Exhibit 10.3
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of this 28th day of August, 2002 (the "Effective Date"), by and among
CRESCENT JEWELERS, a California corporation (the "Company"), CRESCENT JEWELERS,
INC., a Delaware corporation (the "Parent"), and ▇▇▇▇▇▇▇▇'▇ INC., a Delaware
corporation (the "Purchaser").
WHEREAS, the Company has offered to sell to the Purchaser $50,000,000
of the Company's Series A Preferred Stock (the "Preferred Stock"), and the
Purchaser is willing to purchase the Preferred Stock, subject to the terms and
conditions hereof;
WHEREAS, the parties wish to evidence the sale of the Preferred Stock
by entering into this Agreement pursuant to which the Purchaser shall purchase,
and the Company shall issue and sell 1,000,000 shares of the Preferred Stock;
and
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company to enter into this Agreement, and the
Purchaser has approved this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. ISSUANCE AND SALE OF PREFERRED STOCK.
1.1 AUTHORIZATION OF PREFERRED STOCK. The Company has authorized the
issuance and sale of the Preferred Stock as set forth in and pursuant to the
Company's Amended and Restated Articles of Incorporation (the "Articles"), which
are attached hereto as Exhibit A, and which have been filed with the Secretary
of State of the State of California. The Preferred Stock shall have the rights,
privileges and preferences set forth in the Articles.
1.2 PURCHASE AND SALE OF PREFERRED STOCK. The Company agrees to issue
and sell to the Purchaser, and the Purchaser agrees to purchase from the
Company, the Preferred Stock for an aggregate purchase price of $50,000,000 (the
"Purchase Price") or $50 per share.
1.3 CLOSING. The sale and purchase of the Preferred Stock shall occur
at the offices of Jenkens & ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or such other location as the Company and the
Purchaser shall agree in writing, on August 28, 2002 at 11:00 a.m. EST (the
"Closing Date"). The delivery of the Preferred Stock shall be made to the
Purchaser against payment by wire transfer of immediately available funds to an
account designated in writing by the Company. If on the Closing Date the Company
shall fail to tender the Preferred Stock to the Purchaser as provided in this
Section 1.3, or any of the conditions specified in Section 4 hereof shall not
have been fulfilled to the Purchaser's satisfaction, at the Purchaser's
election, the Purchaser shall be relieved of all obligations under this
Agreement,
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without thereby waiving any other rights the Purchaser may have by reason of
such failure or such non-fulfillment.
1.4 USE OF PROCEEDS. The proceeds of the sale of the Preferred Stock
shall be used by the Company to pay down the Senior Indebtedness.
1.5 DEFINITIONS. Certain capitalized terms used in this Agreement are
defined in Section 12.1 hereof; references to a "Schedule" or "Exhibit" are,
unless otherwise specified, to the Schedules and Exhibits attached to this
Agreement.
SECTION 2. GENERAL REPRESENTATIONS AND WARRANTIES.
The Parent and the Company hereby jointly and severally represent and
warrant to the Purchaser as follows:
2.1 CAPITAL STOCK; SUBSIDIARIES.
(a) The authorized Capital Stock of the Company consists of
(i) 2,000,000 shares of common stock, no par value, 1,000 of which are issued
and outstanding and held by the Parent and (ii) 2,000,000 shares of preferred
stock, no par value, none of which are issued or outstanding immediately prior
to the execution of this Agreement. All such outstanding shares have been
validly issued and are fully paid, non-assessable shares, and free of preemptive
rights. No shares of the Capital Stock of the Company are held on the date
hereof in the treasury of the Company. The issuance and sale of all such shares
have been in full compliance with all applicable federal and state securities
laws. There are no subscriptions, options, warrants or calls relating to the
issuance by the Company of any shares of its Capital Stock, including any right
of conversion or exchange under any outstanding security or other instrument. To
the Company's knowledge, there are no voting trusts or other agreements or
understandings with respect to the voting of the Capital Stock of the Company.
The shares of the Company's common stock are vested with all of the voting
rights in the Company. The Company is not subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of its
Capital Stock or any security convertible into or exchangeable for any of its
Capital Stock.
(b) The Company's sole Subsidiary is Sparkle Insurance
Company, a corporation organized under the laws of the Turks and Caicos, British
West Indies. All of the outstanding shares of Capital Stock of the Subsidiary
have been validly issued and are fully paid and nonassessable and are owned
beneficially and of record by the Company, free and clear of any Liens other
than Liens in favor of, or for the benefit of, the Senior Lenders.
