SECURITIES PURCHASE AND LOAN AGREEMENT National Investment Managers Inc. Dublin, Ohio 43017
SECURITIES PURCHASE AND LOAN AGREEMENT
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November
30, 2007
Woodside
Capital Partners IV, LLC
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Woodside
Capital Partners IV QP, LLC
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▇▇▇▇▇▇▇▇▇▇,
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Brothers Commercial Bank
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇,
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Woodside
Agency Services, LLC, as Collateral Agent
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▇▇▇▇▇▇▇▇▇▇,
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Ladies
and Gentlemen:
The
undersigned, National Investment Managers Inc., a Florida corporation (the
"Company"),
hereby agrees with the Collateral Agent and the Holders as follows:
1. DEFINITIONS.
For
all
purposes of this Securities Purchase and Loan Agreement (the "Agreement")
the
following terms shall have the meanings set forth herein or elsewhere in the
provisions hereof:
Acquired EBITDA.
Acquired EBITDA shall mean,
for any
period, with respect to any Person or business acquired pursuant to a Permitted
Acquisition,
an
amount equal to the amount set forth on Schedule 1(a),
as such
schedule may be amended from time to time by the Company with the prior written
consent of the Holders.
Acquired Party.
Acquired Party shall mean any Person, 100% of the outstanding equity interest
or
substantially all of the assets of which are acquired by the Company or any
of
its Subsidiaries in connection with a Permitted Acquisition.
Adjusted EBITDA.
Adjusted EBITDA shall mean, for any period, but without duplication, the sum
of
(a) EBITDA, plus (b) Acquired EBITDA (if applicable). The Company shall be
permitted for the fiscal quarter ending December 31, 2007 to add back into
the
calculation of Adjusted EBITDA extraordinary expenses incurred in the Company’s
fiscal quarter ending March 31, 2007 in an amount not to exceed $242,763 and
in
the Company’s fiscal quarter ending June 30, 2007, in an amount not to exceed
$450,000. In addition, the Company shall be permitted for the fiscal quarter
ending March 31, 2008 to add back into the calculation of Adjusted EBITDA
extraordinary expenses incurred in the Company’s fiscal quarter ending June 30,
2007 in an amount not to exceed $450,000.
Adjusted Net Worth.
Adjusted Net Worth shall mean, in connection with any liquidation or sale of
assets by the Company, the consolidated net worth of the equity of the Company,
immediately prior to such liquidation or immediately after such sale, determined
in accordance with GAAP, taking into account (i) the total consideration
received by the Company for such transaction, (ii) the transaction costs
incurred in connection with such transaction, and (iii) any liabilities of
the
Company whether or not to be discharged in connection with such
transaction.
Affiliate.
Affiliate shall mean any Person directly or indirectly controlling, controlled
by or under direct or indirect common control with the Company (or other
specified Person) and shall include (a) any Person who is a director or
beneficial holder of at least 15% of any class of the then outstanding capital
stock (or other shares of beneficial interest) of the Company (or other
specified Person) and Family Members of any such Person, (b) any Person of
which
the Company (or other specified Person) or an Affiliate (as defined in clause
(a) above) of the Company (or other specified Person) shall, directly or
indirectly, either beneficially own at least 15% of any class of the then
outstanding capital stock (or other shares of beneficial interest) or constitute
at least a 15% equity participant, and (c) in the case of a specified Person
who
is an individual, Family Members of such Person; provided,
however,
that no
Investor shall be an Affiliate of the Company for the purposes of this
Agreement.
Approval
Date.
Approval Date shall mean the date on which the put arrangements set forth in
Section 11 hereof shall have been approved by the requisite holders of the
Preferred Stock, and evidence thereof shall have been delivered to the
Holders.
Call Closing Date.
See
Section 11.3.
Call Notice.
See
Section 11.3.
Capital
Expenditures.
Capital
Expenditures shall mean amounts paid or Indebtedness incurred by the Company
or
any of its Subsidiaries in connection with the purchase or lease of fixed assets
(both tangible and intangible) that would be required to be capitalized and
shown on the balance sheet of such Person in accordance with
GAAP.
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Capital Transaction.
Capital
Transaction shall mean any of the following: (i) any sale or other disposition
of all or substantially all of the assets of the Company or any of its
Subsidiaries in any single transaction or series of related transactions; (ii)
any transfer or other disposition in any single transaction or series of related
transactions of a majority of the Company’s or any of its Subsidiary’s Common
Stock; (iii) a Qualified Public Offering; (iv) the liquidation or dissolution
of
the Company or any of its Subsidiaries; (v) a merger or consolidation of the
Company or any of its Subsidiaries in which the Company or such Subsidiary,
as
applicable, is not the surviving entity; (vi) a Change of Control or (vii)
the
repayment in full of the Senior Debt or the Notes.
Change of Control.
Change
of Control shall mean any of the following: (i) any person or group of persons
(within the meaning of the Securities Exchange Act of 1934) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934,)
of 30% or more of the issued and outstanding shares of capital stock of the
Company having the right to vote for the election of directors of the Company
under ordinary circumstances; (ii) the occupation of a majority of the seats
(other than vacant seats) on the board of directors of the Company by Persons
who were neither (i) nominated by the board of directors of the Company nor
(ii)
appointed by directors so nominated; or (iii) the Company ceases to own and
control all of the economic and voting rights associated with all of the
outstanding capital Stock of any of its Subsidiaries.
Charter.
Charter
shall include the articles or certificate of incorporation, statute,
constitution, joint venture or partnership agreement, operating agreement or
articles or other organizational document of any Person other than an
individual, each as from time to time amended or modified.
CIP Agreement.
CIP
Agreement shall mean that certain Contingent Interest Payment Agreement, dated
as of the date hereof, among the Company, the Holders and the Collateral Agent.
Closing.
See
Section 2.3.
Closing
Date.
See
Section 2.3.
Code.
Code
shall mean the Internal Revenue Code of 1986, any successor statute of similar
import, and the rules and regulations thereunder, collectively and as from
time
to time amended and in effect.
Collateral.
Collateral shall mean all of the property, rights and interest of the Company
and its Subsidiaries that are or are intended to be the subject of the Liens
created by the Security Documents.
Collateral
Agent.
Collateral Agent shall mean Woodside Agency Services, LLC,
as
agent for the Holders and any successor thereto.
Commission.
Commission shall mean the Securities and Exchange Commission.
Common Equity Value.
See
Section 11.5(a).
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Common Stock.
Common
Stock shall mean, collectively, (a) the Common Stock of the Company described
in
Section 4.5(a), (b) any capital stock or other securities into which or for
which Common Stock shall have been converted or exchanged pursuant to any
recapitalization, reorganization or merger of the Company, and (c) any shares
of
capital stock issued with respect to the foregoing pursuant to a stock dividend
or stock split.
Company.
See
preamble.
Company Appraisal.
See
Section 11.5(b).
Company
Appraiser.
See
Section 11.5(b).
Consolidated
or
consolidated.
Consolidated or consolidated shall mean, with reference to any term defined
herein, that term as applied to the accounts of the Company and all of its
Subsidiaries, consolidated in accordance with GAAP.
Co-Sale Rights Agreements.
Co-Sale
Rights Agreements shall mean the Co-Sale Agreements, dated as of the date
hereof, by and among the Company, the Holders, and certain holders of its
capital stock party thereto.
Default.
Default
shall mean an event or condition which with the passage of time or giving of
notice, or both, would become an Event of Default.
Distribution.
Distribution shall mean (a) the declaration or payment of any dividend on or
in
respect of any shares of any class of capital stock or other equity interest
of
the Company or other specified Person (other than dividends payable in the
form
of capital stock), (b) the purchase, redemption or other retirement of any
shares of any class of capital stock or other equity interests of the Company
or
other specified Person, directly or indirectly through a Subsidiary of such
Person or otherwise; the return of capital by any Person to its shareholders
or
equity holders as such; or otherwise, or (c) any other distribution on or in
respect of any shares of any class of capital stock or other equity interests
of
the Company or other specified Person.
EBITDA.
EBITDA
shall mean, for any period, for the Company and its Subsidiaries on a
consolidated basis, an amount equal to (a) Net Income for such period, plus
(b)
the sum of (i) consolidated interest charges for such period, (ii) the provision
for federal, state, provincial, local and foreign income taxes payable by the
Company and its Subsidiaries for such period, (iii) the amount of depreciation
and amortization expense for such period, (iv) non-cash charges for stock based
compensation for such period, and (v) non-cash extraordinary and unusual or
non-recurring writedowns or writeoffs for such period, in each case, to the
extent deducted in calculating such Net Income, minus (c) any extraordinary,
unusual, non-recurring or non-operating gains for such period, in each case,
calculated for the Company and its Subsidiaries in accordance with GAAP on
a
consolidated basis.
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Employment
Agreements.
Employment Agreements shall mean the Employment Agreements, between the Company
and (a) each of its Key Employees, (b) each Person listed on Schedule 1(b)
hereto
and (c) each seller in connection with a Permitted Acquisition, in each case,
in
a form acceptable to the Holders.
Environmental Actions.
Environmental Actions shall mean any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any governmental
authority, or any third party involving violations of Environmental Laws or
Releases of Hazardous Substances from (a) any assets, properties, or businesses
of the Company, its Subsidiaries, or any of their predecessors in interest,
(b)
from adjoining properties or businesses, or (c) from or on to any facilities
which received Hazardous Substances generated by the Company, its Subsidiaries,
or any of their predecessors in interest.
Environmental
Laws.
Environmental Laws shall mean all
federal, state and local laws relating to public health, or to pollution or
protection of the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) including,
without limitation, the Clean Air Act, as amended, CERCLA, the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the Toxic Substances
Control Act, the Federal Water Pollution Control Act, as amended, the Safe
Drinking Water Act, as amended, the Hazardous Materials Transportation Act,
as
amended, the Oil Pollution Act of 1990, any state Laws implementing the
foregoing federal Laws, and all other Laws relating to or regulating (i)
emissions, discharges, releases, or cleanup of pollutants, contaminants,
chemicals, polychlorinated biphenyls (PCB's), oil and gas exploration and
production wastes, brine, solid wastes, or toxic or Hazardous Substances or
wastes (collectively, the "Polluting Substances"), (ii) the generation,
processing, distribution, use, treatment, handling, storage, disposal, or
transportation of Polluting Substances, or (iii) environmental conservation
or
protection. References in this Agreement to Environmental Laws existing or
in
effect as of a particular date shall include written administrative
interpretations and policies then existing or in effect.
Environmental Liabilities and Costs.
Environmental Liabilities and Costs shall mean all liabilities, monetary
obligations, losses, damages, punitive damages, consequential damages, treble
damages, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel,
experts, or consultants, and costs of investigation and feasibility studies),
fines, penalties, sanctions, and interest incurred as a result of any claim
or
demand, or Remedial Action required, by any governmental authority or any third
party, and which relate to any Environmental Action.
Environmental Lien.
Environmental Lien shall mean any Lien in favor of any governmental authority
for Environmental Liabilities and Costs.
ERISA.
ERISA
shall mean the federal Employee Retirement Income Security Act of 1974, any
successor statute of similar import, and the rules and regulations thereunder,
collectively and as from time to time amended and in effect.
Events
of Default.
See
Section 10.1.
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Exercising
Holder.
See
Section 11.1.
Excepted Capital Raises.
Excepted Capital Raises shall mean the sale of equity interests of the Company
(a) to Laurus Master Fund, Ltd. (or its Affiliates) on the Closing Date and
(b)
to any Person so long as the net proceeds received by Company in connection
with
such sale are used to acquire the Common Stock that ▇▇▇▇▇▇ Capital Group LLC
and
DCI Master LDC are required to purchase pursuant to that certain Put Agreement
dated as of November 30, 2005 with IBF Fund Liquidating LLC.
Family Members.
Family
Members shall mean, as applied to any individual, any parent, spouse, child,
spouse of a child, brother or sister of the individual, and each trust created
for the benefit of one or more of such Persons and each custodian of a property
of one or more such Persons.
Fee Agreement.
Fee
Agreement shall mean that certain Fee Agreement, dated as of the date hereof,
among the Company, the Holders and the Collateral Agent.
Fee Letter.
Fee
Letter shall mean the letter agreement, dated September 25, 2007, by and among
the Company, Woodside IV, ▇▇▇▇▇▇ Brothers Commercial Bank and ▇▇▇▇▇▇ Commercial
Paper Inc.
Financing Agreements.
Financing Agreements shall include this Agreement, the Securities, the
Registration Rights Agreement, the Intercreditor Agreement, the Subordination
Agreements, the Co-Sale Rights Agreements, the Fee Agreement, the Fee Letter,
the CIP Agreement, the Guaranties, the Security Documents, and any and every
other present or future instrument or agreement from time to time entered into
between the Company or any of its Subsidiaries and the Collateral Agent or
any
Holder of the Securities and which relates to this Agreement or is stated to
be
a Financing Agreement, as from time to time amended or modified and all
statements, reports or certificates delivered by or on behalf of the Company
and
any of its Subsidiaries to the Collateral Agent or any Holder of the Securities
in connection herewith or therewith.
Financial
Statements.
See
Section 4.7(a)(i).
Fixed Charge Coverage Ratio.
Fixed
Charge Coverage Ratio shall mean, as of any date of determination
and as
determined for the Company and its Subsidiaries on a consolidated
basis,
the
ratio of (a) Adjusted EBITDA for the four fiscal quarter period ending as of
such date, less
cash
taxes paid during such period, less
Capital
Expenditures made during such period to (b)
the
amount of the current portions of long term Indebtedness at such
date,
plus
interest
expense on Indebtedness for Borrowed Money during such period.
Formula Value.
See
Section 11.5(c).
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Fully
Diluted Basis.
Fully
Diluted Basis shall mean, at any time, the sum of (i) the number of shares
of
Common Stock then outstanding plus (ii) the number of shares of Common Stock
then issuable upon exercise of then outstanding warrants, options or convertible
securities, in each case, (x) to the extent then exercisable and (y) assuming
that a share of Preferred Stock would convert into Common Stock only to the
extent that the per share value of the Common Stock which would be received
in
respect of such share of Preferred Stock upon conversion thereof would exceed
the “conversion price” of such Preferred Stock.
GAAP.
GAAP
shall mean the Generally Accepted Accounting Principals adopted in the United
States which are (a) consistent with the principles promulgated or adopted
by
the Financial Accounting Standards Board and its predecessors, in effect from
time to time, (b) applied on a basis consistent with prior periods, and (c)
such
that a certified public accountant would, insofar as the use of accounting
principles is pertinent, be in a position to deliver an unqualified opinion
as
to financial statements in which such principles have been properly
applied.
Guaranties.
Guaranties shall mean the guarantees of the Obligations, granted or to be
granted by each of the Guarantors.
Guarantors.
Guarantors shall mean each of the Subsidiaries of the Company as of the date
hereof and any additional Subsidiaries of the Company who become Guarantors
pursuant to Section 7.19.
Hazardous Substances.
Hazardous Substances shall mean any hazardous waste as defined by 42 U.S.C.
§6903(5), any hazardous substances as defined by 42 U.S.C. §9601(14), any
pollutant or contaminant as defined by 42 U.S.C. §9601(33), and any toxic
substance, oil, petroleum, friable asbestos, hazardous materials, or other
substances regulated by any Environmental Laws.
Holder.
Holder
shall mean, as to any Security, the holder thereof, unless such holder shall
have presented such Security to the Company for transfer and the transferee
shall have been entered in the Company's stock register (in the case of Warrant
Shares), in the register referred to in Section 14.1(a) (in the case of a Note)
or in the register referred to in Section 14.2(a) (in the case of a Warrant),
as
a subsequent holder, in which case "Holder"
shall
mean such subsequent holder.
Indebtedness.
Indebtedness shall include all obligations, contingent and otherwise, which
in
accordance with GAAP should be classified upon the obligor's balance sheet
as
liabilities, or to which reference should be made by footnotes thereto,
including without limitation, in any event and whether or not so classified:
(a)
all debt and similar monetary obligations, whether direct or indirect; (b)
all
liabilities secured by any mortgage, pledge, security interest, lien, charge,
or
other encumbrance existing on property owned or acquired subject thereto,
whether or not the liability secured thereby shall have been assumed; (c) all
guaranties, endorsements and other contingent obligations whether direct or
indirect in respect of Indebtedness of others, including any obligation to
supply funds to or in any manner to invest in, directly or indirectly, the
debtor, to purchase Indebtedness, or to assure the owner of Indebtedness against
loss, through an agreement to purchase goods, supplies, or services for the
purpose of enabling the debtor to make payment of the Indebtedness held by
such
owner or otherwise,
(d) all
obligations to repurchase, redeem, retire or defease (i) any capital stock,
(ii)
other equity interests, or (iii) rights to acquire equity interests,
provided,
that
the
conversion of one class of stock solely to another class of stock shall not
be
deemed to create Indebtedness and (e) all Indebtedness for Borrowed
Money.
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Indebtedness for Borrowed Money.
Indebtedness for Borrowed Money shall mean (a) all Indebtedness of the Company
and its Subsidiaries for borrowed money, whether current or funded, or secured
or unsecured, (b) all Indebtedness of the Company and its Subsidiaries for
the
deferred purchase price of property or services represented by a note or other
security, (c) all Indebtedness of the Company and its Subsidiaries created
or
arising under any conditional sale or other title retention agreement with
respect to property acquired by the Company or any of its Subsidiaries (even
though the rights and remedies of the seller or lender under such agreement
in
the event of default are limited to repossession or sale of such property),
(d)
all Indebtedness of the Company and its Subsidiaries secured by a purchase
money
mortgage or other lien to secure all or part of the purchase price of property
subject to such mortgage or lien, (e) all obligations under leases which shall
have been or should be, in accordance with GAAP, recorded as capital leases
in
respect of which the Company or any of its Subsidiaries are liable as lessee,
(f) any liability of the Company or any of its Subsidiaries in respect of
banker's acceptances or letters of credit, including any reimbursement
obligations with respect thereto, (g) all interest, fees and other expenses
owed
with respect to indebtedness described in the foregoing clause (a), (b), (c),
(d), (e) or (f) above, and (h) all Indebtedness referred to in clause (a),
(b),
(c), (d), (e), (f) or (g) above which is directly or indirectly guaranteed
by
the Company or any of its Subsidiaries, or which the Company or any of its
Subsidiaries has agreed (contingently or otherwise) to purchase or otherwise
acquire, or in respect of which the Company or any of its Subsidiaries has
otherwise assured a creditor against loss.
Independent Director.
Independent Director shall mean
a
Person other than an executive officer or employee of the Company or any other
individual having a relationship which, in the opinion of the Company’s board of
directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. The following persons shall not be
considered independent:
(a) a
director who is, or at any time during the past three years was, employed by
the
Company;
(b) a
director who accepted or who has a Family Member who accepted any compensation
from the Company in excess of $100,000 during any period of twelve consecutive
months within the three years preceding the determination of independence,
other
than the following:
(i) compensation
for board or board committee service;
(ii) compensation
paid to a Family Member who is an employee (other than an executive officer)
of
the Company; or
(iii) benefits
under a tax-qualified retirement plan, or non-discretionary
compensation;
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(c) a
director who is a Family Member of an individual who is, or at any time during
the past three years was, employed by the Company as an executive
officer;
(d) a
director who is, or has a Family Member who is, a partner in, or a controlling
shareholder or an executive officer of, any organization to which the Company
made, or from which the Company received, payments for property or services
in
the current or any of the past three fiscal years that exceed 5% of the
recipient's consolidated gross revenues for that year, or $200,000, whichever
is
more, other than the following:
(i) payments
arising solely from investments in the Company's securities; or
(ii) payments
under non-discretionary charitable contribution matching programs;
(e) a
director of the issuer who is, or has a Family Member who is, employed as an
executive officer of another entity where at any time during the past three
years any of the executive officers of the issuer serve on the compensation
committee of such other entity; or
(f) a
director who is, or has a Family Member who is, a current partner of the
Company's outside auditor, or was a partner or employee of the Company's outside
auditor who worked on the Company's audit at any time during any of the past
three years.
Intangible Assets.
Intangible Assets shall mean goodwill, write-up in book value of assets, the
excess of cost over book value of acquired businesses accounted for by the
purchase method, customer lists, non-compete agreements, formulae, trademarks,
trade names, patents, patent rights and deferred expenses (including, but not
limited to, unamortized debt discount and expense, organizational expense and
packaging and product development and design expense).
Intercreditor Agreement.
Intercreditor Agreement shall mean that certain Intercreditor and Subordination
Agreement, dated as of the date hereof, among the Collateral Agent, the Holders
and the Senior Creditor.
Interest Coverage Ratio.
Interest Coverage Ratio shall mean, as of any date of determination
and as
determined for the Company and its Subsidiaries on a consolidated
basis,
the
ratio of (a) Adjusted EBITDA for the four fiscal quarter period ending as of
such date less Acquired EBITDA for such period to (b) interest expense on
Indebtedness for Borrowed Money made during such period.
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Investments.
Investments shall mean (a) any share of capital stock, units, interests,
evidence of Indebtedness or other security issued by any other Person, (b)
any
loan, advance, or extension of credit to, or contribution to the capital of,
any
other Person, (c) any purchase of the securities of any other Person, or
commitment to make such purchase, and (d) any other investment in any other
Person; provided,
however,
that
the term "Investment" shall not include (i) trade and customer accounts
receivable for services rendered in the ordinary course of business and payable
in accordance with customary trade terms, and all letters of credit or other
instruments securing or evidencing the same, (ii) advances to employees for
travel expenses, drawing accounts and similar expenditures but only to the
extent that all such advances outstanding at any particular time do not exceed
$25,000, (iii) stock or other securities acquired in connection with the
satisfaction or enforcement of Indebtedness or claims due or owing to the
Company or any of its Subsidiaries or as security for any such Indebtedness
or
claim, (iv) any acquisition of assets or stock of a Person which is permitted
pursuant to Section 7.14, and (v) the endorsement for collection of instruments
in the ordinary course of business.
