstanding equity securities of the Borrower; and (vi) except
as set forth on the Capitalization Schedule there are no pre-emptive or other
outstanding rights, options, warrants, conversion rights or other similar
agreements or understandings for the purchase or acquisition of any equity
securities in any such entity.
6. Costs and Expenses. The Security Parties, jointly and
severally, agree to reimburse Prairie for all out of pocket expenses incurred in
the preparation, negotiation and execution of this Amendment, the Other
Amendment Documents and the Merger Agreement and the consummation of the
transactions contemplated hereby and thereby, including, without limitation,
reasonable expenses and fees of counsel for Prairie.
7. No Further Amendments; Ratification of Liability; Waiver;
Release. Except as amended or terminated hereby or pursuant hereto, the Purchase
Agreement and each of the other Investment Documents shall remain in full force
and effect in accordance with their respective terms. Each Security Party, as a
debtor, grantor, guarantor or assignor, or in any similar capacity in which it
has acted as an accommodation party or guarantor, as the case may be, hereby
ratifies, confirms and reaffirms its liabilities, its payment and performance
obligations (contingent or otherwise) and its agreements under the Purchase
Agreement and the other Investment Documents to the extent such Person is a
party thereto, all as amended by this Amendment, and agrees and acknowledges
that (a) it has no defenses, claims or set-offs to the
- 13 -
enforcement of such liabilities, obligations and agreements, (b) Prairie has
fully performed all obligations to such Person which Prairie may have had prior
to, or have on and as of, the date hereof and (c) other than as specifically set
forth herein, Prairie does not waive, diminish or limit any term or condition
contained in the Purchase Agreement or any other Investment Document. Prairie's
agreement to the terms of this Amendment or any other amendment of the Purchase
Agreement or any other Investment Document shall not be deemed to establish or
create a custom or course of dealing among the Security Parties or Prairie, or
any of them. This Amendment and the Other Amendment Documents contain the entire
agreement among the Security Parties and Prairie contemplated by this Amendment.
In consideration of Prairie's agreements herein contained, each Security Party,
jointly and severally, hereby irrevocably releases and forever discharges
Prairie and its Affiliates and their respective subsidiaries, successors,
assigns, participants, directors, officers, employees, agents, consultants and
attorneys (each, a "Released Person") of and from all damages, losses, claims,
demands, liabilities, obligations, actions and causes of action whatsoever which
such Security Party or any of its Affiliates may now have or claim to have
against Prairie or any other Released Person on account of or in any way
touching, concerning, arising out of or founded upon the Purchase Agreement, as
amended hereby, the Investment Documents and the transactions contemplated or
otherwise evidenced thereby, whether presently known or unknown and of every
nature and extent whatsoever.
8. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
9. Further Assurances. Each Security Party covenants and agrees
that it will at any time and from time to time do, execute, acknowledge and
deliver, or will cause to be done, executed, acknowledged and delivered, all
such further acts, documents and instruments as reasonably may be required by
Prairie in order to effectuate fully the intent of this Amendment.
10. Severability. If any term or provision of this Amendment or
the application of this Amendment to any party or circumstance shall be held to
be invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, the validity, legality and enforceability of the remaining terms
and provisions of this Amendment shall not in any way be affected or impaired
thereby, and the affected term or provision shall be modified to the minimum
extent permitted by law so as most fully to achieve the intention of this
Amendment.
11. Captions. The captions in this Amendment are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Amendment or any provisions hereof.
12. Governing Law. This Amendment shall be a contract made under
and governed by the laws of the State of Illinois, without regard to conflict of
laws principles.
* * * * *
- 14 -
IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment to Note and Warrant Purchase Agreement on the date first
written above.
▇▇▇▇▇ HOLDINGS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Title: President
---------------------------------
▇▇▇▇▇ PRODUCTS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
----------------------------------
Title: Vice President
---------------------------------
▇▇▇▇▇ ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Title: Vice President
---------------------------------
PRAIRIE CAPITAL MEZZANINE FUND, L.P.
By: ▇▇▇▇▇▇▇ & King Capital, L.L.C.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Title: Managing Member
EXHIBIT A
(Form of Note)
Attached hereto
EXHIBIT B
(Capitalization Schedule)
Attached hereto