2.2 ORGANIZATION AND AUTHORITY. The Company is (i) a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, (ii) has all requisite power and authority (corporate and other) to
own and operate its properties, to conduct its business as currently conducted
and as currently proposed to be conducted, to offer, issue, sell and deliver the
Preferred Stock, to enter into this Agreement and the Other Agreements and to
perform its obligations under this Agreement, the Articles and the Other
Agreements and (iii) has duly qualified to do business as a foreign corporation
and is in good standing in every
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jurisdiction in which the failure to so qualify would materially and adversely
effect the business, earnings, prospects, properties or condition (financial or
other) of the Company and its Subsidiary, taken as a whole (an "MAE").
2.3 FINANCIAL STATEMENTS AND OTHER INFORMATION; FINANCIAL CONDITION.
The Company has delivered to the Purchaser (i) consolidated financial statements
of the Parent, the Company and the Subsidiary for the Fiscal Years ended July
31, 2000 and 2001, including consolidated audited balance sheets, consolidated
statements of income, consolidated statements of shareholders equity, and
consolidated statements of cash flows, together with the opinions thereon of
Ernst & Young LLP, independent certified public accountants, and (ii) unaudited
balance sheets, consolidated statements of income, consolidated statements of
shareholders equity, and consolidated statements of cash flows financial
statements of the Parent, the Company and the Subsidiary as of and for each
Fiscal Quarter since July 31, 2001 (such financial statements, collectively, are
hereinafter referred to as the "Financial Statements"). The Financial Statements
have been prepared in accordance with GAAP applied on a consistent basis during
the respective periods, are correct and complete copies thereof, and fairly
present in all material respects the financial position of the Parent, the
Company and the Subsidiary as of the respective dates of the balance sheets
included therein and the results of operations of the Parent, the Company and
the Subsidiary for the respective periods covered by the statements of income
and cash flows, provided, however, that the unaudited financial statements
referred to in the foregoing clause (ii) lack footnotes and other presentation
items and are subject to normal year-end adjustments in accordance with the
ordinary course of business consistent with past practice, none of which would,
either individually or in the aggregate, be material to the Parent, the Company
and the Subsidiary, taken as a whole. Except as set forth in the Financial
Statements, neither the Parent, the Company nor the Subsidiary has any material
obligation or liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or not due) which, either individually
or in the aggregate, would be material to the Parent, the Company or the
Subsidiary that is not disclosed by the Financial Statements other than
liabilities incurred since July 31, 2002 in the ordinary course of business
which, either individually or in the aggregate, are not material to the
financial condition of the Parent, the Company or the Subsidiary or the conduct
of their business. Neither the Parent nor the Company knows of any reasonable
basis for the assertion against the Parent, the Company or the Subsidiary of any
liability or obligation of any nature whatsoever that would be required by GAAP
to be disclosed in the Financial Statements that is not disclosed.
2.4 CHANGES. Since July 31, 2002, there has not been any change in the
assets, liabilities, business, earnings, properties or condition (financial or
other) of the Parent, the Company and the Subsidiary, taken as a whole, from
that reflected in the Financial Statements, except changes in the ordinary
course of business consistent with past practice that have not had and are not
reasonably likely to have an MAE.
2.5 LICENSES, REGISTRATIONS, ETC. The Company and its Subsidiary own or
possess, and hold free from burdensome restrictions or known conflicts with the
rights of others, all licenses, registrations, franchises, permits, copyrights,
trademarks, service marks, trade names and patents and all rights with respect
to the foregoing, necessary for the conduct of their respective businesses as
now conducted, and are in compliance with the terms and conditions, if
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any, of all such franchises, licenses, registrations, permits, rights of way,
easements, consents, copyrights, trademarks, service marks, trade names and
patents and the terms and conditions of any agreements relating thereto, except
for such conflicts or noncompliance which, either individually or in the
aggregate, are not reasonably expected to have an MAE.