Investor Appraisal.
See
Section 11.5(b).
Investor Appraiser.
See
Section 11.5(b).
Investors.
Investors shall mean Woodside, ▇▇▇▇▇▇ and any permitted transferee of
Securities.
Issuance Notice.
See
Section 8.4(b).
Key
Employee.
Key
Employee shall mean each of ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ so long each such Person
is an employee of the Company or any of its Subsidiaries, and any other employee
of the Company receiving aggregate annual compensation from the Company of
not
less than $250,000.
▇▇▇▇▇▇.
▇▇▇▇▇▇
shall mean ▇▇▇▇▇▇ Brothers Commercial Bank.
Leverage Ratio.
Leverage Ratio shall mean, as of any date of determination, the ratio of (a)
Total Funded Debt at such date to (b) Adjusted EBITDA for the four fiscal
quarter period ending as of such date.
Lien.
Lien
shall mean (a) any encumbrance, mortgage, pledge, lien, charge or other security
interest of any kind upon any property or assets of any character, or upon
the
income or profits therefrom; or (b) any acquisition of or agreement to have
an
option to acquire any property or assets upon conditional sale or other title
retention agreement, device or arrangement (including a capitalized lease);
or
(c) any sale, assignment, pledge or other transfer for security of any accounts,
general intangibles, or chattel paper, with or without recourse.
Loan.
Loan
shall mean the term loan in the original principal amount of $6,000,000 made
by
▇▇▇▇▇▇ to the Company pursuant to Section 2.1(c).
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Major Holder.
Major
Holder shall mean the holder or holders at the relevant time (excluding the
Company) of (a) in the case of the Notes, at least 10% or more in outstanding
principal amount of the Notes, (b) in the case of the Warrants and Warrant
Shares, at least 10% of the total number of (i) the Warrant Shares then issuable
upon exercise of the outstanding Warrants plus
(ii)
then outstanding Warrant Shares and (c) if no class of Securities is referred
to, the Major Holders of the Notes so long as any Notes are outstanding, and
the
Major Holders of the then outstanding Warrants and Warrant Shares.
Majority Holders.
Majority Holders shall mean the holder or holders at the relevant time
(excluding the Company) of (a) in the case of the Notes, 50.1% or more in
outstanding principal amount of the Notes, (b) in the case of the Warrants
and
Warrant Shares, 50.1% or more of the number of (i) the Warrant Shares then
issuable upon exercise of the outstanding Warrants plus
(ii)
then outstanding Warrant Shares and (c)
if no
class of Securities is referred to, the Majority Holders of Notes so long as
any
Notes are outstanding and the Majority Holders of the then outstanding Warrants
and Warrant Shares.
Material Adverse Effect.
Material Adverse Effect shall mean (i) a material adverse change in, or a
material adverse effect on, the operations, business, assets, properties,
liabilities (actual or contingent), condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole; (ii) a material
impairment of the rights and remedies of the Collateral Agent or any Holder,
or
of the ability of the Company or any Guarantor to perform its obligations under
any Financing Agreement to which it is a party; or (iii) a material adverse
effect upon the legality, validity, binding effect or enforceability against
the
Company or any Guarantor of any Financing Agreement to which it is a
party.
Maturity Date.
Maturity Date shall mean January 31, 2011.
Maximum Rate.
See
Section 3.5(c).
Negotiation Period.
See
Section 11.5(b).
Net Income.
Net
Income shall mean, with respect to any Person, the book net income (or book
net
loss, as the case may be) of such Person for any period, after all taxes
actually paid or accrued and all expenses and other charges determined in
accordance with GAAP consistently applied.
Net Worth.
Net
Worth shall mean, with respect to the Company and its Subsidiaries on a
consolidated basis, Total Assets, less
Total
Liabilities, plus
all
accumulated amortization of Intangible Assets subsequent to the date of this
Agreement.
Non
Compete Agreements.
Non
Compete Agreements shall mean the Non-Compete Agreements (or applicable
provisions of Employment Agreements that contain non-compete covenants), between
the Company and (a) each of its Key Employees, (b) each Person listed on
Schedule 1(b)
hereto
and (c) each seller in connection with a Permitted Acquisition, in each case,
in
a form acceptable to the Holders.
Notes.
Notes
shall mean the Senior Secured Notes of the Company aggregating up to $12,000,000
in principal amount issued pursuant to Section 2.1 hereof and any other Notes
transferred to any other holders pursuant to Section 15 hereof.
-11-
Obligations.
Obligations shall mean all indebtedness, obligations and liabilities of the
Company or any of its Subsidiaries (including, without limitation, those in
connection with the “put” rights of the Holders described in Section 11) to any
of the Holders or the Collateral Agent, individually or collectively, existing
on the date hereof or arising thereafter, arising by contract, operation of
law
or otherwise, arising or incurred under this Agreement or any of the other
Financing Agreements, irrespective of whether for the payment of money, direct
or indirect, absolute or contingent, due or to become due, voluntary or
involuntary, joint or several, liquidated or unliquidated, secured or unsecured,
whether now existing or hereafter arising, and including all interest, costs,
fees (including attorneys fees), and expenses (including interest, costs,
indemnities, fees, taxes and expenses that accrue with respect thereto,
irrespective of whether a claim therefore is allowed pursuant to the provisions
of the Bankruptcy Code or other insolvency proceeding (if applicable)) and
any
and all other amounts which the Company or any of its Subsidiaries is required
to pay pursuant to any of the foregoing, by law, or otherwise.
Permitted Acquisition.
Permitted Acquisition shall mean any acquisition by the Company or any of its
Subsidiaries
of all
or substantially all of the assets of any Person or all of the capital stock
(or
other equity interests) of any Person; provided that, with respect to any such
acquisition, each of the following conditions is met:
(i) the
Acquired Party is in the same line or similar line of business as the Company
and its Subsidiaries;
(ii) the
Holders have provided their prior written consent to such acquisition;
provided
that the
consent of the Holders shall not be required in the event that (a) the aggregate
purchase price for the acquisition is less than $800,000, (b) the aggregate
purchase price for all acquisitions with a purchase price of less than $800,000
during any 24 month period is less than $2,000,000 and (c) the Company does
not
require funding under the Senior Loan Agreement to finance such
acquisition;
(iii) both
immediately before and immediately after giving effect to such acquisition,
no
Default shall be continuing or shall result therefrom, and, after giving effect
on a pro forma basis to the acquisition, the Company shall be in compliance
with
all terms and conditions of this Agreement and the other Financing
Agreements;
(iv) the
Company and the Acquired Party shall comply with Section 7.19; and
(v) prior
to
such acquisition, the Holders shall have received the acquisition agreement,
all
other acquisition-related documents and the Acquired Party’s financial
statements, and such agreements and financial statements shall be satisfactory
to the Holders; provided
that the
Company shall not be required to satisfy this condition if (a) the aggregate
purchase price for the acquisition is less than $800,000, (b) the aggregate
purchase price for all acquisitions with a purchase price of less than $800,000
during any 24 month period is less than $2,000,000 and (c) the Company does
not
require funding under the Senior Loan Agreement to finance such
acquisition.
-12-
Permitted Indebtedness.
See
Section 7.10.
Permitted Liens.
See
Section 7.11.
Person.
Person
shall mean an individual, partnership, corporation, limited liability company,
association, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision
thereof.
Post-Closing
Letter.
Post
Closing Letter shall mean that certain Post-Closing letter agreement, dated
the
date hereof, between the Company and the Collateral Agent.
Preferred Stock.
Preferred Stock shall mean, collectively, (a) the Preferred Stock of the Company
described in Section 4.5(a), (b) any capital stock or other securities into
which or for which Preferred Stock shall have been converted or exchanged
pursuant to any recapitalization, reorganization or merger of the Company,
and
(c) any shares of capital stock issued with respect to the foregoing pursuant
to
a stock dividend or stock split.
Preemptive Right.
See
Section 8.4(a).
Prepayment Price.
Prepayment Price shall mean, at any time, with respect to any repayment or
prepayment of the Notes at such time (whether voluntary or involuntary) or,
following an Event of Default, any acceleration or demand for payment of the
Notes at such time, the principal amount of Notes (including any payment in
kind
interest accrual) being redeemed or repaid multiplied by the applicable price
percentage set forth below:
|
Period
|
Prepayment Price Percentage
|
|
|
November
30, 2007 through November 30, 2009
|
105%
|
|
|
December
1, 2009 through January 30, 2011
|
102.5%
|
|
|
Maturity
Date
|
100%
|
;
provided,
however,
in the
event that the repayment or prepayment occurs in connection with a sale of
all
or substantially all of the Company’s assets or Common Stock, then the
Prepayment Price shall be the principal amount of Notes being redeemed or repaid
multiplied by the applicable price percentage set forth below:
|
Period
|
Prepayment Price Percentage
|
|
|
November
30, 2007 through November 30, 2008
|
103%
|
|
|
December
1, 2008 through November 30, 2009
|
102%
|
|
|
December
1, 2009 through January 30, 2011
|
101%
|
|
|
Maturity
Date
|
100%
|
-13-
;
provided further
that, if
the Holders shall have received on or prior to May 30, 2009 an aggregate amount
of (i) fees, (ii) interest and (iii) cash in connection with the Holders
exercising their “put” rights hereunder in an amount equal to or greater than
12,000,000, the Prepayment Price Percentage applicable to any repayment or
prepayment made in connection with a sale of all or substantially all of the
Company’s assets or Common Stock shall be 100%.
Projections.
See
Section 4.7(a)(ii).
Public Sale.
Public
Sale shall mean any sale of Common Stock or other equity interest to the public
pursuant to a public offering registered under the Securities Act or to the
public through a broker or market-maker pursuant to the provisions of Rule
144
(or any successor rule) adopted under the Securities Act or any other public
offering not required to be registered under the Securities Act.
Public Valuation Criteria.
Public
Valuation Criteria shall mean, at any time of determination, that (i) the
Company’s common stock equity is publicly-traded at an average daily trading
volume level over the past 90 days which is greater than or equal to 1.50%
of
the outstanding common stock equity of the Company, (ii) the number of
non-restricted shares of the Company’s common stock equity available to be
publicly-traded as of the last date for which such information is publicly
available is greater than or equal to 25% of the total shares outstanding of
common stock equity of the Company, (iii) the product of all non-restricted
shares of the Company’s common stock equity available to be publicly-traded as
of the last date for which such information is publicly available multiplied by
the
thirty-day average per share closing stock price of the Company’s common stock
equity is at least $25,000,000 and (iv) the closing stock price of the Company’s
common stock equity is at least $1.00 per share.
Purchase Price.
See
Section 2.2.
Put Closing Date.
See
Section 11.2.
Put Notice.
See
Section 11.1.
Qualified Public Offering.
Qualified Public Offering shall mean the closing of the Company’s underwritten
public offering pursuant to an effective registration statement under the
Securities Act covering the offer and sale of shares of Common Stock in which
not less than $20,000,000 of gross proceeds are received by the Company for
the
account of the Company.
Real Property.
See
Section 4.13.
Registration Rights Agreement.
Registration Rights Agreement shall mean the Registration Rights Agreement,
dated as of the date hereof, by and among the Company and the
Holders.
-14-
Related Agreements.
Related
Agreements shall mean, collectively, the Financing Agreements, the Senior
Documents, the Employment Agreements, the Non-Compete Agreements and any
document governing or evidencing the Subordinated Debt.
Release.
Release
shall have the meaning specified in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. §§9601 et seq.
and the
regulations promulgated thereunder, as in effect from time to time.
Remedial Action.
Remedial Action shall mean all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate, or in any way address Hazardous
Substances in the indoor or outdoor environment, (b) prevent or minimize a
Release or threatened Release of Hazardous
Substances so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment, (c) restore or reclaim
natural resources or the environment, (d) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (e)
conduct any other actions with respect to Hazardous Substances authorized by
Environmental Laws.
Repurchase Price.
See
Section 11.5(a).
Rescission Notice.
See
Section 11.4.
Restricted Payment.
Restricted Payment shall mean any payment (whether in cash, securities or other
property) to or for the benefit of any Affiliate of the Company or any of its
Subsidiaries in respect of any Indebtedness (other than Subordinated Debt)
owed
by or other obligation of the Company or such Subsidiary to such Affiliate.
Securities.
Securities shall mean the Notes, the Warrants and the Warrant
Shares.
Securities Act.
Securities Act shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Security Documents.
Security Documents shall mean all security agreements, Guaranties, pledge
agreements, UCC financing statements, and any other instruments or documents
required by the Collateral Agent to be executed or delivered hereunder to secure
the Obligations.
Sellers.
Sellers
shall mean the holders of the Seller Subordinated Closing Debt listed on
Schedule 1(c)
hereto.
Seller Subordinated Closing Debt.
Seller
Subordinated Closing Debt shall mean the Indebtedness of the Company set forth
on Schedule 1(c)
hereto.
Seller Subordination Agreements.
Seller
Subordination Agreements shall mean those certain Subordination Agreements,
dated as of the date hereof, among each Seller, the Collateral Agent, the
Holders and the Company.
-15-
Senior Creditor.
Senior
Creditor shall mean RBS Citizens, National Association.
Senior Debt.
Senior
Debt shall have the meaning assigned to it in the Intercreditor
Agreement.
Senior Documents.
Senior
Documents shall mean the Senior Loan Agreement, and all promissory notes,
reimbursement agreements, guaranties, security agreements, trademark security
agreements, pledge agreements, deeds of trust, mortgages, subordination
agreements and other instruments, agreements and documents executed at any
time
pursuant thereto or in connection therewith, including all amendments
thereto.
Senior Loan Agreement.
Senior
Loan Agreement shall mean that certain Revolving Line of Credit and Term Loan
Agreement, dated as of even date herewith, between the Senior Creditor and
the
Company (as amended and in effect from time to time, including any restatement
of or replacement agreement therefore, whether with the same or different
parties).
Specified Shareholder.
Specified Shareholder shall mean any Person that, together with its Affiliates,
holds a number of shares of the Common Stock in excess of 2% of the aggregate
number of shares of Common Stock then outstanding, calculated on a Fully Diluted
Basis.
Subsidiary.
Subsidiary shall mean any Person of which the Company or other specified Person
now or hereafter shall, at the time, own directly, or indirectly through a
Subsidiary, at least a majority of the outstanding capital stock (or other
shares of beneficial interest) entitled to vote generally.
Subordinated Debt.
Subordinated Debt shall mean (a) the Seller Subordinated Closing Debt and (b)
unsecured Indebtedness owed to a seller as part of the purchase price in
connection with a Permitted Acquisition so long as such Indebtedness is made
subordinate and junior in right of payment to any and all Obligations pursuant
to a Subordination Agreement satisfactory to the Holders.
Subordination Agreement.
Subordination Agreement shall mean (a) the Seller Subordination Agreements
and
(b) any other agreement satisfactory to the Holders subordinating any
Subordinated Debt.
Third Appraiser.
See
Section 11.5(b).
Total Assets.
Total
Assets shall mean all assets of the Company and its Subsidiaries determined
on a
consolidated basis in accordance with GAAP.
Total Funded Debt.
Total
Funded Debt shall mean the Notes, the Senior Debt, the Subordinated Debt and
any
other Indebtedness for Borrowed Money of the Company or its
Subsidiaries.
-16-
Total Liabilities.
Total
Liabilities shall mean all liabilities of the Company and its Subsidiaries
determined on a consolidated basis in accordance with GAAP and classified as
such on the consolidated balance sheet of the Company and its
Subsidiaries.
Transfer Notice.
See
Section 15.2.
Unrepurchased Securities.
See
Section 11.4.
Warrants.
Warrants shall mean the Warrants of the Company issued to the Holders pursuant
to Section 2.1 hereof and any other Warrants transferred to any other permitted
holders pursuant to Section 15 hereof; provided that
no
Warrants which have been sold pursuant to a Public Sale shall be considered
to
be outstanding Warrants or Securities hereunder.
Warrant
Shares.
Warrant
Shares shall mean, collectively, (a) shares of Common Stock issuable upon
exercise of the Warrants in accordance with their terms, (b) any capital stock
or other securities into which or for which such Common Stock shall have been
converted or exchanged pursuant to any recapitalization, reorganization or
merger of the Company, and (c) any shares of capital stock issued with respect
to the foregoing pursuant to a stock dividend or a stock split; provided that
no
Warrant Shares which have been sold pursuant to a Public Sale shall be
considered to be outstanding Warrant Shares or Securities
hereunder.
Woodside QP.
Woodside QP shall mean Woodside
Capital Partners IV QP, LLC.
Woodside IV.
Woodside
IV shall mean Woodside
Capital Partners IV, LLC.
2. SALE AND PURCHASE OF SECURITIES; TERM LOAN.
2.1
Sale and Purchase of Securities; Term Loan.
(a) The
Company agrees to issue and sell to Woodside QP and, subject to all of the
terms
and conditions hereof and in reliance on the representations and warranties
set
forth or referred to herein, Woodside QP agrees to purchase, at the Closing
(as
described below) (i) a Senior Secured Note of the Company, in the aggregate
principal amount of $3,273,000, such Note to be in the form of Exhibit A hereto,
(ii) a $0.50 Common Stock Purchase Warrant for the purchase of 1,566,346 shares
of Common Stock, such Warrant to be in the form of Exhibits B-1
hereto,
(iii) a $1.00 Common Stock Purchase Warrant for the purchase of 1,044,230 shares
of Common Stock, such Warrant to be in the form of Exhibits B-2
hereto
and (iv) a $1.50 Common Stock Purchase Warrant for the purchase of 522,115
shares of Common Stock, such Warrant to be in the form of Exhibits B-3
hereto;
(b) The
Company agrees to issue and sell to Woodside IV and, subject to all of the
terms
and conditions hereof and in reliance on the representations and warranties
set
forth or referred to herein, Woodside IV agrees to purchase, at the Closing
(as
described below) (i) a Senior Secured Note of the Company, in the aggregate
principal amount of $2,727,000, such Note to be in the form of Exhibit A hereto,
(ii) a $0.50 Common Stock Purchase Warrant for the purchase of 1,305,049 shares
of Common Stock, such Warrant to be in the form of Exhibits B-1
hereto,
(iii) a $1.00 Common Stock Purchase Warrant for the purchase of 870,033 shares
of Common Stock, such Warrant to be in the form of Exhibits B-2
hereto
and (iv) a $1.50 Common Stock Purchase Warrant for the purchase of 435,016
shares of Common Stock, such Warrant to be in the form of Exhibits B-3
hereto;
-17-
(c) Subject
to all of the terms and conditions hereof, ▇▇▇▇▇▇ agrees to lend to the Company,
at the Closing (as described below), an amount equal to $6,000,000, such term
loan to be evidenced by a Senior Secured Note of the Company, in the aggregate
principal amount of $6,000,000, such Note to be in the form of Exhibit A hereto;
and
(d) The
Company agrees to issue to ▇▇▇▇▇▇, subject to all of the terms and conditions
hereof and in reliance on the representations and warranties set forth or
referred to herein, at the Closing (as described below), (i) a $0.50 Common
Stock Purchase Warrant for the purchase of 2,871,394 shares of Common Stock,
such Warrant to be in the form of Exhibits B-1
hereto,
(ii) a $1.00 Common Stock Purchase Warrant for the purchase of 1,914,264 shares
of Common Stock, such Warrant to be in the form of Exhibits B-2
hereto
and (iii) a $1.50 Common Stock Purchase Warrant for the purchase of 957,131
shares of Common Stock, such Warrant to be in the form of Exhibits B-3
hereto
2.2. Purchase Price.
The
aggregate purchase price for the Securities purchased pursuant to Section 2.1(a)
and (b) is $6,000,000 (the “Purchase Price”).
The
parties hereto agree that (a) the aggregate purchase price for the Note to
be
issued to Woodside QP at the Closing is $3,271,909.00; (b) the aggregate
purchase price for the Warrants to be issued to Woodside QP at the Closing
is
$1,091.00; (c) the aggregate purchase price for the Note to be issued to
Woodside IV at the Closing is $2,726,091.00; and (d) the aggregate purchase
price for the Warrants to be issued to Woodside IV at the Closing is $909.00,
and, in each case, will be reported as such by all parties for federal, state
and local tax purposes.
2.3.
Closing.
The
closing of the purchase, sale and issuance of Securities and the Loan (the
"Closing")
will
take place at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. on November 30, 2007, or at such other time,
date and place as the parties hereto may mutually agree upon (the "Closing Date").
At
the Closing, the Company will deliver to the Holders the Securities described
in
Section 2.1 hereof against (a) payment by the Holders of the Purchase Price
in
immediately available funds and (b) the making of the Loan to the Company in
immediately available funds. Each of the Securities described in Section 2.1
hereof issued at the Closing will be issued to the Holders and registered in
their name in the records of the Company.
2.4. Use of Proceeds.
The
proceeds from the sale of the Securities hereunder and the Loan will be used
solely for the purposes set forth on Schedule 2.4
hereto.
The Company agrees that it will not use any part of the proceeds from the sale
of the Securities or the Loan to purchase or carry any "margin security" or
"margin stock," as such terms are defined in any regulation, rule or
interpretation of the Board of Governors of the Federal Reserve
System.
-18-
3.
PRINCIPAL AND INTEREST PAYMENTS ON NOTES;
SECURITY.