2.6 TITLE TO PROPERTIES; LEASES. The Company and its Subsidiary each
has good and valid title to the properties reflected as being owned by it on the
Financial Statements, as well as to the properties acquired since the date of
the most recent Financial Statement (except property disposed of since said date
in the ordinary course of business) and none of such properties is subject to
any Lien other than Permitted Liens. The Company and its Subsidiary each has the
right to, and does, enjoy peaceful and undisturbed possession under all leases
under which it is leasing property. All such leases are valid, subsisting and in
full force and effect, and none of such leases is in default.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the Company nor its
Subsidiary is (a) in violation of any term of its charter or by-laws, or (b) in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in, and is not otherwise in default under, (i)
any evidence of Indebtedness or any instrument or agreement under or pursuant to
which any evidence of Indebtedness has been issued the consequences of which
default would be to permit the holder or holders of such Indebtedness, or any
trustee or agent acting on behalf of such holder or holders, to accelerate the
maturity of any such Indebtedness or to require that any such Indebtedness be
prepaid prior to its stated maturity or (ii) any other instrument or agreement
to which it is a party or by which it is bound or any of its properties is
affected, the consequences of which default would reasonably be expected to have
an MAE. As of the date hereof, neither the Company nor its Subsidiary is in
default with respect to, or has failed (which failure has not been remedied) to
make at the time contemplated, payment of any dividends or any mandatory
redemption payments of any preferred stock or any principal of, or premium or
interest on, any Indebtedness for Money Borrowed. Neither the execution,
delivery or performance of this Agreement and the Other Agreements nor the
offer, issuance, sale, delivery or performance of the Preferred Stock does or
will (A) conflict with or violate the charter or by-laws of the Company or its
Subsidiary, (B) conflict with or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation of any Lien on any of the properties or assets of the Company or its
Subsidiary pursuant to the terms of, any evidence of Indebtedness, or any
instrument or agreement under or pursuant to which any evidence of Indebtedness
has been issued, or any other instrument or agreement referred to in this
Section 2.7 to which the Company or its Subsidiary is a party or by which they
are bound or by which any of their properties are affected (the consequences of
which could reasonably be expected to have an MAE), or (C) require the consent
of, or other action by, any trustee, shareholder or creditor of, any lessor to
or any investor in, the Company or its Subsidiary, other than for the consents
and actions described on Schedule 2.7, all of which have been obtained or taken
or none of which would have an MAE.
2.8 NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor its
Subsidiary is a party to or bound by (nor are any of their respective properties
affected by) any contract or agreement, or subject to any order, writ,
injunction or decree or other action of any court or any
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governmental department, commission, bureau, board or other administrative
agency or official, or any charter or other corporate or contractual
restriction, which has an MAE. Neither the Company nor its Subsidiary is a party
to any material contract or agreement with any Affiliate, which contract or
agreement is on terms that are less favorable to it than would obtain in a
comparable arm's-length transaction with a Person other than an Affiliate.
2.9 COMPLIANCE WITH LAW, ETC. Each of the Company and its Subsidiary is
in compliance with all statutes, laws and ordinances and all governmental rules
and regulations to which it is subject, the violation of which, either
individually or in the aggregate, would reasonably be expected to have an MAE.
Neither the execution, delivery or performance of this Agreement and the Other
Agreements nor the offer, issuance, sale, delivery or performance of the
Preferred Stock does or will cause the Company or its Subsidiary to be in
violation of any law or ordinance, writ, injunction or decree or other action of
any court or governmental authority or arbitrator or any order, rule or
regulation, of any federal or state agency, or to the Company's and its
Subsidiary's knowledge, of any county, municipal or other governmental or public
authority or agency.
2.10 COMPLIANCE WITH ERISA.
(a) The term "Plan" shall mean each "employee benefit plan" as
defined in Section 3(3) of ERISA sponsored by the Company or its Subsidiary.
Neither the Company, its Subsidiary or any ERISA Affiliates maintain any
employee benefit plan subject to Title IV of ERISA (a "Title IV Plan").
(b) The term "party in interest" shall have the meaning
assigned thereto in Section 3(14) of ERISA; the term "prohibited transaction"
shall have the meaning assigned thereto in Section 4975 of the Code and Section
406 of ERISA; the term "accumulated funding deficiency" shall have the meaning
assigned thereto in Section 412 of the Code and Section 302 of ERISA.
(c) Except as set forth in Schedule 2.10, no Plan holds any
assets invested in "employer securities" within the meaning of Section 407(d) of
ERISA.
(d) The Company and its Subsidiary have not engaged in a
prohibited transaction that would subject the Company or its Subsidiary to a
material tax or penalty which would be reasonably expected to have an MAE.
(e) Provided that the representations and warranties of the
Purchaser set forth in Section 3.5 are true and accurate in all respects,
neither the execution and delivery of this Agreement and the Other Agreements
nor the offer, issuance, sale and delivery of the Preferred Stock by the Company
or the consummation of the transactions contemplated hereby and thereby will
involve or constitute a prohibited transaction.
(f) Except as required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or any similar state statutes, no Plan
provides medical, life insurance or
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other welfare benefits to or with respect to former employees or independent
contractors of the Company or any ERISA Affiliate.
(g) Except as would not reasonably be expected to have an MAE:
each Plan is in substantial compliance with ERISA, the Code and applicable law;
no Title IV Plan has an accumulated funding deficiency, whether or not waived;
no proceedings have been instituted by the PBGC nor has any other Person taken
action to terminate any Title IV; neither the Company, its Subsidiary nor any
ERISA Affiliate has incurred any material unfunded liability to or on account of
a Title IV Plan; and no condition exists which could reasonably be expected to
present a material risk to the Company or any ERISA Affiliate of incurring such
a liability. None of the Plans is, nor has the Company, its Subsidiary or any
ERISA Affiliate within the last six years been obligated to make any
contributions to, a "multi-employer plan" within the meaning of Section 4001 of
ERISA.
2.11 PENDING LITIGATION, ETC. There is no action at law, suit in equity
or other proceeding or investigation (whether or not purportedly on behalf of
the Company or its Subsidiary) in any court or by or before any other
governmental or public authority or agency, or any arbitrator or arbitration
panel pending or, to the best knowledge of the Company, threatened in writing
against the Company, its Subsidiary or any of their respective properties that,
either individually or in the aggregate, (a) would have an MAE, or (b) questions
the validity or enforceability of this Agreement, the Articles or the Other
Agreements other than, in each case, as set forth on Schedule 2.11. Neither the
Company nor its Subsidiary is in default with respect to any order, writ,
injunction, judgment or decree of any court or other governmental or public
authority or agency or arbitrator or arbitration panel, which would have an MAE.
2.12 TAXES. All federal, state and other tax returns of the Company and
its Subsidiary required by law to be filed have been duly filed or a valid
extension for such filing has been obtained, and all federal, state and other
taxes, assessments, fees and other governmental charges upon the Company and its
Subsidiary or upon any of their respective properties, incomes or assets that
are due and payable have been paid, except where such failure to file or pay
would have an MAE. No extensions of the time for the assessment of deficiencies
have been granted by the Company or its Subsidiary. The Company does not know of
any proposed, asserted, or assessed tax deficiency against it or its Subsidiary
that would be material to the condition (financial or other) of the Company and
its Subsidiary, taken as a whole. Neither the Company nor its Subsidiary is a
party to, bound by or obligated under any tax sharing or similar agreement.
There are no Liens on any properties or assets of the Company or its Subsidiary
imposed or arising as a result of the delinquent payment or the non-payment of
any tax, assessment, fee or other governmental charge which is due and owing,
except Liens for taxes, assessments or other governmental charges either not
delinquent, or the validity of which is being contested in good faith by
appropriate proceedings and which are adequately reserved for in accordance with
GAAP. The charges, accruals and reserves, if any, on the books of the Company
and its Subsidiary in respect of federal, state and local corporate franchise
and income taxes for all fiscal periods to date are adequate in accordance with
generally accepted accounting principles, and the Company knows of no additional
unpaid assessments for such periods or of any basis therefor. There are no
applicable taxes or other governmental charges or governmental fees payable by
the
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Company or its Subsidiary in connection with the execution and delivery of this
Agreement and the Other Agreements or the offer, issuance, sale and delivery of
the Preferred Stock.
2.13 INVESTMENT COMPANY ACT. The Company is not an "investment company"
or an "affiliated person" of an "investment company" or a company "controlled"
by an "investment company" as such terms are defined in the Investment Company
Act of 1940, as amended. Neither the Company nor its Subsidiary is an
"investment adviser" or an "affiliated person" of an "investment adviser" as
such terms are defined in the Investment Advisers Act of 1940, as amended.