3.1. Mandatory Principal Repayment.
The
Company agrees to (x) repay the aggregate principal amount of the Notes in
one
installment in the amount of the Prepayment Price on the earlier to occur of
(a)
the Maturity Date, (b) a Capital Transaction and (c) the acceleration of the
Notes following an Event of Default, and (y) prepay the Notes, at the Prepayment
Price, in an amount equal to (i) 100% of the net cash insurance proceeds
received by the Company or any of their Subsidiaries in respect the loss,
destruction or condemnation of any Collateral, (ii) 100% of the net cash
proceeds received by the Company or any of its Subsidiaries from any asset
sale
not permitted pursuant to Section 7.14 and (iii) 100% of the net cash proceeds
received by the Company or any of its Subsidiaries from any offering or sale
of
equity interests (other than proceeds received by the Company from Excepted
Capital Raises), provided that
(1) any
such amounts applied to permanently prepay a loan made under the Senior Loan
Agreement, as in effect on the date hereof, where such prepayment is accompanied
by a corresponding reduction of the Senior Creditor’s commitment to make loans
under the Senior Loan Agreement, as in effect on the date hereof, shall not
be
required to be applied to prepay the Notes and (2) in the event that the
Leverage Ratio as of the most recently ended fiscal quarter is less than
3.00:1.00, no prepayment under clause (iii) shall be required so long as such
proceeds are used to finance a Permitted Acquisition within three months of
receipt of such proceeds by the Company or any of its Subsidiaries. Any payments
required under this Section 3.1 shall be made to the Holders of the Notes
pro rata,
in
accordance with the outstanding principal amounts of such Holder’s Notes.
3.2. Optional Prepayments.
Subject
to the last sentence of this Section 3.2, the Company may at any time and from
time to time prepay all or any portion (in integral multiples of $500,000)
of
the principal amount of the Notes, provided that
(a) such
prepayment shall be allocated to all of the Notes outstanding at the time in
proportion to the respective outstanding principal amounts thereof, (b) all
accrued and unpaid interest on the principal amount being prepaid is paid at
the
same time as such prepayment, (c) any such prepayment shall be made to the
Holders of the Notes pro rata,
in
accordance with the outstanding principal amounts of such Holder’s Notes, (d)
the Company shall give the Holders irrevocable written notice of such prepayment
not less than 5 nor more than 30 days prior to the prepayment date, specifying
(i) such prepayment date, (ii) the principal amount of the Notes to be
prepaid on such date, and (iii) the accrued interest applicable to the
prepayment and (iv) that such prepayment is to be made pursuant to this Section
3.2, and (e) the principal amount of the Notes payable in the event of an
optional prepayment pursuant to this Section 3.2 shall be an amount equal to
the
Prepayment Price. All Notes which have been prepaid may not be reborrowed.
All
optional prepayments under this Section 3.2 shall be applied first to all costs,
expenses, indemnities and other amounts payable hereunder and under the
applicable Notes, then to payment of default interest, if any, then to payment
of premium, if any, then to payment of accrued interest and thereafter to
payment of principal. Notwithstanding the foregoing, the Company shall not
prepay all or any portion of the principal amount of the Notes at any time
prior
to May 30, 2009.
-19-
3.3. Presentation or Surrender of Notes.
The
Company may, as a condition to accepting any prepayment of a Note, require
the
Holder thereof to present such Note at the place specified in the Note for
payment of the principal thereof, for notation thereon of the amount and date
of
such prepayment, or, if such Note is prepaid in full, to surrender the same
to
the Company.
3.4. No Reborrowing.
No
amount repaid or prepaid pursuant to Section 3.1 or 3.2 may be reborrowed under
the Notes.
3.5. Interest Payments.
(a)
Subject to Sections 3.5(b) and 3.5(c) hereof, the unpaid principal amount of
the
Notes outstanding from time to time shall bear interest from the Closing Date
until and including the Maturity Date, at a rate equal to fifteen percent (15%)
per annum, of which (A)
twelve percent (12%) per annum shall be due and payable, in cash, (x) on the
first day of each calendar month
(commencing on the first such date following the Closing Date)
in
arrears (y) on the date of any repayment or prepayment of such Notes (with
respect to the portion of such Notes so repaid or prepaid), and (z) at the
Maturity Date and (B) the remaining three percent (3%) shall be compounded
monthly by adding the amount of such interest to the principal amount of the
Notes and shall be due and payable, in cash, at the Maturity Date and on the
date of any repayment or prepayment of such Notes (with respect to the portion
of such Notes so repaid or prepaid).
Interest on the Notes shall be calculated on the basis of the actual number
of
days elapsed and a 360 day year. Notwithstanding the foregoing, (a) in the
event
that the Company or any of its Subsidiaries receives net cash proceeds of at
least $800,000 from any offering or sale of equity interests prior to December
31, 2007, the interest rate set forth in clause (B) above shall be reduced
to
2.625% and (b) in the event that any interest payment is payable on a day that
is not a business day, such payment shall be payable on the first business
day
following such day.
(b) Upon
the
occurrence and during the continuance of any Event of Default the Notes shall
bear interest at a rate equal to 18% per
annum,
which
shall be due and payable, in cash (x) monthly on the first day of each calendar
month (commencing on the first such date following the occurrence of such Event
of Default), in arrears and (y) upon the date of any repayment or prepayment
of
the Notes (with respect to the portion of such Notes so repaid or
prepaid).
(c) It
is not
intended by the Holders of the Notes, and nothing contained in this Agreement
or
any Note shall be deemed, to establish or require the payment of a rate of
interest in excess of the maximum rate permitted by applicable federal, state
or
other law (the "Maximum Rate")
and,
to prevent such an occurrence, any agreement which may now or hereafter be
in
effect between the Company and the Holders of the Notes regarding the payment
of
fees or interest to such Holders is hereby limited by the provisions of this
Section 3.5(c). If, in any month, the effective interest rate applicable to
the
principal outstanding under the Notes, absent the Maximum Rate limitation
contained herein, would have exceeded the Maximum Rate, then the effective
interest rate applicable to the Notes for that month shall be the Maximum Rate,
and, if in any subsequent month, the effective interest rate would otherwise
be
less than the Maximum Rate, then the effective interest rate applicable to
the
Notes for such month shall be increased to the Maximum Rate until such time
as
the amount of interest paid hereunder equals the amount of interest which would
have been paid in respect of the Notes if the same had not been limited by
the
Maximum Rate. In the event that, upon payment in full of the principal
outstanding under the Notes, the total amount of interest paid or accrued in
respect of the Notes under the terms of this Agreement is less than the total
amount of interest which would have been paid or accrued in respect of the
Notes
had the interest not been limited hereby to the Maximum Rate, then the Company
shall, to the extent permitted by such applicable federal, state or other law,
pay to each of the holders of the Notes an amount equal to the excess, if any,
of (i) the lesser of (A) the amount of interest which would have been charged
in
respect of the Notes if the Maximum Rate had, at all times, been in effect
with
respect to the Notes and (B) the amount of interest which would have accrued
in
respect of the Notes had the effective interest rate applicable with respect
to
the Notes at all times not been limited hereunder by the Maximum Rate over
(ii)
the amount of interest actually paid or accrued in respect of the Notes held
by
such holder under this Agreement. In the event that the Holders of the Notes
receive, collect or apply as interest any sum in excess of the Maximum Rate,
such excess amount shall be applied to the reduction of principal outstanding
under the Notes until the payment in full thereof, and if no such principal
is
then outstanding, such excess, or part thereof remaining, shall be paid to
the
Company.
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3.6. Security.
(a) All
Obligations shall be secured by a perfected first priority security interest
(subject only to Permitted Liens entitled to priority under applicable law)
in
all assets of the Company, whether now owned or hereafter acquired, pursuant
to
the Security Documents to which the Company is a party.
(b) All
Obligations shall also be guaranteed pursuant to the terms of the Guaranties.
The obligations of the guarantors under the Guaranties shall be in turn secured
by a perfected first priority security interest (subject only to Permitted
Liens
entitled to priority under applicable law) in all of the assets of each
guarantor, whether now owned or hereafter acquired, pursuant to the terms of
the
Security Documents to which such person is a party.
3.7.
Subordination to Indebtedness Under Senior Loan
Agreement.
Notwithstanding any other provision of this Agreement or any other Financing
Agreement, the payment of principal and interest on each of the Notes and each
of the obligations owing to the Investors under the other Financing Agreements
is and shall be junior and subordinated in right of payment, to the extent
and
in the manner set forth in the Intercreditor Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
In
order
to induce the Collateral Agent and the Holders to enter into this Agreement
and
to purchase the Securities and make the Loan, the Company hereby represents
and
warrants
to each of the Collateral Agent and the Holders, both before and immediately
after giving effect to the Closing:
4.1. Organization and Good Standing.
The
Company and each of its Subsidiaries is duly organized and existing in good
standing in its jurisdiction of organization and is duly qualified as a foreign
corporation and authorized to do business in all other jurisdictions in which
the nature of its business or property makes such qualification necessary,
except where the failure to so qualify would not be expected to have a Material
Adverse Effect. The Company and each of its Subsidiaries has the requisite
power
to own its properties and to carry on its business as now conducted and as
proposed to be conducted.
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4.2. Authorization.
The
execution, delivery and performance by the Company and each of its Subsidiaries
of this Agreement and each Related Agreement to which such Person is a party,
as
applicable, and the issuance and sale by the Company of the Securities
hereunder, (a) are within the Company’s or such Subsidiary’s power and
authority, (b) have been duly authorized by all necessary corporate or other
proceedings, and (c) do not conflict with or result in any breach of any
provision of or the creation of any Lien upon any of the property of the Company
or its Subsidiaries (other than Liens created by the Security Documents and
the
Senior Documents) or require any consent or approval pursuant to the Charter
or
bylaws of the Company or any of its Subsidiaries, except for such necessary
corporate approvals as shall have been received prior to the Closing Date,
or
any material law, regulation, order, judgment, writ, injunction, license,
permit, agreement or instrument applicable to the Company or any of its
Subsidiaries.
4.3. Enforceability.
The
execution and delivery by the Company and each of its Subsidiaries of this
Agreement and each of the Related Agreements to which such Person is a party,
and the issuance and sale by the Company of the Securities hereunder, will
result in legally binding obligations of the Company and its Subsidiaries,
as
applicable, enforceable against such Persons in accordance with the respective
terms and provisions hereof and thereof, except to the extent that (a) such
enforceability is limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting generally the enforcement of creditors'
rights and (b) the availability of the remedy of specific performance or
injunctive or other equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
4.4. Governmental Approvals.
Except
as set forth on Schedule 4.4
hereto,
the execution, delivery and performance by the Company and each of its
Subsidiaries of this Agreement and each Related Agreement to which such Person
is a party, and the issuance and sale of the Securities hereunder, do not
require the approval or consent of, or any filing with, any governmental
authority or agency.
4.5. Capitalization.
(a) The
authorized capital stock of the Company consists of (i) 10,000,000 shares of
Preferred Stock, $0.001 par value per share of which 4,000,000 shares have
been
designated as Series A Preferred Stock (the “Series A Preferred Stock”),
4,000,000 shares have been designated as Series B Preferred Stock (the
“Series B Preferred Stock”),
1,000,000 shares have been designated as Series C Preferred Stock (the
“Series C Preferred Stock”),
500,000 shares have been designated as Series D Preferred Stock (the
“Series D Preferred Stock”)
and
60,000 shares have been designated as Series E Preferred Stock (the
“Series E Preferred Stock”)
and
(ii) 100,000,000 shares of Common Stock, $0.001 par value per share. On the
Closing Date, after giving effect to the transactions contemplated hereby and
by
the Related Agreements, the Company will have no outstanding capital stock
other
than 2,420,000 shares of Series A Preferred Stock, 3,715,000 shares of Series
B
Preferred Stock, 770,834 shares of Series C Preferred Stock, 409,500 shares
of
Series D Preferred Stock, 29,350 shares of Series E Preferred Stock and
35,539,620 shares of Common Stock, all of which shares will be owned as set
forth on Schedule 4.5(a)
hereto
and will be duly authorized, validly issued, fully paid and non-assessable.
On
the Closing Date, after giving effect to the transactions contemplated hereby
and by the Related Agreements, each of the Subsidiaries of the Company will
have
the authorized, issued and outstanding capital stock (or other equity interests)
set forth on Schedule 4.5(a)
hereto,
all of which outstanding shares of capital stock (or other equity interests)
will be duly authorized, validly issued, fully paid and non-assessable (as
may
be applicable to such interests) and will be owned, beneficially and of record
by the Company.
-22-
(b) Options,
Etc.
Except
for the Warrants or as set forth on Schedule 4.5(b)
hereto,
each of the Company and its Subsidiaries has no outstanding rights (either
pre-emptive or other) or options to subscribe for or purchase, and no warrants
or other agreements providing for or requiring the issuance by any of the
Company or its Subsidiaries of, any of its capital stock or other equity
interest, or any securities convertible into or exchangeable for its capital
stock or other equity interest.
(c) Common
Stock Issuable
Upon Conversion, Etc..
Schedule 4.5(c)
hereto
sets forth the number of shares of Common Stock issuable upon conversion of
all
Preferred Stock or any other securities convertible into or exchangeable for
its
capital stock or other equity interests (including the exercise of all options
and warrants to subscribe for or purchase the Company’s capital
stock).
(d) Reservation,
Etc.
Sufficient shares of authorized but unissued Common Stock have been reserved
by
appropriate corporate action in connection with the prospective exercise of
the
Warrants. The issuance of the Warrant Shares (i) will not require any further
corporate action by the stockholders or directors of the Company, (ii) will
not
be subject to pre-emptive rights in any present or future stockholders of the
Company, and (iii) will not conflict with any provision of any agreement to
which the Company is a party or by which it is bound. All Warrant Shares, when
issued upon exercise of the Warrants in accordance with their terms, will be
duly authorized, validly issued, fully paid and non-assessable.
4.6. Subsidiaries.
Except
as set forth on Schedule 4.6
hereto,
neither the Company nor any of its Subsidiaries (a) has any Subsidiaries nor
owns or holds of record and/or beneficially any shares of any class of the
capital of any corporation, nor (b) owns any legal and/or beneficial interests
in any partnerships, limited liability companies, business trusts or joint
ventures, or in any other unincorporated trade or business enterprises.
4.7. Reports and Financial Statements.
(a) The Holders have heretofore been furnished with complete and
correct copies of the following:
(i) the
balance sheets and related statements of income and cash flows attached hereto
as Schedule 4.7(a)(i)
(collectively, the "Financial Statements");
and
-23-
(ii) the
projections of the future performance of the Company and its Subsidiaries for
the three-year period following the Closing Date, on a consolidated basis,
including income, net profits, and cash flows, as attached hereto as
Schedule 4.7(a)(ii)
(the
"Projections").
(b) Each
of
the Financial Statements was prepared in accordance with GAAP applied on a
basis
consistent with prior periods except as otherwise stated therein; each of the
balance sheets of the Company included in such Financial Statements fairly
presents the financial condition of the Company and its Subsidiaries as at
the
close of business on the date thereof; and each of the statements of income
and
cash flows of the Company and its Subsidiaries included in such Financial
Statements fairly presents the results of operations of the Company and its
Subsidiaries for the fiscal period then ended.
(d) The
Projections constitute a reasonable basis for the assessment of the future
performance of the Company and its Subsidiaries, on a consolidated basis, during
the periods indicated therein, and all material assumptions used in the
preparation of the Projections are set forth in the notes thereto.
4.8. Material Adverse Effect.
There
has been no Material Adverse Effect since June 30, 2007.
4.9. Indebtedness and Liens.
The
Company and its Subsidiaries have no Indebtedness or Liens upon any of their
properties other than Permitted Indebtedness and Permitted Liens.
4.10. Related Agreements.
The
Holders have heretofore or simultaneously herewith been furnished with complete
and correct copies of all of the Related Agreements. This Agreement and the
Related Agreements are the only material agreements relating to the transactions
contemplated hereby to which the Company or any of its Subsidiaries is a party.
Neither the Company nor any of its Subsidiaries is in default on any of its
obligations under this Agreement or any Related Agreement to which such Person
is a party and, to the best knowledge of the Company, no other party to any
Related Agreement is in default thereunder.
4.11. Employee
Benefit Plans.
(a) Identification of Plans. Except
for the arrangements set forth in Schedule 4.11,
neither
the Company nor any of its Subsidiaries now maintains or contributes to any
pension, profit-sharing, deferred compensation, bonus, stock option, share
appreciation right, severance, group or individual health, dental, medical,
life
insurance, survivor benefit, or similar plan, policy or arrangement, whether
formal or informal, for the benefit of any director, officer, consultant, or
employee of it, whether active or terminated; nor has it ever maintained or
contributed to any such plan, policy, or arrangement that was subject to ERISA.
Each of the arrangements set forth in Schedule 4.11
is
herein referred to as an "Employee Benefit Plan."
(b) Compliance with Terms and Law. Each
Employee Benefit Plan is and has been maintained and operated in compliance
with
the terms of such plan and with the requirements prescribed by any and all
statutes, governmental, or court orders, or governmental rules or regulations
in
effect from time to time, including but not limited to ERISA and the Code, and
applicable to such plan. Each Employee Benefit Plan that is intended to qualify
under Section 401(a) of the Code is so qualified.
-24-
(c) Absence of Certain Events and Arrangements.
(i) There
is
no pending, or, to the Company’s knowledge, threatened, legal action,
proceeding, or investigation, other than routine claims for benefits, concerning
any Employee Benefit Plan, or any fiduciary or service provider thereof, and
to
the Company’s knowledge, there is no basis for any such legal action or
proceeding.
(ii) No
Employee Benefit Plan, nor any party in interest in respect thereof, has engaged
in a prohibited transaction that could subject the Company or any of its
Subsidiaries, directly or indirectly, to liability under Section 409 or 502(i)
of ERISA or Section 4975 of the Code.
(iii) No
communication, report, or disclosure has been made that, at the time made,
did
not accurately reflect the terms and operations of any Employee Benefit
Plan.
(iv) No
Employee Benefit Plan provides material welfare benefits subsequent to
termination of employment to employees or their beneficiaries (except to the
extent required by applicable state insurance laws and Title I, Part 6
of ERISA).
(v) Neither
the Company nor any of its Subsidiaries has undertaken to maintain any Employee
Benefit Plan for any period of time and each such plan is terminable at the
sole
discretion of the Company, subject only to such constraints as may imposed
by
applicable law.
(vi) No
Employee Benefit Plan is maintained pursuant to a collective bargaining
agreement or is or has been subject to the minimum funding requirements of
Section 302 of ERISA or Section 412 of the Code.
(d) Funding of Certain Plans. With
respect to each Employee Benefit Plan for which a separate fund of assets is
or
is required to be maintained, full payment has been made of all amounts that,
under the terms of each such plan, it is required to have paid as contributions
to that plan as of the end of such plan’s most recently ended year.
4.12. Solvency.
Prior
to, upon and immediately after consummation of the transactions contemplated
hereby and by the Related Agreements, the Company and each of its Subsidiaries
is solvent, has tangible and intangible assets having a fair value in excess
of
the amount required to pay its probable liabilities on its existing debts as
they become absolute and matured, and has access to adequate capital for the
conduct of its business and the ability to pay its debts from time to time
incurred in connection therewith as such debts mature.
-25-
4.13. Title to Assets;
Leases.
The
Company and each of its Subsidiaries own all of the assets reflected in the
consolidated balance sheet of the Company and its Subsidiaries as of June 30,
2007 and attached to Schedule 4.7(a)(i)
hereto
as at the Closing Date, subject to no Liens other than Permitted Liens and
except for assets disposed of since such date in the ordinary course of business
and consistent with past practices of the Company and its Subsidiaries. Neither
the Company nor any of its Subsidiaries owns any real property. The Company
and
each of its Subsidiaries enjoys peaceful and undisturbed possession, and is
in
compliance, in all material respects, with the terms, (a) of all leases of
real
property on which facilities operated by it are situated (the "Real Property"),
each
of which is listed on Schedule 4.13
hereto,
and (b) of all leases of personal property, and all leases described in clauses
(a) and (b) above are valid and in full force and effect.
4.14. Litigation.
Except
as set forth on Schedule 4.14
hereto,
there is no litigation, at law or in equity, or any proceeding before any court,
board or other governmental or administrative agency or any arbitrator pending
or, to the knowledge of the Company, threatened which, individually or in the
aggregate, is reasonably likely to result in any final judgment or liability
which, after giving effect to any applicable insurance, could result in a
Material Adverse Effect or which seeks to enjoin the consummation of, or which
questions the validity of, any of the transactions contemplated by this
Agreement or any Related Agreement. No judgment, decree or order of any court,
board or other governmental or administrative agency or arbitrator has been
issued against or binds the Company or any of its Subsidiaries or any of their
assets which has or may have a Material Adverse Effect.
4.15. Defaults.
No
Default or Event of Default exists on the date hereof. Neither the Company
nor
any of its Subsidiaries is in default under any provisions of its respective
Charter or by-laws or under any material provisions of any contract, agreement,
lease or other instrument to which it is a party or by which it or its property
is bound or in material violation of any law, judgment, decree or governmental
order, rule or regulation applicable to the Company or such
Subsidiary.
4.16. Governmental Regulations.
The
Company is not a "holding company," or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company," as such terms are defined
in
the Public Utility Holding Company Act of 1935; nor is the Company a "registered
investment company," or an "affiliated person" or a "principal underwriter"
of a
"registered investment company," as such terms are defined in the Investment
Company Act of 1940, as amended.
4.17. Representations and Warranties under Related Agreements.
All
representations and warranties made by the Company or any of its Subsidiaries
in
any of the Related Agreements or in the certificates delivered in connection
therewith are true and correct as of the date hereof with the same force and
effect as though made on and as of the date hereof, and such representations
and
warranties are hereby confirmed to the Collateral Agent and the Holders. To
the
best knowledge of the Company, all representations and warranties made in the
Related Agreements by or on behalf of any party thereto other than the Company
or its Subsidiaries are true and correct in all material
respects.
-26-
4.18. Taxes.
The
Company each of its Subsidiaries has filed all tax returns and reports which
are
required to be filed with any foreign, federal, state or local governmental
authority or agency, and the Company and each such Subsidiary has paid, or
made
adequate provision for the payment of, all assessments received and all taxes
which have or may become due under applicable foreign, federal, state or local
governmental law or regulations with respect to the periods in respect of which
such returns and reports were filed. The Company knows of no additional
assessments since the date of such returns and reports, and there will be no
additional assessments for which adequate reserves have not been established.
The Company and each of its Subsidiaries have made adequate provision for all
current taxes. There is no action, suit, taxing authority proceeding, or audit
with respect to any tax now in progress, pending, or to the best of the
Company’s knowledge, threatened, against or with respect to the Company or any
of its Subsidiaries. No deficiency or proposed adjustment in respect of taxes
that has not been settled or otherwise resolved has been asserted or assessed
by
any taxing authority against the Company or any of its Subsidiaries. Neither
the
Company nor any of its Subsidiaries has consented to extend the time in which
any tax may be assessed or collected by any taxing authority. Neither the
Company nor any of its Subsidiaries has requested or been granted an extension
of the time for filing any tax return to a date on or after the Closing Date.
Neither the Company nor any of its Subsidiaries has been a member of any
affiliated group, or filed or been included in a combined, consolidated, or
unitary tax return. Neither the Company nor any of its Subsidiaries is a party
to or bound by any tax sharing or allocation agreement or has any current or
potential contractual obligation to indemnify any other person with respect
to
taxes. Each
of
the Company and its Subsidiaries has withheld and paid all taxes required to
have been withheld and paid by it in connection with amounts paid or owing
to
any employee, creditor, independent contractor, or other Person, based on the
Company’s or such Subsidiary's characterization of such Person, which
characterization is, to the Company’s knowledge, reasonable.
4.19. Environmental Compliance.
(a) The
Company and each of its Subsidiaries has been issued and is in compliance with
all permits, certificates, approvals, licenses and other authorizations relating
to environmental matters and required under applicable Environmental Laws for
the conduct of its business. None of the Company, its Subsidiaries, nor, to
the
Company’s knowledge, any operator of the Real Property is in alleged violation
of any Environmental Laws which alleged violation would have a material adverse
effect on the business, assets, or financial condition of the Company or any
of
its Subsidiaries.
(b) No
Release of Hazardous Substance or other condition exists at, on, or under any
of
the Real Property or any property formerly owned or leased by the Company or
any
of its Subsidiaries for which the Company or any of its Subsidiaries may be
liable under any Environmental Laws.
(c) Neither
the Company nor any of its Subsidiaries has received notice from any third
party
that it may be liable for any costs or damages whatsoever arising out of the
Release of Hazardous Substances.
-27-
(d) To
the
knowledge of the Company, no underground storage tank or receptacle, asbestos
containing material, or equipment containing polychlorinated biphenyls (PCBs)
exists at any of the Real Property in violation of Environmental
Laws.
(e) Any
Hazardous Substances generated by the Company, its Subsidiaries, or any operator
of the Real Property have been transported offsite only by licensed carriers
in
accordance with applicable Environmental Law.
4.20. Labor Relations.
The
Company and each of its Subsidiaries is in compliance with all applicable
federal and state laws respecting employment and employment practices, terms
and
conditions of employment, wages and hours, and nondiscrimination in employment,
and are not engaged in any unfair labor practice. There is no charge pending
or,
to the Company's knowledge, threatened, against or with respect to the Company
or any of its Subsidiaries before any court or agency alleging unlawful
discrimination in employment practices, and there is no charge of or proceeding
with regard to any unfair labor practice against any of them pending before
the
National Labor Relations Board. There is no labor strike, dispute, slow-down,
or
work stoppage pending, or to the Company's knowledge, threatened against or
involving the Company or any of its Subsidiaries. No employees of the Company
or
any of its Subsidiaries are party to a collective bargaining agreement, and
no
such collective bargaining agreement is currently being negotiated. No one
has
petitioned and no one is now petitioning for union representation of any
employees of the Company or any of its Subsidiaries. Neither the Company nor
any
of its Subsidiaries has experienced any work stoppage or other material labor
difficulty.
4.21. Potential Conflicts of Interest.
Except
as set forth on Schedule 4.2.1(a),
none of
the Persons listed on Schedule 4.21(b),
the
Company, any of the Company’s Subsidiaries or any of their respective officers,
directors, or Key Employees, (i) owns, directly or indirectly, any interest
in (excepting passive holdings for investment purposes of not more than one
percent (1%) of the securities of any publicly held and traded company), or
is
an officer, director, employee, or consultant of, any Person that is a
competitor, lessor, lessee, customer, client or supplier of the Company or
any
of its Subsidiaries; (ii) owns, directly or indirectly, any interest in any
tangible or intangible property used in or necessary to the business of the
Company or any of its Subsidiaries; or (iii) has any cause of action or other
claim whatsoever against the Company or any of its Subsidiaries, or owes any
amount to the Company or any of its Subsidiaries, except for claims in the
ordinary course of business, such as for accrued vacation pay, accrued benefits
under employee benefit plans, and similar matters and agreements.
4.22. Material Contracts.
Except
for the contracts, agreements and arrangements listed in Schedule 4.22
and
contracts, agreements or other arrangements that have been fully performed
and
with respect to which neither the Company nor any of its Subsidiaries has any
further obligations or liabilities, neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by (i)
any
agreement, instrument, or commitment that may affect its ability to consummate
the transactions contemplated hereby or by the Related Agreements, or (ii)
any
other material agreement, instrument, or commitment; including without
limitation, any:
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(a) agreement
for the purchase, sale, lease or license by or from it of (i) real estate
requiring total payments in excess of $100,000 in any instance or (ii) other
services, products, or assets, requiring total payments in excess of $100,000
in
any instance, other than agreements for the purchase of inventory in the
ordinary course of its business;
(b) agreements
requiring it to purchase all or substantially all of its requirements for a
particular product or service from a particular supplier or suppliers, or
requiring it to supply all of a particular customer's or customers' requirements
for a certain service or product (including all management service
agreements);
(c) agreement
or other commitment pursuant to which it has agreed to indemnify or hold
harmless any other person, to share tax liability of any other person, or to
refrain from competing with any other person;
(d) (i)
employment agreement, (ii) consulting agreement, or (iii) agreement providing
for severance payments or other additional rights or benefits (whether or not
optional) in the event of a sale or other change in control of it;
(e) agreement
with any current or former Affiliate, stockholder, officer, director, employee,
or consultant of the Company or any of the Company's Subsidiaries, or with
any
person in which any such Affiliate has an interest;
(f) joint
venture, partnership or teaming agreement;
(g) agreement
with any domestic or foreign government or agency or executive office thereof
or
any subcontract between it and any third party relating to a contract between
such third party and any domestic or foreign government or agency or executive
office thereof;
(h) agreement
the performance of which is reasonably likely to result in a loss to it;
or
(i) promissory
note, indenture, mortgage, loan agreement, guaranty, security agreement, pledge
or similar agreement with any lender.
The
Company has delivered to the Holders correct and complete copies of each
agreement, instrument, and commitment listed in Schedule 4.22,
each as
amended to date. Each such agreement, instrument, and commitment is a valid,
binding and enforceable obligation of the Company or its relevant Subsidiary
and
is in full force and effect. Except as set forth in Schedule 4.22,
neither
the Company nor any of its Subsidiaries is, nor to the Company's knowledge,
is
any other party thereto (nor is the Company or any of its Subsidiaries, to
the
Company's knowledge, considered by any other party thereto to be) in breach
of
or noncompliance with any term of any such agreement, instrument, or commitment
(nor is there, to the Company's knowledge, any basis for any of the foregoing),
except for breaches or noncompliances that singly or in the aggregate would
not
have a Material Adverse Effect. No claim, change order, request for equitable
adjustment, or request for contract price or schedule adjustment, between the
Company or any of its Subsidiaries and any supplier, client or customer,
relating to any agreement, instrument, or commitment listed in Schedule 4.22
is
pending or, to the Company's knowledge, threatened, other than those claims,
change orders or requests which could not result in a Material Adverse Effect.
No agreement, instrument, or commitment listed in Schedule 4.22
includes
or incorporates any provision, the effect of which may be to enlarge or
accelerate any of the obligations of the Company or any of its Subsidiaries
or
to give additional rights to any other party thereto, or will terminate, lapse,
or in any other way be affected, by reason of the transactions contemplated
by
this Agreement.
-29-
4.23. Intellectual Property.
(a) The
Company or one of its Subsidiaries is the sole and exclusive owner of or has
the
right to use, free and clear of any material obligations to pay royalties or
any
other similar obligations, and free and clear of all Liens, all (if any)
franchises, patents, patent applications, patent licenses, patent rights, trade
secrets, trademarks, trademark rights, trade names, trade name rights, brand
names, copyrights, licenses, permits, authorizations and other rights as are
necessary for the conduct of its business as currently conducted or currently
proposed to be conducted. All of the foregoing are in full force and effect,
and
the Company and each of its Subsidiaries is in compliance with the foregoing
without any known conflict with the valid rights of others which could affect
or
impair in a material manner the business, assets or financial condition of
the
Company or any of such Subsidiaries. Except as otherwise described in
Schedule 4.23
there
are no material licenses, sublicenses, covenants or agreements which have been
entered into by the Company or any of its Subsidiaries with respect to any
patents, trade secrets, trademarks, trade names, brand names or copyrights.
None
of the Company nor any of its Subsidiaries is in default in any material respect
under or in relation to any such license, sublicense, covenant or
agreement.
(b) There
is
no claim by or demand of any Person pertaining to, and there is no pending
or,
to the best knowledge of the Company, threatened action, suit, proceeding or
investigation relating to any rights of the Company or any of its Subsidiaries
in respect of any patents, trade secrets, trademarks, trade names, brand names
or copyrights used in the business or operations of the Company or any of its
Subsidiaries.
(c) No
patent, trade secret, trademark, trade name, brand name or copyright owned
or
used by the Company or any of its Subsidiaries (i) is, to the Company's
knowledge, being infringed by any Person, or (ii) to the Company's knowledge,
infringes any patent, trade secret, trademark, copyright or other intellectual
property right of any Person.
(d) Except
as
otherwise described in Schedule 4.23,
none of
the Company nor any of its Subsidiaries is a party to or bound by any agreement
or contract (whether written or, to its knowledge, oral) containing any covenant
prohibiting the Company or any of its Subsidiaries from competing in any
business of any kind in any territory or from competing with any Person, or
prohibiting the Company or any of its Subsidiaries from doing any kind of
business with any Person.
(e) To
the
Company's knowledge: (i) None of the Company, any of its Subsidiaries nor any
of
their respective employees or consultants has infringed or made unlawful use
of,
or is infringing or making unlawful use of, any proprietary or confidential
information of any Person, including without limitation any former employer
of
any past or present employee or consultant of the Company or any of its
Subsidiaries; and (ii) the activities of the Company's and its Subsidiaries’
employees and consultants in connection with their employment or consulting
do
not violate any agreements or arrangements that any such employees or
consultants have with any former employer or any other Person.
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4.24. Brokers.
Except
as set forth on Schedule 4.24,
no
finder, broker, agent or other intermediary has acted for or on behalf of the
Company or any or its Subsidiaries in connection with the negotiation or
consummation of the transactions contemplated hereby, and no fee will be payable
by the Company or any of its Subsidiaries to any such Person in connection
with
such transactions.
4.25. Real
Property Holding Corporation.
The
Company it is not a "United States real property holding corporation" within
the
meaning of Section 897 of the Code, as amended, and Treasury Regulation Section
1.897-2.
4.26. Lawful Issuance. All
of the outstanding shares of the Company's capital stock and all other
securities of the Company were offered, issued, and sold, and, assuming the
accuracy of the Holders’ representations and warranties set forth in Section 5
hereof, the Securities (other than the Note evidencing the Loan) have been
offered and at the Closing will be issued and, except for the Warrants issued
to
▇▇▇▇▇▇, sold, in compliance with (i) all applicable preemptive or similar
rights of all Persons, and (ii) all applicable provisions of the Securities
Act and the rules and regulations thereunder, and all applicable state
securities laws and the rules and regulations thereunder. No Person has any
valid right to rescind any purchase of the Notes, any shares of capital stock
or
other securities of the Company.
4.27. Disclosure.
No
representation, warranty or statement made in this Agreement, any Related
Agreement, or any agreement, certificate, statement or document furnished by
or
on behalf of the Company or any of its Subsidiaries in connection herewith
or
therewith contains any untrue statement of material fact or omits to state
a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances in which they were made, not
misleading.
4.28 Preferred Stock.
No
adjustment to the “conversion price” in respect of any Preferred Stock and no
other antidilution rights in favor of the holders of any Preferred Stock will
be
triggered as a result of the transactions contemplated hereby
4.29. Certain Shareholders.
Schedule 4.29
lists,
as of the date hereof, each Person that, together with its Affiliates, holds
a
number of shares of the Common Stock in excess of 4% of the aggregate number
of
shares of Common Stock then outstanding, calculated on a Fully Diluted
Basis.
5. REPRESENTATIONS AND WARRANTIES OF HOLDERS.
Each
of
the Holders represents and warrants to the Company, that, as of the Closing
Date:
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5.1.
Organization and Good Standing.
Each
Holder is duly organized and existing in good standing in its jurisdiction
of
organization and is authorized to do business in all other jurisdictions in
which the nature of its business or property makes such qualification necessary,
except where the failure to so qualify would not be expected to materially
adversely affect such Holder’s business or financial condition. Each Holder has
the requisite power to own its properties and to carry on its business as now
conducted and as proposed to be conducted.
5.2. Authorization.
The
execution, delivery and performance by each Holder of this Agreement and each
Related Agreement to which such Holder is a party, as applicable, (a) are within
such Holder’s power and authority, (b) have been duly authorized by all
necessary proceedings, and (c) do not conflict with or result in any material
breach of any provision of or the creation of any Lien upon any of the property
of such Holder or require any consent or approval pursuant to the organizational
documents such Holder, except for such necessary partnership or other approvals
as shall have been received prior to the Closing Date, or any material law,
regulation, order, judgment, writ, injunction, license, permit, agreement or
instrument applicable to such Holder.
5.3. Enforceability.
The
execution and delivery by each Holder of this Agreement and each of the Related
Agreements to which it is a party, will result in legally binding obligations
of
such Holder, enforceable against such Holder in accordance with the respective
terms and provisions hereof and thereof, except to the extent that (a) such
enforceability is limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting generally the enforcement of creditors'
rights and (b) the availability of the remedy of specific performance or
injunctive or other equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
5.4. Governmental Consents.
Except
as set forth in Schedule 5.4,
no
consent, approval or authorization of, or registration, qualification or filing
with, any governmental agency or authority is required for the execution and
delivery by the Holders of this Agreement, or for the consummation by the
Holders of the transactions contemplated hereby.
5.5.
Investment Representation.
Each
Holder is (i) an "accredited investor" as defined in the Securities Act, and
(ii) acquiring the Securities for its own account for investment and not with
a
view to selling or otherwise distributing the Securities; provided,
however,
that
the disposition of such Person's property shall at all times be and remain
in
its control, subject to the provisions of Section 15 hereof.
5.6. Brokers.
No
Holder has retained or been represented by any broker, agent, finder or other
intermediary in connection with the negotiation or consummation of the
transactions contemplated by this Agreement.
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5.7. Information.
Each
Holder has been furnished with certain materials relating to the business,
finances and operations of the Company and materials relating to the
transactions contemplated hereby which have been requested by such Holder.
Each
Holder and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by any Holder or its advisors or representatives shall
modify, amend or affect such Holder’s right to rely on the Company’s
representations and warranties contained herein. Each Holder has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision in respect of its acquisition of the Securities.
6. CONDITIONS TO PURCHASE AND LOAN.
Each
of
the obligations of the Holders to purchase the Securities or make the Loan
pursuant to this Agreement is subject to compliance by the Company with its
agreements herein contained, and to the satisfaction, on or prior to the Closing
Date, of the following conditions (subject to the terms of the Post-Closing
Letter):
6.1. Related Agreements.
Each of
the Related Agreements shall have been executed and delivered in a form
satisfactory to the Holders, and each of the Related Agreements shall be in
full
force and effect and no term or condition thereof shall have been amended,
modified or waived except with the prior written consent of the Holders. All
covenants, agreements and conditions contained in the Related Agreements which
are to be performed or complied with on or prior to the Closing Date shall
have
been performed or complied with (or waived with the prior written consent of
the
Holders).
6.2. Charter Documents;
Good Standing Certificates.
The
Collateral Agent shall have received (i) a copy, certified by the applicable
Secretary of State to be true and complete, of the Charter of the Company,
(ii)
a copy, certified by a duly authorized officer of the Company or its
Subsidiaries to be true and complete as of the Closing Date, of the (A) Charter
of each of the Subsidiaries and (B) the by-laws of each of the Company and
its
Subsidiaries, and (iii) certificates of the applicable Secretary of State as
to
the Company's and each of its Subsidiaries' corporate good standing or
qualification to do business, as the case may be, in such state.
6.3.
Pay-off
Letter.
The
Collateral Agent shall have a received a fully-executed copy of a pay-off letter
from Laurus Master Fund, Ltd. to the Company, indicating that the existing
financing arrangements with Laurus Master Fund, Ltd. has been paid in full
and
all Liens securing such financing arrangements have been released, and otherwise
in form and substance satisfactory to the Holders.
6.4. Proof
of Corporate Action, Consents and
Waivers.
The
Collateral Agent shall have received from the Company and each of its
Subsidiaries copies, certified by a duly authorized officer of the Company
or
such Subsidiary to be true and complete as of the Closing Date, of the records
of (i) all action taken to authorize the execution, delivery and performance
of
this Agreement and each of the Related Agreements to which the Company or such
Subsidiary is or is to become a party, and (ii) all consents and waivers from
stockholders of the Company and such Subsidiary and any other third parties
required for the Company's or such Subsidiary’s execution, delivery or
performance of any Financing Agreement.
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6.5. Incumbency Certificate.
The
Collateral Agent shall have received from the Company and each Subsidiary an
incumbency certificate, dated the Closing Date, signed by a duly authorized
officer of the Company or such Subsidiary and giving the name and bearing a
specimen signature of each individual who shall be authorized to sign, in the
name and on behalf of the Company and such Subsidiary, this Agreement and each
of the Related Agreements to which the Company or such Subsidiary is or is
to
become a party, and to give notices and to take other action on behalf of the
Company or such Subsidiary under each of such documents.
6.6. Legal Opinions.
On or
prior to the Closing Date, the Collateral Agent shall have received from (i)
Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, counsel to the Company and its Subsidiaries
and (ii) Company’s local Connecticut, Florida, New Jersey, Pennsylvania, Rhode
Island and Washington counsel, favorable opinions in form acceptable to the
Holders and their counsel and covering such matters with respect to the
transactions contemplated by this Agreement and the Related Agreements as the
Holders or their counsel may reasonably request.
6.7. Representations and Warranties;
Officers'
Certificates.
The
representations and warranties contained or incorporated by reference herein
shall be true and correct on and as of the Closing Date, and the Company and
each of the Company’s Subsidiaries shall have performed and complied with all
conditions and agreements required to be performed or complied with by it prior
to the Closing; and the Collateral Agent shall have received on the Closing
Date
a certificate to these effects signed by an authorized officer of the Company.
6.8. Legality;
Governmental Authorization.
The
purchase of the Securities shall not be prohibited by any law or governmental
order or regulation, and shall not subject the Collateral Agent or any Holder
to
any penalty, special tax, or other onerous condition. All necessary consents,
approvals, licenses, permits, orders and authorizations of, or registrations,
declarations and filings with, any governmental or administrative agency or
of
or with any other Person, with respect to any of the transactions contemplated
by this Agreement or any of the Related Agreements shall have been duly obtained
or made and shall be in full force and effect.
6.9. Payments.
The
Collateral Agent and the Holders shall have received payment for all
out-of-pocket expenses incurred in connection with the transactions contemplated
by this Agreement and the Related Agreements, including, but not limited to,
due
diligence costs and travel expenses. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP, the Collateral
Agent’s, Woodside QP’s and Woodside IV’s special counsel, shall have received
payment for all legal fees reasonably charged and all charges for costs,
expenses and disbursements incurred by such counsel through the Closing
Date.
6.10. [Intentionally Omitted].
6.11. No
Material Effect.
Since
June 30, 2007, there shall not have been, or threatened to be after giving
effect to the transactions contemplated hereby, (i) a Material Adverse Effect
or
(ii) a default under the existing financing arrangements with Laurus
Master Fund, Ltd.
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6.12. Fees.
Any
fees
required to be paid on or before the Closing Date shall have been
paid.
6.13. Funds
Flow.
The
Collateral Agent and the Holders shall have received a flow of funds, in form
and substance satisfactory to it and attached hereto as Schedule 6.13,
with
respect to the transactions contemplated hereby.
6.14. UCC Search Results and Perfection.
The
Collateral Agent shall
(a)
have
received (i) the results of UCC searches with respect to the Collateral
indicating no Liens other than Permitted Liens and otherwise in form and
substance satisfactory to the Holders and (ii)
landlord
waivers, in form and substance reasonably satisfactory to the Collateral Agent,
from each of the landlords with respect to each of their respective properties
listed on Schedule 6.14 hereto
and
(b)
be
satisfied, in its sole discretion, that its Lien on the Collateral, as described
in the Security Documents, has been properly perfected.
6.15. Certificates of Insurance.
The
Collateral Agent shall have received certificates of insurance from an
independent insurance broker dated as of the Closing Date, together with
endorsements thereto (including, without limitation a designation of the
Collateral Agent as loss payee and additional insured), identifying insurance,
types of insurance, insurance limits and policy terms and otherwise describing
the insurance in accordance with the provisions of the Security
Agreements,
which
shall be in amounts, types and terms and conditions satisfactory to the
Holders.
6.16. Capital
Contributions.
The
Collateral Agent shall have received evidence that Laurus Master Fund, Ltd.
(or
its Affiliates) shall have made a capital contribution to the Company of
$3,000,000 by no later than the Closing Date, pursuant to terms and conditions
acceptable to the Holders.
6.17. Senior
Debt Financing.
The
financing from the Senior Creditor pursuant to the Senior Loan Agreement shall
be in full force and effect, shall be on terms and conditions reasonably
satisfactory to the Holders, and shall provide to the Company and its
Subsidiaries, in the aggregate, total credit of not more than $15,000,000.
On
the Closing Date, after giving effect to the transactions contemplated by this
Agreement and the other Financing Agreements and the payment of all transaction
costs, the Company and its Subsidiaries shall, together, have aggregate
unrestricted cash and cash equivalents of at least $2,000,000.