2.14 OUTSTANDING SECURITIES. All securities of the Company and its
Subsidiary have been offered, issued, sold and delivered in compliance with, or
pursuant to exemptions from, all federal and state laws, and the rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities.
2.15 CORPORATE PROCEEDINGS. The Company has taken all corporate action
necessary to be taken by it to authorize the execution and delivery of this
Agreement and the Other Agreements and the offer, issuance, sale and delivery of
the Preferred Stock and the performance of all obligations to be performed by it
hereunder and thereunder.
2.16 CONSENT, ETC. No prior consent, approval or authorization of,
registration, qualification, designation, declaration or filing with, or notice
to (in each case that has not been obtained or made, as appropriate) (a) any
federal, state or local governmental or public authority or agency, or (b) any
shareholder, creditor, lessor or other non-governmental Person, is or was
required for the valid execution, delivery and performance of this Agreement,
the Other Agreements or the valid offer, issuance, sale, delivery and
performance of the Preferred Stock. The Company has obtained all consents,
approvals or authorizations of, made all declarations or filings with, or given
all notices to, all federal, state or local governmental or public authorities
or agencies which are necessary for the continued conduct by the Company of its
business as now conducted or as proposed to be conducted and which the failure
to so obtain, make or give would have an MAE.
2.17 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) The Company and its Subsidiary each is, and will continue
to be, in compliance with all applicable federal, state and local environmental
laws, regulations and ordinances governing its business, products, properties or
assets with respect to all discharges into the ground and surface water,
emissions into the ambient air and generation, accumulation, storage, treatment,
transportation, labeling or disposal of waste materials or processed by-products
for which failure to comply could have an MAE, and neither the Company nor its
Subsidiary is liable for any penalties, fines or forfeitures for failure to
comply with any of the foregoing, the failure to comply with which would
reasonably be expected to have an MAE. All licenses, permits or registrations
required for the business of the Company and its Subsidiary, as presently
conducted and proposed to be conducted, under any federal, state or local
environmental laws, regulations or ordinances have been secured (or application
for, or
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application for transfer thereof, have been made) and each of the Company and
its Subsidiary is in substantial compliance therewith.
(b) No release, emission, or discharge into the environment of
hazardous substances, as defined under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, or hazardous waste as defined under
the Resource Conservation and Recovery Act, or air pollutants as defined under
the Clean Air Act, or pollutants as defined under the Clean Water Act, is
presently occurring or has in the past occurred on or from any property owned or
leased by the Company or its Subsidiary in excess of federal, state or local
permitted releases or reportable quantities, or other concentrations, standards
or limitations under the foregoing laws or any state law governing the
protection of health and the environment or under any other federal, state, or
local laws or regulations.
(c) Neither the Company nor its Subsidiary has ever, except in
accordance with applicable laws or regulations, (i) owned, occupied or operated
a site or structure on or in which (to the Company's knowledge) any hazardous
substance was or is stored, transported or disposed of, (ii) transported or
arranged for the transportation of any hazardous substance or (iii) caused or
been held legally responsible for any release or threatened release of any
hazardous substance, or received notification from any federal, state or other
governmental authority of any release or threatened release, or that it may be
required to pay the costs or expenses incurred in connection with any efforts to
mitigate the environmental impact of any release or threatened release of any
hazardous substance from any site or structure owned, occupied or operated by
the Company or its Subsidiary.
2.18 FULL DISCLOSURE. Neither this Agreement nor any Financial
Statement referred to in Section 2.3 hereof contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.
2.19 VALIDITY OF AGREEMENTS AND PREFERRED STOCK. This Agreement and the
Other Agreements have been duly executed and delivered by the Parent and the
Company and constitute the legal, valid and binding obligation of the Parent and
the Company, enforceable against them in accordance with their terms, subject in
each case to applicable principles of equity and bankruptcy and insolvency law.
Upon receipt by the Company of payment for the Preferred Stock as provided in
this Agreement, the Preferred Stock will have been duly issued by the Company
and will constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms, subject in each
case to applicable principles of equity and bankruptcy and insolvency law.