6.18. No
Litigation.
No
restraining order or injunction shall prevent the transactions contemplated
by
this Agreement and the other Financing Agreements and no action, suit or
proceeding shall be pending or threatened before any court or administrative
body (i) in which it will be, or is, sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or the other Financing
Agreements or the consummation of the transactions contemplated hereby or
thereby or (ii) which
has
or may have a Material Adverse Effect.
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6.19. General.
All
instruments and legal, governmental, administrative and corporate proceedings
in
connection with the transactions contemplated by this Agreement and the Related
Agreements shall be satisfactory in form and substance to the Holders, and
each
Holder shall have received copies of all documents, including, without
limitation, records of corporate or other proceedings, opinions of counsel,
consents, waivers, licenses, approvals, permits and orders which the Holders
may
have requested in connection therewith.
6.20. Releases.
The
Company shall have received releases from certain Persons as requested by the
Holders, in form and substance satisfactory to the Holders.
For
purposes of determining compliance with the conditions specified in this Section
6, each Holder that has signed this Agreement shall be deemed to have consented
to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Holder.
7.
COVENANTS APPLICABLE TO THE COMPANY WHILE NOTES
ARE
OUTSTANDING.
The
Company covenants that, until all of the Indebtedness of the Company with
respect to the Notes has been paid in full, the Company will comply and will
cause each of the Company's Subsidiaries to comply with this Section 7, unless
otherwise consented to in writing by the Majority Holders of the
Notes:
7.1. Punctual Payment.
The
Company will duly and punctually pay or cause to be paid all principal and
interest payable with respect to the Notes, and all other amounts owing
hereunder, in accordance with the terms thereof.
7.2. Records and Accounts;
Accountants and Accounting Methods.
The
Company and each of its Subsidiaries will (i) keep true and accurate records
and
books of account in which full, true and correct entries will be made in
accordance with GAAP and (ii) maintain adequate accounts and reserves for all
taxes (including income taxes), all depreciation, depletion, obsolescence and
amortization of its properties and all other contingencies.
Neither
the Company, nor any of its Subsidiaries, shall modify or change its
fiscal
year or its method of accounting (other than as may be required to conform
to
GAAP) or enter into, modify, or terminate any agreement currently existing,
or
at any time hereafter entered into with any third party accounting firm or
service bureau for the preparation or storage of the Company’s or its
Subsidiaries’ accounting records without said accounting firm or service bureau
agreeing to provide the Holders with the information required hereunder
regarding the Company’s and its Subsidiaries’ financial
condition.
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7.3. Corporate Existence;
Maintenance of Properties.
Subject
to the proviso set forth in the last sentence of this Section 7.3, the Company
and each of its Subsidiaries will preserve and keep in full force and effect
its
legal existence, rights and franchises. Neither the Company nor any of its
Subsidiaries will engage in any business other than the business currently
being
conducted by such Person. The Company and each of its Subsidiaries will maintain
all of its properties used or useful in the conduct of its business in good
condition, repair and working order and cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided,
however,
that
nothing in this Section 7.3 shall prevent the Company or any of its Subsidiaries
from discontinuing the operation and maintenance of any of such properties
if
such discontinuance is, in the judgment of the Company, desirable in the conduct
of such Person's business and does not materially adversely affect the business,
assets or financial condition of the Company or any of its
Subsidiaries.
7.4. Insurance.
The
Company and each of its Subsidiaries will maintain with financially sound and
reputable insurance companies, funds or underwriters insurance of the kinds,
covering the risks and in the relative proportionate amounts usually carried
by
reasonable and prudent companies conducting businesses similar to that of such
Person.
7.5. Taxes.
The
Company and each of its Subsidiaries will pay and discharge, or cause to be
paid
and discharged, before the same shall become overdue, all material taxes,
assessments and other governmental charges imposed upon the Company and each
of
its Subsidiaries and their real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies, which if unpaid might by law become a Lien or
charge upon any of their properties; provided,
however,
that
any such tax, assessment, charge, levy or claim need not be paid if the validity
or amount thereof shall currently be contested in good faith by appropriate
proceedings and if the Company or any of its Subsidiaries shall have set aside
on its books adequate reserves with respect thereto; and provided,
further,
that
the Company and its Subsidiaries will pay or cause to be paid all such taxes,
assessments, charges, levies or claims forthwith upon the commencement of
foreclosure on any Lien which may have attached as security therefor, unless
such proceeding is stayed.
7.6. Certain Financial Covenants.
The
Company and its Subsidiaries will comply with each of the covenants set forth
on
Schedule 7.6
hereto.
7.7. Inspection of Properties and Books.
The
Company and each of its Subsidiaries shall permit the Collateral Agent, the
Holders or any of their designated representatives to visit and inspect, upon
reasonable notice to the Company and during normal business hours, any of the
properties of the Company and its Subsidiaries, to examine the books of account
of the Company and its Subsidiaries (and to make copies thereof and extracts
therefrom), and to discuss the affairs, finances and accounts of the Company
and
its Subsidiaries with, and to be advised as to the same by, officers and
accountants of such Persons, all at such reasonable times and intervals as
the
Collateral Agent or any Holder may reasonably request.
7.8. Compliance with Laws,
Contracts,
Licenses,
and Permits.
The
Company and each of its Subsidiaries will comply with (a) all applicable laws
and regulations wherever its business is conducted, (b) the provisions of its
Charter and by-laws, (c) all material agreements and instruments by which it
or
any of its properties may be bound (including, without limitation, the Related
Agreements), except, in the case of this clause (c), where the failure to so
comply would not have a Material Adverse Effect, and (d) all applicable decrees,
orders, and judgments. If any authorization, consent, approval, operating right,
permit or license from any officer, agency or instrumentality of any government
shall become necessary or required in order that the Company or any of its
Subsidiaries may fulfill any of its obligations hereunder, the Company and
its
Subsidiaries will immediately take or cause to be taken all reasonable steps
within its power to obtain such authorization, consent, approval, operating
right, permit or license and furnish the Holders with evidence
thereof.
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7.9. Further Assurances.
The
Company and each of its Subsidiaries will cooperate with the Collateral Agent
and the Holders and execute such further instruments and documents as the
Collateral Agent and the Holders shall reasonably request to carry out to the
Collateral Agent’s and the Holders’ satisfaction the transactions contemplated
by this Agreement and the Related Agreements.
7.10. Restrictions on Indebtedness.
Neither
the Company nor any of its Subsidiaries will create, incur, assume, guarantee
or
be or remain liable, contingently or otherwise, with respect to any Indebtedness
other than the following ("Permitted Indebtedness"):
(a) current
liabilities incurred in the ordinary course of business not incurred through
(i)
the borrowing of money, or (ii) the obtaining of credit except for credit on
an
open account basis customarily extended, and in fact extended, in connection
with normal purchases of goods and services;
(b) Indebtedness
in respect of taxes, assessments, governmental charges or levies and claims
for
labor, materials and supplies to the extent that payment therefor shall not
at
the time be required to be made in accordance with the provisions of Section
7.5
hereof;
(c) Indebtedness
in respect of judgments or awards which have been in force for less than the
applicable period for taking an appeal so long as execution is not levied
thereunder or in respect of which the Company or any of its Subsidiaries shall
at the time in good faith be prosecuting an appeal or proceedings for review
and
in respect of which a stay of execution shall have been obtained pending such
appeal or review;
(d) Endorsements
for collection, deposit or negotiation and warranties of products or services,
in each case incurred in the ordinary course of business;
(e) Indebtedness
in respect of operating leases incurred in the ordinary course of
business;
(f) Indebtedness
under or in respect of the agreements or instruments existing on the date of
this Agreement listed and described on Schedule 7.10(f)
hereto,
but only to the extent of the amounts listed thereon;
(g) Indebtedness
incurred in connection with any purchase money financing of any Capital
Expenditures permitted hereunder, provided
that the
aggregate principal amount of such Indebtedness incurred by the Company and
each
of its Subsidiaries during any fiscal year shall not exceed $150,000 in the
aggregate;
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(h) Indebtedness
under the Financing Agreements;
(i) the
Senior Debt;
(j) the
Seller Subordinated Closing Debt;
(k) unsecured
Indebtedness owed to a seller as part of the purchase price in connection with
a
Permitted Acquisition so long as such Indebtedness is made subordinate and
junior in right of payment to any and all Obligations pursuant to a
Subordination Agreement satisfactory to the Holders;
provided
that
such Indebtedness is on terms and conditions satisfactory to the Holders in
their sole discretion;
and
(l) additional
senior Indebtedness not to exceed $10,000,000; provided
that
such additional senior Indebtedness is on terms and conditions satisfactory
to
the Holders in their sole discretion.
7.11. Restrictions on Liens.
Neither
the Company nor any of its Subsidiaries will create or incur or suffer to be
created or incurred or to exist any Lien or other security interest of any
kind
upon any of its property or assets of any character whether now owned or
hereafter acquired, or upon the income or profits therefrom; or transfer any
of
such property or assets or the income or profits therefrom for the purpose
of
subjecting the same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors; or acquire, or
agree
or have an option to acquire, any property or assets upon conditional sale
or
other title retention or purchase money security agreement, device or
arrangement; or suffer to exist for a period of more than 30 days after the
same
shall have been incurred any Indebtedness or claim or demand against it which
if
unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given
any
priority whatsoever over its general creditors (other than those claims which
the Company or such Subsidiary is contesting in good faith by appropriate
proceedings and as to which the Company or such Subsidiary shall have set aside
on its books, adequate reserves with respect thereto); or sell, assign, pledge
or otherwise transfer any accounts, contract rights, general intangibles,
chattel paper or instruments with or without recourse; provided,
however,
that
the Company and its Subsidiaries may create or incur or suffer to be created
or
incurred or to exist any of the following ("Permitted Liens"):
(a) Liens
to
secure taxes, assessments and other government charges or claims for labor,
material or supplies in respect of obligations not overdue (other than any
such
overdue taxes, levies, claims, assessments or charges, to the extent the payment
therefor shall not at the time be required to be made in accordance with the
provisions of Section 7.5 hereof);
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(b) Deposits
or pledges made in connection with, or to secure payment of, workmen's
compensation, unemployment insurance, old age pensions or other social security
obligations;
(c) Liens
in
respect of judgments or awards, the Indebtedness with respect to which is
permitted by Section 7.10(c);
(d) Liens
of
carriers, warehousemen, mechanics and materialmen, and other like liens, in
existence less than 60 days from the date of creation thereof or in respect
of
obligations not overdue or, if overdue, all such liens that the Company or
such
Subsidiary is contesting in good faith and by appropriate proceedings diligently
conducted and with respect to which adequate reserves have been established
and
are being maintained in accordance with GAAP and which prevent enforcement
of
the lien;
(e) Encumbrances
consisting of easements, rights of way, zoning restrictions, restrictions on
the
use of real property and irregularities in the title thereto, landlord's or
lessor's Liens under leases to which the Company or any of its Subsidiaries
is a
party, and other minor Liens or encumbrances none of which interferes materially
with the use of the property affected in the ordinary conduct of the business
of
the Company and its Subsidiaries and which defects do not individually or in
the
aggregate have a material adverse effect on the business, assets or financial
condition of the Company or any of its Subsidiaries;
(f) Liens
presently outstanding as shown on Schedule 7.11
hereto;
(g) Purchase
money security interests in or purchase money mortgages on real or personal
property acquired after the date hereof to secure purchase money Indebtedness
permitted by Section 7.10(g), incurred in connection with the acquisition of
such property, which security interests or mortgages cover only the real or
personal property so acquired;
(h) Liens
incurred pursuant to the Security Documents; and
(i) Liens
incurred in connection with the Senior Debt.
7.12. Distributions;
Payments of Subordinated Debt.
Neither
the Company nor any of its Subsidiaries shall (i) make any Distribution except
any Subsidiary may make Distributions to the Company or (ii) pay or acquire
any
Subordinated Debt; provided
that the
Company may make scheduled payments of principal and interest on the Seller
Subordinated Closing Debt so long as no Default exists or would result
therefrom.
7.13. Capital Expenditures.
The
Company and its Subsidiaries together will not make any Capital Expenditures
in
excess of $250,000 for any single expenditure or project nor will any of such
Persons make any Capital Expenditures which aggregate more than $250,000 with
respect to such Persons in any fiscal year.
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7.14. Merger,
Consolidation,
Purchase or Sale of Assets.
Neither
the Company nor any of its Subsidiaries will (a) become a party to any merger
or
consolidation, (b) sell, lease, sublease or otherwise transfer or dispose
(including, without limitation, pursuant to any sale-leaseback transactions)
of
any portion of its assets, (c) acquire all or substantially all of the assets
of
any Person or any portion of the capital stock (or other equity interests)
of
any Person or (d) acquire any assets outside the ordinary course of business;
provided
that
notwithstanding the forgoing, (i) any Subsidiary of the Company may merge or
consolidate with the Company or any other Subsidiary of the Company so long
as,
in the case of any merger or consolidation with the Company, the Company is
the
surviving entity, (ii) the Company and its Subsidiaries may sell inventory
and
dispose of obsolete or worn-out machinery and equipment, in each case, in the
ordinary course of business, consistent with past practices, (iii) the Company
and any of its Subsidiaries may become a party to any merger or consolidation
or
sell or otherwise transfer or dispose of any portion of their assets so long
as,
in each case, contemporaneously with the closing of any such transaction, all
of
the Obligations (including, without limitation, the Prepayment Price with
respect to the Notes, the CIP Amount pursuant to the CIP Agreement (or,
to
the extent that the Approval Date has occurred, all obligations in connection
with the “put” rights of the Holders described in Section 11) and the Fee
pursuant to the Fee Agreement)
are
indefeasibly paid in full, and (iv) the Company may acquire any Acquired Party
pursuant to a Permitted Acquisition.
7.15. Investments.
The
Company will not, nor will it permit any of its Subsidiaries to, have
outstanding or acquire or commit itself to acquire or hold any Investment except
for the Investments set forth on Schedule 7.15
and
except Investments in: (a) marketable direct obligations issued or guaranteed
by
the United States of America which mature within one year from the date of
acquisition thereof or which are subject to a repurchase agreement, exercisable
within 90 days from the date of acquisition of such agreement, with any
commercial bank or trust company incorporated under the laws of the United
States of America or any state thereof or the District of Columbia, (b)
non-extendible commercial paper maturing within one year from the date of
acquisition thereof and having, at the date of acquisition thereof, the highest
rating obtainable from ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's
Corporation, (c) bankers' acceptances eligible for rediscount under Federal
Reserve Board requirements accepted by any commercial bank or trust company
referred to in clause (a) hereof, (d) deposit accounts or certificates of
deposit maturing within one year from the date of acquisition thereof issued
by
or maintained with, as applicable, any commercial bank or trust company referred
to in clause (a) hereof and having capital and surplus of at least $100,000,000
and rated at least “Prime-1”
(or the then equivalent grade) by Moody’s or at least “A-1” (or the then
equivalent grade) by Standard & Poor’s Ratings Services,
and (e)
certificates of deposit maturing within one year from the date of acquisition
thereof issued by banks organized under the laws of any other jurisdiction,
each
having combined capital and surplus of not less than $100,000,000, and having
at
least an "A" rating or better.
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7.16. Transactions with Affiliates and Shareholders.
Neither
the Company nor any of its Subsidiaries will (a) engage in any transaction
with
any Affiliate except as expressly provided in clause (b) below, or (b) make
any
Restricted Payment other than (i) payments made pursuant to the terms of any
Related Agreement as in effect on the Closing Date, (ii) in the case of each
Person party to an Employment Agreement, payments of base salary as currently
in
effect and any increases thereto or bonuses (except for those bonuses provided
for in the Employment Agreements) approved by the Majority Holders of the Notes
in writing, (iii) payments of customary Board fees to any “outside” director of
the Company, and (iv) so long as no Default or Event of Default has occurred
and
is continuing, payments made pursuant to the terms of any agreement or
instrument, as in effect on the Closing Date, listed on Schedule 7.16.
In
addition, neither the Company nor any of its Subsidiaries will (w) increase
the
base salary of any Person party to any Employment Agreement over the amount
currently in effect, (x) pay any bonuses to such Persons (other than as set
forth in the Employment Agreements), (y) implement any management compensation,
bonus or stock option plan, in each case, without the prior written approval
of
the Majority Holders of the Notes or (z) without the prior written consent
of
the Holders, enter into any arrangements with any Specified Shareholder with
respect to any capital raising transaction, investment banking services,
consulting or management services, the acquisition of, or merger with, any
Person (including the acquisition of all or substantially all of the assets
of
any Person), or any similar arrangements.
7.17. Employee Benefit Plans.
The
Company and each of its Subsidiaries will take all actions necessary to
maintain, fund, and administer its employee benefit plans in accordance with
federal, state and local law. Without limiting the foregoing, each of the
Company and its Subsidiaries (a) will not permit the aggregate present value
of
the unfunded vested accrued benefits under all employee benefit plans of the
Company or such Subsidiary or any ERISA Affiliate to exceed $150,000, and will
not take any action which would result in the foregoing; (b) will furnish to
the
Holders a copy of any actuarial statement related to any pension plan
maintained, funded or contributed to by the Company or such Subsidiary which
is
required to be submitted under Section 103(d) of ERISA, no later than the date
on which such statement is submitted to the Department of Labor or the Internal
Revenue Service; (c) will furnish to the Holders forthwith a copy of (i) any
notice of a pension plan termination sent to the Pension Benefit Guaranty
Corporation under Section 4041(a) of ERISA with respect to any pension plan
maintained, funded or contributed to by the Company or such Subsidiary, or
(ii)
any notice, report or demand sent or received by a pension plan under Sections
4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA; and (d) will furnish
to
the Holders a copy of any request for waiver from the funding standards or
extension of the amortization periods required by Sections 303 and 304 of ERISA
or Section 412 of the Code with respect to any pension plan maintained, funded
or contributed to by the Company or such Subsidiary no later than the date
on
which the request is submitted to the Department of Labor or the Internal
Revenue Service, as the case may be.
7.18. Activities and Use of Proceeds.
The
Company will use the proceeds from the sale of the Securities and the Loan
for
the purposes set forth in Section 2.4 hereof. The Company will supply to the
Holders such additional information and documents as any Holder may reasonably
request with respect to the use of proceeds and will permit each Holder to
have
access to any and all records and information and personnel as such Holder
deems
necessary to verify such use of proceeds.
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7.19. Guaranties and Other Related Documents.
Each
Person shall, upon becoming a Subsidiary of the Company, promptly execute and
deliver to the Holders, a guaranty in form and substance reasonably satisfactory
to the Holders guaranteeing all Obligations or other instruments and documents
as the Holders shall require in order to grant the Collateral Agent a first
(subject only to Permitted Liens entitled to priority under applicable law)
priority, perfected security interest in all assets of such Subsidiary.
7.20. Upstream Limitations.
The
Company will not permit any of its Subsidiaries to enter into any agreement,
contract or arrangement (other than the Senior Loan Documents and this
Agreement) restricting the ability of any Subsidiary to pay or make dividends
or
distributions in cash or kind, to make loans, advances or other payments of
whatsoever nature or to make transfers or distributions of all or any part
of
its assets to the Company or any of its Subsidiaries.
7.21. Environmental Compliance.
The
Company shall, and shall cause each of its Subsidiaries to (a) keep any property
either owned or operated by the Company or its Subsidiaries free of any
Environmental Liens or post bonds or other financial assurances sufficient
to
satisfy the obligations or liability evidenced by such Environmental Liens,
(b)
comply, in all material respects, with Environmental Laws and provide to the
Holders documentation of such compliance which the Holders reasonably requests,
(c) promptly notify the Holders of any Release of a Hazardous Substances in
any
reportable quantity from or on to property owned or operated by the Company
or
its Subsidiaries and take any Remedial Actions required to ▇▇▇▇▇ said Release
or
otherwise to come into compliance with applicable Environmental Law, and (d)
promptly, but in any event within 5 days of its receipt thereof, provide the
Holders with written notice of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of the Company or its Subsidiaries, (ii) commencement of any Environmental
Action or notice that an Environmental Action will be filed against the Company
or its Subsidiaries, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a
material
adverse change in the business, assets or financial condition of the Company
or
any of its Subsidiaries
7.22. Deposit Accounts.
The
Company and its Subsidiaries shall not, at any time after March 31, 2008, permit
the aggregate balance maintained in all deposit accounts (other than payroll
accounts) which are not subject to a control agreement in favor of the
Collateral Agent to exceed $150,000.
7.23. Minimum Availability Under Senior Loan Agreement.
The
Company
shall maintain a minimum borrowing availability under the Revolving Loan (as
such term is defined in the Senior Loan Document) at all times sufficient to
fund three (3) months of debt service payments on Subordinated Debt on a pro
forma basis.
7.24. Use of Proceeds of Term
Loan.
The
Company will use the proceeds from any Term Loan Advance (as such term is
defined in the Senior Loan Agreement) made after the Closing Date solely for
Permitted Acquisitions.
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7.25. Cash Management.
On or
prior to March 31, 2008, the Company shall have entered into cash management
arrangements in accordance with Section 5(u) of the Senior Loan
Agreement.
7.26. Certain Agreements.
Neither
the
Company nor any of its Subsidiaries will enter into any arrangements with
respect to any capital raising transaction, investment banking services,
consulting or management services, the acquisition of, or merger with, any
Person (including the acquisition of all or substantially all of the assets
of
any Person), or any similar arrangements, in each case, without the prior
written consent of the Holders.
8. COVENANTS
APPLICABLE WHILE THE WARRANTS OR ANY
WARRANT SHARES ARE
OUTSTANDING.
The
Company covenants that, so long as any Warrants or Warrant Shares are
outstanding, the Company will comply, and will cause each of the Company’s
Subsidiaries to comply with the following:
8.1. General.
The
Company will comply with and will cause each of its Subsidiaries to comply
with
the provisions of Sections 7.16-7.18 hereof.