2.20 LABOR RELATIONS. Except as disclosed on Schedule 2.20, neither the
Company nor its Subsidiary is engaged in any unfair labor practice, unjust
dismissals or employment discrimination that would have an MAE. There is (a) no
charge or complaint pending or, to the Company's knowledge, threatened against
the Company or its Subsidiary before the National Labor Relations Board or
before the Equal Employment Opportunity Commission or any federal, state, local
or foreign agency or court responsible for the prevention of unlawful employment
practices or breaches of employment contracts that would have an MAE, (b) no
grievance or
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arbitration proceedings pending, or to the Company's knowledge, threatened
against the Company or its Subsidiary, (c) no strike, labor dispute, slowdown or
stoppage pending or, to the Company's knowledge, threatened against the Company
or its Subsidiary, (d) no union representation question existing with respect to
the employees of the Company or its Subsidiary and no union organizing
activities are taking place with respect to any thereof, and (e) no collective
bargaining agreement currently in existence to which the Company or its
Subsidiary is a party.
2.21 BROKER'S OR FINDER'S COMMISSIONS. Except as disclosed on Schedule
2.22, no broker's or finder's placement fee or commission will be payable by the
Company with respect to the issuance and delivery of the Preferred Stock or any
of the transactions contemplated hereby. The Company will hold the Purchaser
harmless from any claim, demand or liability for broker's or finder's placement
fees or commissions (other than any such fees or commissions payable by or to
the Purchaser), whether or not payable by the Company, alleged to have been
incurred in connection with this transaction.
2.22 INSURANCE. The Company and its Subsidiary have, with respect to
the properties and business of the Company and its Subsidiary, with financially
sound and reputable insurers, insurance against such casualties and
contingencies of such types and in such amounts as is customary in the case of
corporations engaged in the same or a similar business or having similar
properties similarly situated.
2.23 OFFEREES. The Company represents that neither the Company nor any
Person acting as its agent, broker, dealer or otherwise in connection with the
offering or sale of the Preferred Stock has, either directly or through any
agent, offered any of the Preferred Stock or any similar securities for sale to,
or solicited any offers to buy any thereof from, or otherwise approached or
negotiated in respect thereof with, any Person or Persons other than the
Purchaser. The Company agrees that neither it nor any agent will on behalf of
it, sell or offer any of the Preferred Stock or any similar securities to, or
solicit offers to buy any thereof from, or otherwise approach or negotiate in
respect thereof with, any other Person or Persons whomsoever, or take any other
action, so as to bring the issuance and sale of the Preferred Stock within the
provisions of Section 5 of the Securities Act or the provisions of any state
securities law requiring registration of securities, notification of the
issuance and sale thereof or confirmation of the availability of any exemption
from registration thereof.
SECTION 3. REPRESENTATIONS OF THE PURCHASER.
The Purchaser represents and warrants to the Company as follows:
3.1 EXISTENCE. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
3.2 AUTHORITY. The Purchaser has the right and corporate power and
authority to enter into, execute, deliver and perform its obligations under this
Agreement and the Other Agreements, and its officers or agents executing and
delivering this Agreement and the Other Agreements are duly authorized to do so.
This Agreement and the Other Agreements have been
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duly and validly executed and delivered and constitute the legal, valid and
binding obligation of the Purchaser, enforceable in accordance with their
respective terms.
3.3 INVESTOR STATUS. The Purchaser is an "accredited investor" within
the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act
of 1933, as amended (the "Securities Act"). It understands and acknowledges that
the Preferred Stock has not been registered under the Securities Act or any
other applicable securities law, is being offered in transactions not requiring
registration under the Securities Act or any other securities laws, and may not
be offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act and any other applicable
securities law, pursuant to an exemption therefrom or in a transaction not
subject thereto and in each case in compliance with the conditions for transfer
set forth in Section 3.4.
3.4 INVESTMENT FOR OWN ACCOUNT; RESTRICTION ON TRANSFER. The Purchaser
is purchasing the Preferred Stock for its own account for investment, and not
with a view to, or for offer or sale in connection with, any distribution
thereof in violation of the Securities Act or any other securities laws. The
Purchaser agrees, and each Person to whom the Preferred Stock is offered, sold,
assigned, transferred, pledged, encumbered or otherwise disposed of
(collectively, "transferred"), in whole or in part, will agree, to transfer such
Preferred Stock only to the Purchaser, or a Subsidiary of the Purchaser which is
an "accredited investor" within the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act, that is acquiring such Preferred Stock (or
any interest therein) for its own account and not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act
or any other securities law, or pursuant to any other available exemption from
the registration requirements of the Securities Act and the requirements of any
other securities laws.