8.2. Sale and Issuance of Capital Stock.
Excluding the Excepted Capital Raises, neither the Company nor any of its
Subsidiaries will (a) issue, sell, give away, transfer, pledge, mortgage, assign
or otherwise dispose of, (b) grant any rights (either preemptive or other)
or
options to subscribe for or purchase, or (c) enter into any agreements, or
issue
any warrants, providing for the issuance of any of, its capital stock or any
securities convertible into or exchangeable for any of its capital stock, except
for (i) the Warrants and the Warrant Shares and (ii) options and/or additional
equity interests in the Company described on Schedule 4.5(b)
hereto
or otherwise issued or issuable to employees, consultants, officers or directors
of the Company pursuant to a stock option plan or restricted stock plan or
agreement, for a number of shares equal to up to an aggregate of 2.5% of the
fully-diluted Common Stock of the Company calculated as of the date
hereof.
8.3. Distributions.
Neither
the Company nor any of its Subsidiaries shall make any cash Distributions to
the
holder of any Preferred Stock in respect thereof.
8.4 Preemptive Rights.
(a) If
after
the Closing Date the Company proposes to issue any equity securities, subject
to
paragraph (c) of this Section, each Holder shall have the right (the
“Preemptive Right”)
to
purchase a number of shares of the equity securities to be issued at the time
set forth in paragraph (b) of this Section sufficient to enable such Holder
to
maintain its proportionate equity ownership interest in the equity securities
to
be so issued (on a Fully-Diluted Basis) at the level of such interest
immediately prior to such issuance. The foregoing shall apply equally to any
sale of equity securities by a Subsidiary if any purchaser in such sale is
also
an equity security-holder of the Company, or an Affiliate thereof, so as to
enable each Holder to maintain its proportionate equity ownership interest
in
the Company and its Subsidiaries taken as a whole immediately prior to such
issuance.
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(b) The
Company shall, at least thirty (30) days prior to any such issuance, give
written notice of any such issuance to each Holder, setting forth in reasonable
detail with proposed terms and conditions thereof (the “Issuance Notice”)
which
notice shall offer each Holder the opportunity to purchase such securities
at
the same price and on the same terms, as the securities are proposed to be
issued by the Company. Any Holder may exercise its right of first refusal by
delivery of a written notice to the Company together with immediately available
funds in the requisite amount within fifteen (15) days after its receipt of
the
Issuance Notice.
(c) The
Preemptive Rights shall not apply to the following issuances: (i) equity
securities issued in connection with the acquisition of another corporation
or
other business entity by the Company by merger, purchase of substantially all
assets or other reorganization whereby the Company owns, upon consummation
of
such acquisition, greater than fifty percent (50%) of the voting power to elect
the directors of such corporation or other business entity; (ii) equity
securities issued in any merger or consolidation of the Company, provided that
such
merger or consolidation is approved by the Majority Holders; (iii) issuances
for
compensation-related (rather than financing) purposes to directors and employees
of the Company and any Subsidiary thereof; (iv) the grant of stock to employees
or the grant of employee stock options, restricted stock or stock purchase
rights; (v) sales or issuances of equity securities upon exercise of employee
stock option or employee stock purchase rights; (vi) equity securities
distributed or set aside ratably to all holders of equity securities on a per
share equivalent basis; (vii) issuance of equity securities upon exercise of
any
warrant existing on the date hereof; and (viii) equity securities issued upon
conversion or exercise of any class of equity securities.
9.
COVENANTS APPLICABLE WHILE
THE
SECURITIES ARE OUTSTANDING.
The
Company hereby agrees that so long as any Securities are outstanding that it
will comply with and it will cause each of its Subsidiaries to comply with
the
following provisions:
9.1. Annual Statements.
As soon
as available and in any event within 90 days after the close of the fiscal
year
of the Company commencing with the fiscal year ending on December 31, 2007,
the
Company will deliver to each Major Holder consolidated and consolidating balance
sheets and statements of income and retained earnings and consolidated and
consolidating statements of cash flows of the Company and its Subsidiaries
audited by an independent public accounting firm selected by the Company and
acceptable to the Majority Holders, showing the consolidated financial condition
of the Company and its Subsidiaries as of the close of such fiscal year and
the
consolidated and consolidating results of the Company's and its Subsidiaries'
operations during such fiscal year. Each of the financial statements delivered
hereunder shall be certified without qualification (except any qualifications
as
the Majority Holders may in their discretion approve in writing) by such
accounting firm to have been prepared in accordance with GAAP consistently
applied, accompanied by an agreed upon procedures report from such accounting
firm and by the written statement of such accounting firm that no Default or
Event of Default exists, or if such firm shall have obtained knowledge of any
such Default or Event of Default, setting forth the nature
thereof.
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9.2. Quarterly Statements.
The
Company will deliver to each Major Holder, within 45 days after the end of
each
calendar quarter, a covenant compliance certificate in the form of Exhibit C
hereto.
9.3. Monthly Statements.
Within
30 days after the end of each month commencing with the month ending October
31,
2007, the Company will deliver to each Major Holder internal, unaudited
consolidated and consolidating balance sheets and statements of income, retained
earnings and cash flows of the Company and its Subsidiaries as of the end of
each such month and for the year to date, setting forth in each case in
comparative form (a) the figures for the corresponding period or periods of
the
previous fiscal year and (b) the figures from the annual budget covering the
current fiscal year, in each case, certified by both the President and the
Treasurer or chief financial officer of the Company to be true and correct
and
to have been prepared in accordance with GAAP consistently applied (subject
to
normal year-end adjustments and the absence of footnotes).
9.4. Other Financial Information.
The
Company will deliver to each Major Holder:
(a) at
least
30 days prior to the commencement of each fiscal year, an annual budget and
projected monthly balance sheets and statements of income for such fiscal year,
prepared on a consolidated and consolidating basis and on a comparative basis
to
the Projections and, as soon as practical after preparation thereof, complete
and correct copies of all quarterly (if any) or annual budgetary analyses or
forecasts of the Company in the form customarily prepared by management for
its
own internal use or the use of the board of directors of the
Company;
(b) copies
of
all documents and materials (including
accountant’s management letters) furnished
from time to time to any director on the Company's board of
directors;
(c) contemporaneously
with the filing or mailing thereof, copies of all material of a financial nature
filed with the Securities and Exchange Commission or sent to the stockholders
of
the Company;
(d) promptly
after the receipt thereof, copies of any reports as to adequacies in accounting
controls submitted by independent accountants with respect to the Company and
its Subsidiaries;
(e) contemporaneously
with the mailing thereof, copies of all material of a financial nature (which
materials shall include, without limitation, all collateral reports, financial
statements, enterprise valuations and business plans) or an environmental nature
delivered to the Senior Creditor; and
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(f) from
time
to time such other financial data and information as any Major Holder may
reasonably request.
9.5. Officers' Certificates.
Together with delivery of consolidated financial statements of the Company
pursuant to Sections 9.1 and 9.3 above, the Company will deliver to each Major
Holder a certificate of the President, chief financial officer or Treasurer
of
the Company, (a) stating that such statements have been prepared in accordance
with GAAP consistently applied and present fairly the consolidated financial
position of the Company and its Subsidiaries as of the dates specified and
the
results of their consolidated operations and cash flows with respect to the
periods specified (subject in the case of interim financial statements only
to
normal year-end adjustments and a lack of footnotes), and (b) stating that
such
officers have caused the provisions of this Agreement and the Securities to
be
reviewed and have no knowledge of any Default or Event of Default, or if either
such officer has such knowledge, specifying such Default or Event of Default
and
the nature thereof, and what action the Company has taken, is taking or proposes
to take with respect thereto.
9.6. Notice of Litigation,
Defaults,
Etc.
The
Company will, promptly upon any officer of the Company obtaining knowledge
thereof, give notice to each Major Holder of any (i) litigation or any
administrative proceeding, pending, threatened or to which the Company or any
of
its Subsidiaries may otherwise hereafter become a party which may result in
a
Material Adverse Effect, (ii) Default or Event of Default hereunder, with such
notice specifying the nature and period of existence thereof and what action
the
Company has taken or proposes to take with respect thereto, (iii) default or
event of default under any Related Agreement or under any other agreement
relating to any Indebtedness for Borrowed Money, with such notice specifying
the
nature and period of existence thereof, (iv)
material violation of any Environmental Law that the Company or any of its
Subsidiaries reports in writing or is reportable by such Person in writing
(or
for which any written report supplemental to any oral report is made) to any
federal, state or local environmental agency, (v) inquiry, proceeding,
investigation, or other action, including a written notice from any agency
of
potential environmental liability, of any federal, state or local environmental
agency or board, that may result in any material
adverse change in the business, assets, or financial condition of the Company
or
any of its Subsidiaries
and (vi)
inquiry, proceeding, investigation, or other action, of the Securities and
Exchange Commission or any similar state agency in respect of the Company,
any
of its Subsidiaries or any director, officer or employee of the Company or
any
of its Subsidiaries.
9.7. Right to Attend Meetings.
Each
Holder shall be entitled to have one observer at each and every meeting of
the
Company’s board of directors, or if a meeting is held by telephone conference,
to participate therein by telephone. The Holders shall be entitled to
reimbursement for any fees and expenses incurred in connection with retaining
a
Person to serve as observer, and any such observer shall have all rights of
an
observer, including reimbursement for all reasonable expenses incurred in
connection with attendance at such meetings. The Company will give each Holder
at least five business days’ prior written notice of the time, place and subject
matter of any proposed meeting (or action by written consent) of the board
of
directors or managers of the Company, or any committee thereof, such notice
in
all cases to include true and complete copies of all documents furnished to
any
director in connection with such meeting or consent. In the event such observer
receives material non-public information, whether attending such meeting or
by
other means, no Holder shall trade on such information until such time as the
information is made publicly available.
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9.8. Other Information.
The
Company will deliver to each Person entitled to receive notice pursuant to
Section 9.7(a) of board meetings and consents, copies of all papers which may
be
distributed from time to time to the directors or stockholders of the Company
at
such time as such papers are so distributed to them. In addition, from time
to
time upon the request of the Collateral Agent or the Holders or upon the request
of any representative designated by the Majority Holders, the Company will
furnish to any authorized officer or representative of such Person such
information regarding the business, affairs, prospects and financial condition
of the Company and its Subsidiaries as such officer or representative may
reasonably request. Each such officer or representative shall have the right
during normal business hours to examine the books and records of the Company
and
its Subsidiaries, to make copies, notes and abstracts therefrom, and to make
an
independent examination of the books and records of the Company and its
Subsidiaries.
9.9. Amendment of Related Agreements,
Etc.
Neither
the Company nor any of its Subsidiaries shall agree to any amendment or
modification of its Charter or by-laws, or agree to any amendment or
modification of or grant any waiver or fail to enforce any of its rights
pursuant to any of the Related Agreements, unless approved in each case by
the
Majority Holders in writing.
9.10. Budget.
The
Majority Holders shall be entitled to review and approve, such approval not
to
be unreasonably withheld, the Company's annual budget delivered in accordance
with the provisions set forth in Section 9.4 hereof, and no material
modification of such budget shall thereafter be made without the written consent
of the Majority Holders.
9.11. Key
Employees.
The
Company and/or its applicable Subsidiary shall enter into an Employment
Agreement and a Non-Compete Agreement with each (a) employee that becomes a
Key
Employee after the date hereof and (b) each seller in connection with a
Permitted Acquisition.
9.12 Independent Directors.
Within
one hundred twenty (120) days of the date hereof, the Company’s shareholders
shall elect an Independent Director that is satisfactory to the Holders to
its
board of directors in accordance with the terms of its Charter and, at all
times
thereafter, at least one Independent Director that is satisfactory to the
Holders shall be a member of the Company’s board of directors.
10. DEFAULTS.
10.1. Events of Default.
Holders
of the Securities will be entitled to exercise the remedies provided by Section
10.2 hereof in accordance with the terms thereof if any one or more of the
following events ("Events of Default")
shall
occur:
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(a) the
Company shall fail to make any payment of principal or interest on any of the
Notes on the date the same shall become due, whether on any scheduled payment
date, at maturity or by acceleration or otherwise;
(b) the
Company shall fail to redeem any Preferred Stock when due in accordance with
the
terms of the Charter;
(c) the
Company shall fail to pay when due the Repurchase Price for any Warrants or
Warrant Shares pursuant to Section 11 hereof;
(d) the
Company or any of its Subsidiaries shall fail to perform or observe any
covenant, agreement or provision applicable to it (other than those provisions
set forth in Sections 10.1(a) - (c) above) set forth in Sections 7, 8 or 9
hereof;
(e) the
Company or any of its Subsidiaries shall fail to perform or observe any
covenant, agreement or provision applicable to it, under this Agreement or
any
other Financing Agreement to which it is a party, other than those provisions
set forth in Sections 10.1(a) - (d) above, and such failure shall not be
rectified, waived or cured to the satisfaction of the Majority Holders within
thirty (30) days of written notice thereof to the Company;
(f) there
occurs any "Event of Default" under the Senior Loan Agreement or any of the
other Senior Documents, including any amendments or modifications
thereto;
(g) any
representation or warranty made by the Company to any Holder in connection
with
this Agreement or any Related Agreement or any amendment to this Agreement
or
any Related Agreement shall prove to have been false, in any material respect,
on the date as of which it was made;
(h) the
Company or any of its Subsidiaries shall fail (i) to make any required payment
on any Indebtedness for Borrowed Money, or (ii) to perform or observe any of
the
covenants or provisions required to be performed or observed by it pursuant
to
any of the Related Agreements, as amended from time to time consistent with
Section 9.9 and, in the case of each of (i) and (ii), (x) such failure shall
continue, without having been duly cured, waived or consented to, beyond the
period of grace, if any, therein specified and so as to permit the acceleration
thereof, if any acceleration is provided for therein, or (y) any security
interest in or other Lien on any property securing any such Indebtedness shall
be enforced through judicial proceedings or foreclosure or repossession of
collateral;
(i) a
final
judgment which in the aggregate with other outstanding final judgments against
the Company or any of its Subsidiaries exceeds $150,000 shall be rendered
against the Company or any of its Subsidiaries if, within 30 days after entry
thereof, such judgment shall not have been satisfied and discharged or stayed
pending appeal or bonded, or within 30 days after expiration of such stay such
judgment shall not have been discharged;
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(j) the
Company or any of its Subsidiaries shall:
(i) commence
a voluntary case under Title 11 of the United States Code as from time to time
in effect, or authorize, by appropriate proceedings of its board of directors
or
other governing body, the commencement of such a voluntary case;
(ii) have
filed against it a petition commencing an involuntary case under said Title
11
and such petition shall not have been dismissed or stayed within 45
days;
(iii) seek
relief as a debtor under any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of debtors or to
the
modification or alteration of the rights of creditors, or consent to or
acquiesce in such relief;
(iv) have
entered against it an order by a court of competent jurisdiction (x) finding
it
to be bankrupt or insolvent, (y) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors,
or (z) assuming custody of, or appointing a receiver or other custodian for,
all
or a substantial part of its property; or
(v) make
an assignment for the benefit of, or enter into a composition with, its
creditors, or appoint or consent to the appointment of a receiver or other
custodian for all or a substantial part of its property;
(k) the
employment of ▇▇▇▇▇▇ ▇▇▇▇ shall be terminated for any reason, including by
resignation, or such Person is otherwise legally restricted from participating
in the business conducted by the Company or any of its Subsidiaries, and the
Company shall not have hired a replacement for any such Person who has been
approved by the Majority Holders within 120 days thereafter,
(l) the
Company or any of its Subsidiaries shall fail to maintain in full force and
effect any federal, state or local license, permit or operating right material
to the operation of its business;
(m) if
any of
the Financing Agreements shall be cancelled, terminated, revoked or rescinded
or
any of the Collateral Agent’s or any Holder’s Liens on the Collateral shall
cease to be perfected, or shall cease to have the priority contemplated hereby
and by the Security Documents, in each case otherwise than in accordance with
the terms thereof or with the express prior written consent, agreement or
approval of the Majority Holders of the Notes, or any action at law or in equity
or other legal proceeding to cancel, revoke or rescind any of the Financing
Agreements shall be commenced by or on behalf of the Company or any of its
Subsidiaries party thereto or any of their respective stockholders, or any
court
or any other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment, order, decree
or ruling to the effect that, any one or more of the Financing Agreements is
illegal, invalid or unenforceable in accordance with the terms
thereof;
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(n) the
Company or any of its Subsidiaries shall be convicted, pursuant to a final
determination of a court of competent jurisdiction of a state or federal crime,
or the Company or any of its Subsidiaries is held liable,
pursuant to a final determination of a court of competent jurisdiction (or
admits liability), in any civil or criminal action brought by a governmental
entity, a punishment for which in any such case is reasonably likely to include
fines or penalties in excess of, or the forfeiture of any assets of the Company
or such Subsidiary having a fair market value in excess of
$150,000;
(o) the
Company or any of its Subsidiaries agrees to the settlement of any one or more
pending or threatened actions, suits or proceedings affecting the Company or
any
of its Subsidiaries before any court or other governmental authority or any
arbitrator or mediator, providing for the payment of money exceeding $150,000
in
the aggregate;
(p) any
material portion of the Company’s, or any of its Subsidiaries’ assets is
attached, seized, subjected to a writ or distress warrant, levied upon, or
comes
into the possession of any third Person;
(q) the
Company or any of its Subsidiaries is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part
of
its business affairs;
(r) a
notice
of lien, levy, or assessment is filed of record with respect to any of the
Company’s or any of its Subsidiaries’ assets by the United States, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien, whether ▇▇▇▇▇▇
or
otherwise, upon any of the Company’s or any of its Subsidiaries’ assets and the
same is not paid before such payment is delinquent;
(s) the
obligation of any Guarantor under any Guaranty is limited or terminated by
operation of law or by such guarantor thereunder;
or
(t) there
occurs any default under the Subordinated Debt.
10.2. Remedies.
Upon
the occurrence and continuance of any of the Events of Default under Section
10.1 hereof, in each and every such case:
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(a) the
Collateral Agent may and, upon the request of the Majority Holders of the Notes,
shall, proceed to protect and enforce its or their rights by suit in equity,
action at law and/or other appropriate proceedings either for specific
performance of any covenant, provision or condition contained or incorporated
by
reference in this Agreement or in the Notes, or in aid of the exercise of any
power granted in this Agreement or in the Notes, and (unless there shall have
occurred an Event of Default under Section 10.1(j) hereof, in which case the
unpaid balance of the Notes shall automatically become due and payable) may
by
notice to the Company, declare all or any part of the unpaid principal amount
of
the Notes then outstanding to be forthwith due and payable, and thereupon such
unpaid principal amount or part thereof, together with interest accrued thereon
and all other sums, if any, payable under this Agreement or the Notes shall
become so due and payable without presentation, presentment, protest or further
demand or notice of any kind, all of which are hereby expressly waived, and
such
holder or holders may proceed to enforce payment of such amount or part thereof
in such manner as it or they may elect; and
(b) (i)
the
Majority Holders of the Warrants and the Warrant Shares may proceed to protect
and enforce its or their rights by suit in equity, action at law and/or other
appropriate proceeding for specific performance of any covenant, provision
or
condition contained or incorporated by reference in this Agreement or in any
Related Agreement, or in aid of the exercise of any power granted in this
Agreement or any Related Agreement, and, immediately in the case of Section
10.1(j) hereof and at any time after the giving of a Put Notice to the Company
pursuant to Section 11 hereof in all other cases, the theretofore unexercised
"put" rights set forth in Section 11 hereof shall, to the extent not already
exercisable, be deemed to have become immediately exercisable and the Majority
Holders of Warrants and the Warrant Shares may in such Put Notice to the Company
declare all or part of such theretofore unexercised "put" rights to be forthwith
exercised and due and payable (unless there shall have occurred an Event of
Default under Section 10.1(j) hereof, in which case such "put" rights shall
be
automatically exercised and due and payable, whereupon the Repurchase Price
for
the Warrants and the Warrant Shares subject thereto shall become so due and
payable without presentation, presentment, protest or further demand or notice
of any kind, all of which are hereby expressly waived), and any such holder
or
holders may proceed to enforce payment of such amount or part thereof in such
manner as it or they may elect; and
(ii)
the
Majority Holders of the Warrants and the Warrant Shares may demand payment
of
the CIP Amount pursuant to the CIP Agreement and/or payment of the Fee pursuant
to the Fee Agreement; whereupon such CIP Amount and such Fee shall become so
due
and payable without presentation, presentment, protest or further demand or
notice of any kind, all of which are hereby expressly waived, and any such
holder or holders may proceed to enforce payment of such amount or part thereof
in such manner as it or they may elect; provided that
such
amounts shall automatically become due and payable in the case of an event
described in Section 10.1(j) hereof.
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10.3. Waivers.
The
Company and each of its Subsidiaries hereby waives, to the extent not prohibited
by applicable law, (a) all presentments, demands for performance and notices
of
nonperformance (except to the extent specifically required by the provisions
hereof), (b) any requirement of diligence or promptness on the part of any
holder of Securities in the enforcement of its rights under the provisions
of
this Agreement, the Company's Charter, or any Financing Agreement, and (c)
any
and all notices of every kind and description which may be required to be given
by any statute or rule of law.
10.4. Course of Dealing.
No
course of dealing between the Company or any of its Subsidiaries on the one
hand, and the Collateral Agent or any Holder of Securities, on the other hand,
shall operate as a waiver of any of the rights of the Collateral Agent or any
Holder under this Agreement, the Company's Charter, or any Financing Agreement.
No delay or omission in exercising any right under this Agreement, the Company's
Charter, or any Financing Agreement shall operate as a waiver of such right
or
any other right. A waiver on any one occasion shall not be construed as a bar
to
or waiver of any right or remedy on any other occasion.
10.5 Distribution of Proceeds.
After
the exercise of remedies provided for in Section 10.2
(or
after the Notes have automatically become due and payable), any amount received
on account of the Obligations shall be applied first, to the payment of that
portion of the Obligations constituting fees, indemnities, expenses and other
amounts (including fees, charges and disbursement of counsel to the Collateral
Agent) payable to the Collateral Agent in its capacity as such and second,
to
all other Obligations in such order or preference as the Majority Holders may
determine, provided
that
with respect to each type of Obligation owing to the Holders, such as interest,
principal, fees and expenses, distributions shall be made among the Holders
on a
pro rata basis.
11. REPURCHASE OF WARRANTS
AND
WARRANT SHARES.
11.1. Right
to Put Warrants and Warrant
Shares.
Following the Approval Date and at any time and from time to time after the
earliest of (i) the Maturity Date, or (ii) the date of consummation of a Capital
Transaction, or on such earlier date as may be determined under Section 10.2(b)
or Section 11.7 hereof, any Holder (an "Exercising
Holder")
may,
by notice to the Company (a "Put
Notice"),
elect
to sell to the Company (and the Company hereby agrees to repurchase), at the
Repurchase Price specified in Section 11.5 hereof or Section 11.7 hereof, as
applicable, all or such number of the shares of Warrant Shares held by the
Exercising Holder and/or all or such portion of the Warrants held by such
Exercising Holder then outstanding as is specified in the Put Notice. For all
purposes of this Section 11, each Warrant shall be treated as the number of
Warrant Shares for which it is then exercisable.
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11.2. Put Closing.
The put
closing, except as otherwise provided in Section 11.7, shall take place at
the
offices of the Company at 10:00 a.m. local time on a date (a) not more than
90
days after the date a Put Notice is received by the Company as the Company
shall
specify by notice to each Exercising Holder, or at such later time as Fair
Market Value shall have been determined under Section 11.5(b) hereof, or (b)
at
such other time and place as each Exercising Holder and the Company may agree
upon (a "Put Closing Date").
At
the put closing each Exercising Holder will deliver to the Company a certificate
or certificates evidencing the Warrant Shares and/or Warrants then to be
purchased by the Company (properly endorsed or accompanied by assignments,
with
signature(s) guaranteed or similar appropriate documentation of authority to
transfer, and free and clear of all Liens) against payment of the Repurchase
Price to such Exercising Holder in the manner specified in Section 11.4 hereof.
Except to the extent prohibited by applicable law, prior to the Put Closing
Date, the Company will provide the Holders (on a confidential basis) with all
available information that may be material to the exercise of the Holders’
rights under this Section 11, including any plans or proposals for any mergers,
sales of assets, acquisitions and substantial sales of stock or other equity
interests by its stockholders.
11.3. Right to Call Warrants or Warrant
Shares;
Call Closing.
At any
time after a CIP Notice (as defined in the CIP Agreement) is delivered to the
Company by the Majority Holders pursuant to the CIP Agreement, the Company
may,
by notice to each Holder of Warrants and Warrant Shares (the "Call Notice"),
elect
to purchase from each Holder of the Warrants and the Warrant Shares (and each
Holder hereby agrees to sell to the Company) out of funds legally available
therefor, at the Repurchase Price, all but not less than all of Warrant Shares
and the Warrants as are then outstanding on a date specified in such notice
not
fewer than 30 nor more than 90 days after the date of the Call Notice or at
such
later time as Fair Market Value shall have been determined under Section 11.5(b)
hereof. The closing under this Section 11.3 shall take place at the offices
of
the Company at 10:00 a.m. local time on the date so specified or at such later
time as Fair Market Value shall have been determined under Section 11.5(b)
hereof, or at such other time and place as the Company and the Holders may
agree
upon (the "Call Closing Date").
At
the call closing the Holders will deliver to the Company a certificate or
certificates evidencing the Warrant Shares and/or the Warrants, to be purchased
by the Company (properly
endorsed or accompanied by assignments, with signature(s) guaranteed or similar
appropriate documentation of authority to transfer, and free and clear of all
Liens) against payment of the Repurchase Price to the Holders in the manner
specified in Section 11.4 hereof and payment of the Fee under and as defined
in
the Fee Agreement. Except to the extent prohibited by applicable law, prior
to
the Call Closing Date, the Company will provide the Holders (on a confidential
basis) with all available information that may be material to the exercise
of
each Holder’s rights under this Section 11, including any plans or proposals for
any mergers, sales of assets, acquisitions and substantial sales of stock or
other equity interests by its stockholders.
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11.4. Payment.
The
Company shall pay the Repurchase Price and, in the case of a “call”, the Fee
under and as defined in the Fee Agreement, at any closing under Section 11.2
or
11.3 hereof out of funds legally available therefor in cash, or otherwise,
immediately available funds. In the event that any portion of the Repurchase
Price or, in the case of a “call”, any portion of the Repurchase Price or any
portion the Fee under and as defined in the Fee Agreement, is not paid as a
result of any insufficiency of legally available funds or otherwise, (a) in
the
case of a “put” each Exercising Holder shall retain all of its rights hereunder
and under and in connection with the Warrant Shares and Warrants held by such
Exercising Holder, as to that number of Warrant Shares and/or that portion
of
the Warrants exercisable for that number of Warrant Shares as such unpaid
portion represents (the "Unrepurchased Securities"),
until
such time as the unpaid portion of the Repurchase Price and interest thereon,
determined as set forth below, shall be paid to such Exercising Holder; and
each
Exercising Holder shall, at any time or from time to time prior to payment
of
the Repurchase Price for any Unrepurchased Securities, be entitled, by notice
to
the Company (the "Rescission
Notice"),
to
rescind its put of all or part of such Unrepurchased Securities pursuant to
Section 11.1 and (b) in the case of a “call”, such “call” shall be terminated
and the relevant Call Notice automatically rescinded and each Holder shall
retain all its rights hereunder, under the CIP Agreement and the Fee Agreement
and under and in connection with all of the Warrant Shares and the Warrants
to
be purchased pursuant to such Call Notice until such time as the Holders receive
a new Call Notice from the Company. Unless and until the Company receives a
Rescission Notice, the unpaid portion of the Repurchase Price allocable to
the
Unrepurchased Securities shall remain an obligation of the Company and shall
become due and payable, in cash or immediately available funds, as soon as
there
are funds legally available therefor. Interest shall accrue from the date 90
days after the date on which the Company receives the applicable Put Notice
on
any unpaid portion of the Repurchase Price at the rate of 18% per annum,
compounded on a monthly basis to the extent permitted by law and payable on
demand.
11.5. Repurchase Price for Warrants and Warrant
Shares.
(a) Repurchase Price.
The
repurchase price (the "Repurchase Price")
shall
be an amount equal to, (i) in the case of each Warrant Share,
the
quotient obtained by dividing (A) the greatest of (1) the Fair Market Value
of
the Company's common stock equity (as determined pursuant to Section 11.5(b)
hereof), (2) the Formula Value of the Company’s common stock equity (as
determined pursuant to Section 11.5(c) hereof, respectively), calculated as
of
the date of the related Put Notice or Call Notice under Section 11.1 or 11.3
hereof, as applicable, plus,
the
aggregate consideration to be paid to the Company upon the exercise of all
then
exercisable outstanding warrants, options or convertible securities pursuant
to
which the Company is then obligated to issue Common Stock, to the extent such
securities would be deemed to convert pursuant to the definition of Fully
Diluted Basis or (3) the closing stock price of the Company’s common stock
equity multiplied by
the
number of shares of Common Stock then outstanding, calculated on a Fully Diluted
Basis, plus,
the
aggregate consideration to be paid to the Company upon the exercise of all
then
exercisable outstanding warrants, options or convertible securities pursuant
to
which the Company is then obligated to issue Common Stock, to the extent such
securities would be deemed to convert pursuant to the definition of Fully
Diluted Basis (the greatest of subclauses (1), (2) and (3) hereinafter being
referred to as the “Common Equity Value”);
provided
that, in
the event that the Public Valuation Criteria is satisfied, then the Common
Equity Value shall be the amount set forth in subclause (A)(3) above,
by
(B) the
number of shares of Common Stock then outstanding, calculated on a Fully Diluted
Basis, and (ii) in the case of each Warrant, (A) the product of the repurchase
price per Warrant Share then purchasable under such Warrants as determined
under
this Section 11.5 multiplied by
the
number of such shares then purchasable thereunder, minus
(B) the
aggregate exercise price for such shares.
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(b) Fair Market Value.
For a
period of 10 days after the date of any Put Notice (the "Negotiation Period"),
each
Exercising Holder and the Company agrees to negotiate in good faith to reach
agreement upon the fair market value of the Company's common stock equity (the
"Fair Market Value").
In
the event that each Exercising Holder and the Company are unable to agree upon
the Fair Market Value by the end of the Negotiation Period, the Fair Market
Value of the Company's common stock equity shall be determined for purposes
of
this Section 11.5(b) initially by an appraiser of nationally recognized standing
selected by the Company (the "Company Appraiser")
and
whose appraisal (the "Company Appraisal")
shall
be furnished to each Exercising Holder within 45 days after the end of the
Negotiation Period. If no Exercising Holder objects to such determination within
15 days after such Exercising Holder’s receipt of the Company Appraisal, the
fair market value determined by the Company Appraiser shall be the Fair Market
Value. If an Exercising Holder objects to the Fair Market Value determined
by
the Company Appraiser, the Exercising Holders may select an Appraiser (the
"Investor
Appraiser")
who
shall review the determination of the Company Appraiser and issue a report
thereon (the "Investor Appraisal")
to
each Exercising Holder and the Company, within 30 days after delivery to the
Exercising Holders of the Company Appraisal. Within 10 days after delivery
to
the Company of the Investor Appraisal, the Company Appraiser and the Investor
Appraiser shall meet in order to resolve any questions or differences with
respect to the Fair Market Value. If such Appraisers agree on a Fair Market
Value of the Company's common stock equity, such Fair Market Value shall be
the
Fair Market Value. If no agreement is reached, such Appraisers shall select
an
appraiser of nationally recognized standing (the "Third Appraiser")
within
five days after such meeting. Fair Market Value shall then be determined by
the
Third Appraiser within 30 days after delivery to the Company of the Investor
Appraisal, and the determination of the Third Appraiser shall be conclusive
and
binding upon the Company and each Exercising Holder. Fair Market Value shall
in
all cases be calculated by determining the Fair Market Value of the entire
common stock equity interest of the Company taken as a whole, without discounts
for minority interests or restrictions on transfer or illiquidity. All expenses
relating to the appraisals shall be borne by the Company. The Fair Market Value
of the Company’s common stock equity shall be determined taking into account the
aggregate liquidation preference attributable to shares of the Company’s
outstanding Preferred Stock which are not deemed to be converted for purposes
of
calculating outstanding shares on a Fully-Diluted Basis.
(c) Formula Value.
The
“Formula Value”
of
the
Company’s common stock equity at any particular date of determination shall be
an amount calculated as follows: six (6) x EBITDA for the trailing twelve months
as determined by reference to the unaudited income statement most recently
available of the Company (or the audited financial statements in the case of
months constituting the fiscal year or any part thereof for which audited
financial statements are available), prepared in accordance with GAAP (subject,
in the case of interim financial statements, to normal year end adjustments
and
the absence of footnotes), for the period ended as of the last day of the month
ending immediately prior to the date the Formula Value is being determined,
less
all
Indebtedness for Borrowed Money of the Company on any day of calculation,
less
to the
extent (and only to the extent) that any Preferred Stock is deemed not to
convert to Common Stock pursuant to the definition of “Fully Diluted Basis”, the
aggregate liquidation preference of all such Preferred Stock, plus
cash,
(less
outstanding checks) on any day of calculation held by the
Company.
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11.6. Additional Payments Upon Merger,
Etc.
If at
any time within six (6) months after any Put Closing Date or Call Closing Date
with respect to the repurchase or exchange of any Warrants and/or Warrant
Shares, the Company or any of its Subsidiaries shall become party to any Capital
Transaction or the Company or any of its Subsidiaries or their respective
stockholders enter into any agreement or letter of intent contemplating any
Capital Transaction, the Company shall, simultaneously with the consummation
of
such Capital Transaction or at such later time as any payment is received by
the
Company or any of its stockholders in respect of such Capital Transaction,
make
an additional payment to each Exercising Holder in an amount per Warrant Share
(or share of common stock issuable upon exercise of any Warrant) repurchased
from such Exercising Holder pursuant to Section 11.2 or 11.3 hereof equal to
the
excess, if any, of the value per share of the cash, securities and other
property that such Exercising Holder would have received (or that the Company
received in which such Exercising Holder would have had a beneficial interest
as
a stockholder of the Company) had such Exercising Holder’s Warrant Shares and/or
Warrants not been previously repurchased pursuant to Section 11.2 or 11.3
hereof, but instead had been repurchased pursuant to Section 11.6 hereof, over
the payment received by such Exercising Holder with respect to each such share
pursuant to Section 11.2 or 11.3 hereof. Each payment to an Exercising Holder
to
this Section 11.6 shall be made either in cash or in the form of consideration
received by the Company or the holders of common equity of the Company, as
the
case may be.
11.7. Repurchase Price Upon Certain Transactions.
The
Company will give each Major Holder of Warrants and Warrant Shares at least
45
days' prior written notice of any Capital Transaction. Not less than 25 days
prior
to the
consummation of such Capital Transaction, other than a Capital Transaction
described in clause (iii) of the definition thereof, each Holder may elect
to
exercise its put rights, under Section 11.1 hereof, provided
that if
any Holder exercises its put rights under this Section 11.6 then,
notwithstanding any other provision of this Section 11, the closing of the
resulting purchase of Warrant Shares and/or Warrants shall occur simultaneously
with the closing of such Capital Transaction and the Repurchase Price, for
purposes of this Section 11.7, shall be equal to (a) in the case of each
Warrant, (i) the product of the Repurchase Price per Warrant Share then
purchasable thereunder as determined pursuant to clause (b) below multiplied by
the
number of such shares then purchasable thereunder, less
(ii) the
aggregate exercise price for such shares and (b) in the case of each share
of
such Warrant Shares, (i) in the case of a merger, or any other stock
transaction, the highest price per share received by any holder of Common Stock
in connection with such transaction, and (ii) in the case of any liquidation
or
sale of assets, the quotient of (A) the Adjusted Net Worth of the Company
immediately prior to such liquidation or immediately after such sale,
divided by
(B) the
sum of the number of shares of Common Stock then outstanding on a Fully Diluted
Basis.
12. REGISTRATION RIGHTS.
Each
Holder will have certain registration rights with respect to the Warrants and
the Warrant Shares as set forth in the Registration Rights
Agreement.
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13. SUBSEQUENT HOLDERS OF SECURITIES.
Whether
or not any express assignment has been made in this Agreement, the provisions
of
this Agreement and the Financing Agreements that are for the benefit of the
Holders as holders of any Securities are also for the benefit of, and
enforceable by, all subsequent holders of Securities; provided that in any
event, the Collateral Agent shall always act as agent for the Holders with
respect to enforcement of any Security Document in accordance with the terms
and
conditions hereof.
14. REGISTRATION AND TRANSFER OF SECURITIES.
14.1. Registration,
Transfer and Exchange of Notes.
(a) The
Company shall keep at its principal office a register in which shall be entered
the names and addresses of the registered Holders of the Notes issued by it
and
particulars of the respective Notes held by them and of all transfers of such
Notes. The ownership of any of the Notes shall be proven by such register and
the Company may conclusively rely upon such register.
(b) The
Holder of any of the Notes may at any time and from time to time prior to
maturity or redemption thereof surrender any Note held by it for exchange or
(subject to compliance with the applicable provisions of Section 15 hereof)
transfer at said office of the Company. Within a reasonable time thereafter
and
without expense (other than transfer taxes, if any) to such Holder, the Company
shall issue, at its expense, in exchange therefor another Note or Notes, dated
the date to which interest has been paid on the surrendered Note, for the same
aggregate principal amount as the unpaid principal amount of the Note or Notes
so surrendered, having the same maturity and rate of interest, containing the
same provisions and subject to the same terms and conditions as the Note or
Notes so surrendered. Each such new Note shall be in the denominations and
registered in the name of such person or persons as the Holder of such
surrendered Note or Notes may designate in writing, and such exchange shall
be
made in a manner such that no additional or lesser amount of principal or
interest shall result. The Company will pay shipping and insurance charges,
from
and to each Holder's principal office, involved in the exchange or transfer
of
any Note.
(c) Each
Note
issued hereunder, whether originally or in substitution for, or upon transfer
or
exchange of, any Note shall be registered on the date of execution thereof
by
the Company. The registered Holder of a Note shall be deemed to be the owner
of
such Note for all purposes of this Agreement. All notices given hereunder to
such Holder shall be deemed validly given if given in the manner specified
in
Section 17 hereof.
14.2. Registration,
Transfer and Exchange of Warrants.
(a) The
Company shall keep at its principal office a register in which shall be entered
the names and addresses of the Holders of Warrants issued by it and particulars
of the respective Warrants held by them and of all transfers of such Warrants.
The ownership of any of the Warrants shall be proven by such register and the
Company may conclusively rely upon such register.
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(b) The
Holder of any of the Warrants may at any time and from time to time prior to
exercise, repurchase or redemption thereof surrender any Warrant held by it
for
exchange or (subject to compliance with Section 15 hereof) transfer at said
office of the Company. On surrender for exchange of the Warrants, properly
endorsed, to the Company, the Company at its expense will issue and deliver
to
or on the order of the Holder thereof a new Warrant or Warrants of like tenor,
in the name of such Holder or, upon payment by such Holder of any applicable
transfer taxes, as such Holder may direct, calling in the aggregate on the
face
or faces thereof for the number of Warrant Shares called for on the face or
faces of the Warrants so surrendered. The Company will pay shipping and
insurance charges, from and to each Holder's principal office, involved in
the
exchange or transfer of any Warrant.
(c) Each
Warrant issued hereunder, whether originally or in substitution for, or upon
transfer or exchange of, any Warrant shall be registered on the date of
execution thereof by the Company. The registered Holder of a Warrant shall
be
deemed to be the owner of such Warrant for all purposes of this Agreement.
All
notices given hereunder to such Holder shall be deemed validly given if given
in
the manner specified in Section 17 hereof.
14.3. Transfer and Exchange of Common Stock.
(a)
The
Company shall keep at its principal office a register in which shall be entered
the names and addresses of the Holders of any Common Stock (including Warrant
Shares) and the particulars (including without limitation the class thereof,
if
applicable) of the respective Common Stock held by them and of all transfers
of
shares of Common Stock (including Warrant Shares). References to the "holder"
or
"holder of record" of any Common Stock shall mean the holder thereof unless
the
holder shall have presented the stock certificates evidencing same to the
Company for transfer and the transferee shall have been entered in said register
as a subsequent holder, in which case the terms shall mean such subsequent
holder. The ownership of any of the Common Stock shall be proven by such
register and the Company may conclusively rely upon such register.
(b) Upon
surrender at such office of any certificate representing shares of Common Stock
(including Warrant Shares) for registration of exchange or (subject to
compliance with the applicable provisions of this Agreement, including without
limitation the conditions set forth in Section 15 hereof) transfer or
conversion, the Company shall issue, at its expense, one or more new
certificates, in such denomination or denominations as may be requested, for
shares of such class of Common Stock, as applicable, as may be requested, and
registered as such holder may request. Any certificate representing shares
of
Common Stock (including Warrant Shares) surrendered for registration of transfer
shall be duly endorsed, or accompanied by a written instrument of transfer
duly
executed by the holder of such certificate or his attorney duly authorized
in
writing. The Company will pay shipping and insurance charges, from and to each
holder's principal office, upon any transfer, exchange or conversion provided
for in this Section 14.3.
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(c) Each
certificate evidencing Common Stock (including Warrant Shares), whether
originally or in substitution for, or upon transfer, conversion or exchange
of,
any Common Stock (including Warrant Shares), as applicable, or upon the exercise
of any Warrant shall be registered on the date of execution thereof by the
Company. The registered holder of record shall be deemed to be the owner of
the
Common Stock, as applicable, for all purposes of this Agreement. All notices
given hereunder to the holder of record shall be deemed validly given if given
in the manner specified in Section 17 hereof.
14.4. Replacement of Securities.
Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Security and, in the case of any such loss,
theft or destruction, upon delivery of an indemnity bond in such reasonable
amount as the Company may determine (or, in the case of any Security held by
any
Investor or another institutional Holder, an unsecured indemnity agreement
from
such Investor or such other Holder reasonably satisfactory to the Company)
or,
in the case of any such mutilation, upon the surrender of such Security for
cancellation to the Company at its principal office, the Company, at its own
expense, will execute and deliver, in lieu thereof, a new Security of like
tenor, dated in the case of a Note so that there will be no loss of interest.
Any Security in lieu of which any such new Security has been so executed and
delivered by the Company shall not be deemed to be outstanding for any purpose
of this Agreement.
15. RESTRICTIONS ON TRANSFER AND CONFIDENTIALITY.
15.1. General Restriction.
The
Securities shall be transferable only upon the satisfaction of the conditions
set forth below in this Section 15.
15.2. Notice of Transfer.
Prior
to any transfer of any Securities, the Holder thereof shall be required to
give
written notice to the Company describing in reasonable detail the manner and
terms of the proposed transfer and the identity of the proposed transferee
(the
"Transfer Notice"),
accompanied by (a) (i) a certificate of such Holder or the proposed transferee
certifying that such transferee is an "accredited investor," as defined in
the
Securities Act, and (ii) if requested by the Company in connection with a
transfer of any Securities (other than Notes evidencing the Loan), an opinion,
addressed to the Company, of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP or other counsel reasonably
acceptable to the Company, that such transfer may be effected without
registration of such Securities under the Securities Act, and (b) the written
agreement of the proposed transferee to be bound by all of the provisions hereof
and of the Financing Agreements, applicable to holders of such Securities
hereunder or thereunder.
15.3. Restrictive Legends.
Except
as otherwise permitted by this Section 15, each Security (other than the Notes
evidencing the Loan) shall bear the legend specified for such Security on
Schedule 15.3
hereto.
15.4. Termination of Restrictions.
The
restrictions imposed by this Section 15 upon the transferability of Securities
(other than the Notes evidencing the Loan) shall terminate as to any particular
Securities when such Securities shall have been effectively registered under
the
Securities Act or sold pursuant to a Public Sale. Whenever any of such
restrictions shall terminate as to any Securities, the holder thereof shall
be
entitled to receive from the Company, at such Person's expense, new Securities
without such legends.
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15.5. Confidentiality.
Each
Major Holder, and its agents and representatives, will hold in confidence all
proprietary information of the Company and its Subsidiaries provided or made
available to such Major Holder pursuant to Section 9 hereof until such time
as
such information has become publicly available other than as a consequence
of
any breach by a Major Holder of its confidentiality obligations hereunder;
provided that
the
Major Holders may disclose such proprietary information to potential transferees
of their Securities, and the agents, representatives, counsel and affiliates
of
such transferees so long as such transferees and their agents, representatives,
counsel and affiliates, as applicable to be bound be the confidentiality
provisions contained herein..
16. EXPENSES;
INDEMNITY.
(a) The
Company hereby agrees to pay on demand all reasonable out-of-pocket expenses
incurred by the Collateral Agent and the Holders, in connection with the
transactions contemplated by this Agreement and the Related Agreements and
in
connection with any amendments or waivers (whether or not the same become
effective) hereof and thereof and all reasonable out-of-pocket expenses incurred
by the Collateral Agent or any Holder of any Security issued hereunder in
connection with the enforcement of any rights hereunder, under any other Related
Agreement or with respect to any Security, including without limitation
(i)
the
cost and expenses of preparing and duplicating this Agreement, the Securities
and each of the other Related Agreements, (ii) the cost of delivering to the
Investors’ principal offices, insured to their satisfaction, the Securities sold
to them hereunder and any Securities delivered to them in exchange therefor
or
upon any exercise, conversion or substitution thereof,
(iii)
the reasonable legal fees and all charges for costs, expenses and disbursements
of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP, special counsel to the Collateral Agent, Woodside
IV
and Woodside QP, in connection with the transactions contemplated by this
Agreement and the Related Agreements and any amendments, modifications,
approvals, consents or waivers hereunder or thereunder, (iv)
the
reasonable fees, expenses and disbursements of the Investors’ accountants,
consultants and other experts, in connection with their due diligence
investigation of the Company and its Subsidiaries and collateral examinations
of
the Company and its Subsidiaries; (v) all documentary stamp and similar taxes
at
any time payable in respect of this Agreement, the issuance of any of the
Securities and any other Related Agreement, (vi) all
reasonable out-of-pocket expenses, costs and liabilities (including without
limitation (x) reasonable attorneys’, consultant’s, environmental consultant’s,
collateral examiner’s, collateral auditor’s, commercial finance examiner’s,
accountant’s, appraiser’s, engineer’s, investment banker’s and similar
professional fees and costs, whether or not such professionals are employees
of
the Collateral Agent or any Holder, (y) all costs associated with any rights
of
board attendance, observation or inspection and travel and lodging expenses
related thereto and (z) fees
and
expenses in connection with Uniform Commercial Code and other lien searches
and
filing fees)
incurred
by the Collateral Agent or any Holder in connection with (A) the exercise,
enforcement or preservation of rights under this Agreement or any of the Related
Agreements against the Company or any of its Subsidiaries or any of their
officers or employees party thereto, (B) the administration of this Agreement
and the Related Agreements, whether before or after the occurrence of a Default
or Event of Default and (C) any litigation, proceeding or dispute whether
arising hereunder or otherwise, in any way related to the relationship of the
Collateral Agent or any Holder with the Company and any of its
Subsidiaries.
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(b) The
Company hereby further agrees to indemnify, exonerate and hold the Collateral
Agent, the Holders and their stockholders, officers, directors, employees,
general partners, limited partners and agents free and harmless from and against
any and all actions, causes of action, suits, losses, liabilities, damages
and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements), incurred in any capacity by any of the indemnitees as a result
of or relating to (A) any transaction financed or to be financed in whole or
in
part directly or indirectly with proceeds from the Loan or the sale of any
of
the Securities, or (B) the execution, delivery, performance or enforcement
of
this Agreement (including, without limitation, any failure by the Company or
any
of its Subsidiaries to comply with any of its covenants hereunder), the Related
Agreements or any instrument contemplated hereby or thereby, except, in each
such case, for any such liabilities arising from any indemnitee's breach of
this
Agreement, gross negligence or willful misconduct.
(c) The
Company hereby indemnifies the Collateral Agent and the Holders against and
agrees that it will hold the Collateral Agent and the Holders harmless from
any
claim, demand or liability for any broker's, finder's or placement fees or
lender's incentive fees alleged to have been incurred by any of them connection
with the transactions contemplated by this Agreement or the Related
Agreements.
(d) Except
to
the extent otherwise expressly provided herein, the Company shall pay on demand
interest at a rate per annum equal to the lesser of the maximum rate of interest
permitted by law or 18% (compounded quarterly) on all overdue amounts payable
under this Agreement until such amounts shall be paid in full.
(e) The
obligations of the Company under this Section 16 shall survive payment or
transfer of the Securities and the termination of this Agreement.
17. NOTICES.
Any
notice or other communication in connection with this Agreement, any other
Financing Agreement or the Securities will be in writing and shall be deemed
to
be properly delivered if either personally delivered or sent by facsimile,
overnight courier or mailed certified or registered mail, return receipt
requested, postage prepaid, to the recipient at the address specified
below:
If
to the
Company, then to its address set forth on page 1 hereof, to the attention of
the
President or at such other address as such person shall have specified by notice
actually received by the addressor, with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.,
Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇., ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (FAX) ▇▇▇-▇▇▇-▇▇▇▇.
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If
to the
Collateral Agent, then to it at its address set forth on page 1 hereof, or
at
such other address as the Collateral Agent shall have specified by notice
actually received by the addressor, with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, phone:
▇▇▇-▇▇▇-▇▇▇▇, facsimilie: ▇▇▇-▇▇▇-▇▇▇▇.
If
to the
Investors, then to each of them at the respective address set forth on page
1
hereof, or at such other address as any Investor shall have specified by notice
actually received by the addressor, with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, phone:
▇▇▇-▇▇▇-▇▇▇▇, facsimilie: ▇▇▇-▇▇▇-▇▇▇▇.
If
to any
other Holder of any Security, to it at its address set forth in the applicable
register referred to in Section 14 hereof.
Any
such
notice shall be effective (a) if delivered personally or by facsimile, when
received, (b) if sent by overnight courier, when receipted for, and (c) if
mailed as described above, five (5) days after being so mailed.
18. SURVIVAL AND TERMINATION OF COVENANTS.
All
covenants, agreements, representations and warranties made herein or in any
other document referred to herein or delivered to the Collateral Agent or the
Holders pursuant hereto shall be deemed to have been relied on by the Collateral
Agent and the Holders, notwithstanding any investigation made by the Collateral
Agent or any Holder or on the Collateral Agent’s or any Holder’s behalf, and
shall survive the execution and delivery to the Collateral Agent and the Holders
hereof and of the Securities.
19. AMENDMENTS AND WAIVERS.
Any
term
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company
and
the Majority Holders, with respect to any provision of this Agreement which
by
its terms operates for the benefit
of
such respective Holders;
provided
that any
provision hereunder governing the rights, obligations or liabilities of the
Collateral Agent in capacity as such may not be amended or waiver without the
written consent of the Collateral Agent. For the avoidance of doubt, in the
event that any provision hereof expressly requires the consent of the Holders,
the consent of each Holder shall be required hereunder.
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20. COLLATERAL AGENT.
20.1.
Appointment.
Each of
the Holders hereby irrevocably designates and appoints Woodside Agency Services,
LLC, as its Collateral Agent under this Agreement, the Security Documents and
the other Financing Agreements and to hold all Liens upon the Collateral on
its
behalf (and the Collateral Agent hereby accepts such appointment), and each
Holder hereby irrevocably authorizes the Collateral Agent to take such action
on
its behalf under the provisions of this Agreement, the Security Documents and
the other Financing Agreements, and to exercise such powers as are set forth
herein or therein, together with such other powers as are reasonably incidental
thereto. Furthermore, each Holder hereby (i) irrevocably authorizes and directs
the Collateral Agent to (A) execute the Intercreditor Agreement and (B) take
any
and all actions contemplated or required thereunder and (ii) agrees to comply
with the provisions of such Intercreditor Agreement. The provisions of this
Section 20 are solely for the benefit of the Collateral Agent and the Holders,
and none of the Company or any of its Subsidiaries shall have any rights as
third party beneficiaries of any of the provisions hereof. In performing its
functions and duties under this Agreement, the Security Documents and the other
Financing Agreements, the Collateral Agent shall act solely as agent of the
Holders and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for the Company
or
any of its Subsidiaries. The Collateral Agent may perform any of its duties
under this Agreement, the Security Documents or the other Financing Agreements,
by or through its agents or employees.
20.2.
Nature of Duties.
The
Collateral Agent shall have no duties or responsibilities except those expressly
set forth in this Agreement, the Security Documents or the other Financing
Agreements. The Collateral Agent agrees, that contemporaneously with its
exercise of remedies pursuant to this Agreement, the Security Documents and
the
other Financing Agreements, it shall use reasonable efforts to consult thereon
with the Holders to the extent practicable. The Collateral Agent shall not
have
by reason of this Agreement a fiduciary relationship in respect of any Holder.
Nothing in this Agreement, the Security Documents or any other Financing
Agreements, express or implied, is intended to or shall be construed to impose
upon the Collateral Agent any obligations in respect of this Agreement, the
Security Documents or any other Financing Agreements except as expressly set
forth herein or therein. The Collateral Agent may employ agents, co-agents
and
attorneys-in-fact and shall not be responsible to the Holders for the negligence
or misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care.
20.3.
Rights,
Exculpation,
Etc.
Neither
the Collateral Agent nor any of its officers, directors, employees or agents
shall be liable to any Holder for any action taken or omitted by it or any
of
them under this Agreement, the Security Documents or other Financing Agreements,
or in connection herewith or therewith. The Collateral Agent shall not be liable
for any apportionment or distribution of payments made by it in good faith
pursuant to this Agreement, (provided, that the Collateral Agent shall be liable
to the Holders to correct any such ministerial error on any settlement following
its obtaining knowledge of such error), and if any such apportionment or
distribution is subsequently determined to have been made in error, the sole
recourse of any Holder to whom payment was due but not made shall be to recover
from the other Holders any payment in excess of the amount to which it is
determined to have been entitled. The Collateral Agent shall not be responsible
to any Holder for any recitals, statements, representations or warranties
contained in this Agreement, the Security Documents, any other Financing
Agreements or any Financial Statements, or made by the Company or any of its
Subsidiaries in connection with appraisals performed prior to or following
the
Closing Date with respect to the equipment, real estate or other assets, or
for
the execution, effectiveness, genuineness, validity, enforceability,
collectibility, or sufficiency of this Agreement, the Security Documents or
any
of the other Financing Agreements or any of the transactions contemplated
thereby, or for the financial condition of the Company. The Collateral Agent
shall not be required to make any inquiry concerning either the performance
or
observance of any of the terms, provisions or conditions of this Agreement,
the
Security Documents or any of the other Financing Agreements or the financial
condition of the Company, or the existence or possible existence of any Default
or Event of Default. The Collateral Agent may at any time request instructions
from the Majority Holders with respect to any actions or approvals which by
the
terms of this Agreement, the Security Documents or of any of the other Financing
Agreements the Collateral Agent is permitted or required to take or to grant,
and the Collateral Agent shall be absolutely entitled to refrain from taking
any
action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or withholding any
approval under any of the Security Documents or other Financing Agreements
until
it shall have received such instructions from the Majority Holders. Without
limiting the foregoing, no Holder shall have any right of action whatsoever
against the Collateral Agent as a result of the Collateral Agent acting or
refraining from acting under this Agreement, the Security Documents or any
other
Financing Agreements in accordance with the instructions of the Majority
Holders.
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20.4.
Reliance.
The
Collateral Agent shall be entitled to rely upon any written notices, statements,
certificates, orders or other documents or any telephone message believed by
it
in good faith to be genuine and correct and to have been signed, sent or made
by
the proper Person, and with respect to all matters pertaining to this Agreement,
the Security Documents or any other Financing Agreements, and its duties
hereunder or thereunder, and upon advice and statements of legal counsel,
independent accountants, consultants and other experts selected by it. The
Collateral Agent shall be fully justified in failing or refusing to take any
action under this Agreement, the Security Documents and the other Financing
Agreements unless it shall first receive such advice or concurrence of the
Majority Holders or Holders, as applicable, as it deems appropriate or it shall
first be indemnified to its satisfaction by the Holders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action except for its own gross negligence or
willful misconduct.
20.5.
Indemnification of the Collateral Agent and the Holders by the Holders.
To the
extent that the Collateral Agent is not reimbursed and indemnified by the
Company, the Holders will reimburse and indemnify the Collateral Agent for
and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Collateral Agent in any way relating to or arising out of this
Agreement, the Security Documents, or any of the other Financing Agreements
or
any action taken or omitted by the Collateral Agent under this Agreement, the
Security Documents or any of the other Financing Agreements, in proportion
to
each Holder’s share of the outstanding amount of the Notes or other Securities,
as applicable; provided, however, that no Holder shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or disbursements resulting from
the
Collateral Agent’s recklessness, gross negligence or willful misconduct, or
representing ordinary costs and overhead expenses of the Collateral Agent which
do not constitute out-of-pocket expenses or allocated in-house counsel
fees.
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20.6.
Notices of Default.
The
Collateral Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder or under any Security
Documents or other Financing Agreements unless it has received notice of such
Default or Event of Default in accordance with the terms hereof or thereof
or
notice from the Company referring to this Agreement, the Security Documents
or
any other Financing Agreements, describing such Default or Event of Default
and
stating that such notice is a “notice of default”.
20.7.
Collateral Agent in Individual Capacity.
Woodside QP and Woodside IV and their affiliates may generally engage in any
kind of business with the Company as though the Collateral Agent were not the
Collateral Agent hereunder. With respect to any Security issued to Woodside
QP
or Woodside IV, such Persons shall have the same rights and power under this
Agreement, the Security Documents and the other Financing Agreements as though
Woodside Agency Services, LLC was not the Collateral Agent hereunder, and
without notice to or the consent of the other Holders.
20.8.
Successor Collateral Agent.
(a) The
Collateral Agent may resign from the performance of all of its functions and
duties under this Agreement and the other Financing Agreements at any time
by
giving at least ten (10) Business Days’ prior written notice to the Company and
each Holder. Such resignation shall take effect upon the acceptance by a
successor Collateral Agent of appointment pursuant to clause (b) or (c)
below.
(b) Upon
any
such notice of resignation, the Holders shall appoint a successor Collateral
Agent.
(c) If
a
successor Collateral Agent shall not have been so appointed within such ten
(10)
Business Day period because the Holders have not agreed on such successor,
the
retiring Collateral Agent shall then appoint a successor Collateral Agent who
shall serve as Collateral Agent until such time, if any, as the Holders shall
appoint a successor Collateral Agent as provided above.
20.9.
Collateral Matters.
(a) The
Holders hereby irrevocably authorize the Collateral Agent, at its option and
in
its discretion, to release any Collateral Agent’s Lien upon any Collateral (i)
upon the payment in full of the Notes and all other obligations which the
Collateral Agent has been notified in writing are then due and payable; (ii)
constituting property in which the Parent, the Company or any of their
Subsidiaries owned no interest at the time the Lien was granted or at any time
thereafter; (iii) constituting property leased to the Parent, the Company or
any
of their Subsidiaries under a lease which has expired or been terminated in
a
transaction permitted under this Agreement or which will expire imminently
and
which has not been, and is not intended by the Company to be, renewed or
extended; (iv) if approved, authorized or ratified in writing by the Majority
Holders; or (v) as otherwise as required pursuant to the Intercreditor
Agreement. Upon request by the Collateral Agent or the Company at any time,
the
Holders will confirm in writing the Collateral Agent’s authority to release any
Collateral Agent’s Liens upon particular types or items of Collateral pursuant
to this Section 20.9.
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(b) The
Collateral Agent shall have no obligation whatsoever to any of the Holders
to
assure that the Collateral exists or is owned by the Company or is cared for,
protected or insured or has been encumbered, or that the Collateral Agent’s
Liens have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to the Collateral Agent pursuant to this Section 20.9
or
pursuant to any of the Security Documents or other Financing Agreements, it
being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Collateral Agent may act in any manner
it
may deem appropriate, in its sole discretion and that the Collateral Agent
shall
have no duty or liability whatsoever to any Holder as to any of the
foregoing.
20.10.
Agency for Perfection.
Subject
to the Intercreditor Agreement, each Holder hereby appoints the Collateral
Agent
as agent for the purpose of perfecting the Holders’ security interest in assets
which, in accordance with Articles 8 or 9 of the UCC can be perfected only
by
possession. Should any Holder (other than the Collateral Agent) obtain
possession of any such Collateral, such Holder shall notify the Collateral
Agent
thereof, and, promptly upon the Collateral Agent’s request therefor shall
deliver such Collateral to the Collateral Agent or in accordance with the
Collateral Agent’s instructions.
20.11.
Concerning the Collateral and Related Loan Documents.
Each
Holder authorizes and directs the Collateral Agent to enter into this Agreement,
the Security Documents and the other Financing Agreements relating to the
Collateral, for the benefit of the Collateral Agent and the Holders. Each Holder
agrees that any action taken by the Collateral Agent in accordance with the
terms of this Agreement, the Security Documents or the other Financing
Agreements relating to the Collateral, and the exercise by the Collateral Agent
of its powers set forth therein or herein, together with such other powers
that
are reasonably incidental thereto, shall be deemed authorized by and binding
upon all of the Holders.
21. CONSENT TO JURISDICTION.
THE
COMPANY HEREBY AGREES TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS
IN
AND OF THE COMMONWEALTH OF MASSACHUSETTS OVER ANY SUIT, ACTION OR PROCEEDING
EXISTING UNDER OR RELATING TO THIS AGREEMENT, THE SECURITIES OR ANY OF THE
OTHER
FINANCING AGREEMENTS, AND CONSENTS THAT SERVICE OF PROCESS WITH RESPECT TO
ALL
COURTS IN AND OF THE COMMONWEALTH
OF MASSACHUSETTS MAY BE MADE BY REGISTERED MAIL TO IT AT ITS ADDRESS SET FORTH
ON PAGE 1 HEREOF.
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22. RIGHT TO PUBLICIZE
The
Company hereby acknowledges that each of the Investors will have the right
to
publicize its investment in the Company as contemplated hereby by means of
a
tombstone advertisement or other customary advertisement in newspapers and
other
periodicals.
23. WAIVER OF JURY TRIAL.
THE
COMPANY HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN ANY
SUIT, ACTION OR PROCEEDING EXISTING UNDER OR RELATING TO THIS AGREEMENT, THE
SECURITIES OR ANY OF THE OTHER FINANCING AGREEMENTS.
24. MISCELLANEOUS.
(a) This
Agreement and the other Related Agreements set forth the entire understanding
of
the parties hereto with respect to the transactions contemplated hereby and
supersede any prior written or oral understandings with respect thereto. The
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of any other term or provision hereof. The
headings in this Agreement are for convenience of reference only and shall
not
alter or otherwise affect the meaning hereof. THIS
AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND MAY BE EXECUTED
IN ANY NUMBER OF COUNTERPARTS WHICH TOGETHER SHALL CONSTITUTE ONE INSTRUMENT
AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC SUBSTANTIVE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT GIVING EFFECT TO ANY CHOICE
OR
CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE
DOMESTIC SUBSTANTIVE LAWS OF ANY OTHER STATE, AND SHALL BIND AND INURE TO THE
BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS.
(b) The
Company acknowledges that the Holders or any of their Affiliates may be
providing financing or other services to parties whose interests may conflict
with the interests of the Company. Each Holder agrees that it will not furnish
confidential information obtained from the Company to any of its other customers
and that it will treat confidential information relating to the Company and
is
Affiliates with the same degree of care as they treat its own confidential
information. Each Holder further advises the Company that it will not make
available to the Company confidential information that it has obtained or may
obtain from any other customer. In connection with the services and transactions
contemplated hereby, the Company agrees that each Holder is permitted to access,
use and share with any of its Affiliates, agents, advisors (legal or otherwise)
or representatives any information concerning the Company or any of its
Affiliates that is or may come into the possession of such Holder or any of
such
Affiliates.
(c) The
Company agrees that neither it nor its Affiliates will in the future issue
any
press releases or other public disclosure using the name of any Holder or their
respective affiliates or referring to this Agreement, the other Financing
Agreements or the transactions contemplated hereby without the prior written
consent of each Holder.
[Signature
page follows.]
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If
the
foregoing corresponds with your understanding of our agreement, kindly sign
this
letter and the accompanying copies thereof in the appropriate space below and
return one counterpart of the same to the Company, at its address first listed
above.
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Very
truly yours,
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By:
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Name:
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Title:
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Accepted
and agreed to:
WOODSIDE
CAPITAL PARTNERS IV, LLC,
as a
Holder
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By:
Woodside Opportunity Partners, LLC, its Manager
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By: Woodside
Capital Management, LLC, its Manager
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By:
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Name:
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Title:
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WOODSIDE
CAPITAL PARTNERS IV QP, LLC,
as a
Holder
|
By:
Woodside Opportunity Partners, LLC, its Manager
|
||
|
By: Woodside
Capital Management, LLC, its Manager
|
||
|
By:
|
|
|
|
Name:
|
||
|
Title:
|
||
▇▇▇▇▇▇
BROTHERS COMMERCIAL BANK,
as a
Holder
|
By:
|
|
|
Name:
|
|
|
Title:
|
WOODSIDE
AGENCY SERVICES, LLC,
as
Collateral Agent
|
By:
|
Woodside
Capital Management, LLC, its Manager
|
||
|
By:
|
|
||
|
Name:
|
|||
|
Title:
|
|||
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