3.5 NO ERISA PLAN ASSETS. The Preferred Stock will not be purchased
with the assets of any pension plan, profit-sharing plan, retirement plan,
individual retirement account, individual retirement annuity, employee benefit
plan or other plan or arrangement subject to Title I of ERISA or Code Section
4975.
SECTION 4. CONDITIONS OF OBLIGATION TO PURCHASE PREFERRED STOCK.
The Purchaser's obligation to purchase and pay for the Preferred Stock
hereunder on the Closing Date shall be subject to the satisfaction, prior to or
concurrently with such purchase and payment, of the following conditions unless
otherwise waived by the Purchaser in writing:
4.1 PURCHASE AGREEMENT. The Company shall have executed and delivered
this Agreement to the Purchaser.
4.2 PREFERRED STOCK CERTIFICATE. A certificate representing the
Preferred Stock, issued in the name of the Purchaser shall have been duly
executed and delivered by the Company.
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4.3 PERFORMANCE OF OBLIGATIONS. The Company shall have performed all of
its obligations to be performed hereunder prior to or on the Closing Date, and
the Purchaser shall have received an Officer's Certificate from the Company,
dated the Closing Date, to such effect.
4.4 REPRESENTATIONS TRUE. The representations and warranties of the
Company contained in Section 2 hereof shall be true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date.
4.5 SENIOR LOAN AGREEMENT. The Purchaser shall have received an
Officer's Certificate of the Company attaching a fully executed copy of the
Senior Loan Agreement and certifying that such document is a true and complete
copy thereof, and that neither the offer, issuance, sale or delivery of the
Preferred Stock by the Company nor the execution, delivery or performance of
this Agreement or the Other Agreements does or will conflict with or result in a
breach of, or constitute a default under, such Senior Loan Agreement.
4.6 SUBORDINATION AGREEMENT. The Purchaser shall have received an
Officer's Certificate of the Company attaching a fully executed copy of the
Subordination Agreement and certifying that such document is a true and complete
copy thereof, and that neither the offer, issuance, sale or delivery of the
Preferred Stock by the Company nor the execution, delivery or performance of
this Agreement or the Other Agreements does or will conflict with or result in a
breach of, or constitute a default under, such Subordination Agreement.
4.7 LEGALITY. The Preferred Stock shall qualify as a legal investment
for the Purchaser under all applicable laws, and the Purchaser's purchase
thereof shall not cause the Purchaser to be subject to any onerous or materially
burdensome legal requirement or penalty.
4.8 PROCEEDINGS, INSTRUMENTS, ETC. All proceedings and actions taken on
or prior to the Closing Date in connection with the transactions contemplated by
this Agreement, and all instruments incident thereto, shall be in form and
substance reasonably satisfactory to the Purchaser and its counsel, and the
Purchaser and its counsel shall have received copies of all documents that they
may reasonably request in connection with such proceedings, actions and
transactions (including, without limitation, copies of court documents,
certifications and evidence of the correctness of the representations and
warranties contained herein and certifications and evidence of the compliance
with the terms and the fulfillment of the conditions of this Agreement, in form
and substance reasonably satisfactory to the Purchaser and its counsel).
SECTION 5. EXPENSES.
The Company agrees to indemnify the Purchaser from and hold it harmless
against any documentary taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery by the Company or any other
Person of this Agreement, the Preferred Stock, the Other Agreements, and any
documents executed in connection therewith.
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SECTION 6. CERTAIN SPECIAL RIGHTS.
6.1 HOME OFFICE PAYMENT. Subject to the terms of the Articles, the
Company will punctually pay in immediately available funds by 12:00 noon, New
York, New York time on the date payment is due all amounts payable to the
Purchaser with respect to any Preferred Stock held by the Purchaser or its
nominee (without the necessity for any presentation or surrender thereof or any
notation of such payment thereon) in the manner and at the address for such
purpose specified below the Purchaser's name in Schedule 6.1 hereto, or at any
other address as the Purchaser may direct in writing; provided, however, that
the information set forth with respect to the Purchaser in Schedule 6.1 hereto
shall be deemed notice sufficient to permit payment in accordance with this
Section 6.1. The Purchaser agrees that if it sells, assigns or transfers any
Preferred Stock, the Purchaser shall, prior to any such sale, assignment or
transfer, make a proper notation thereon of the amounts paid with respect to
such Preferred Stock as of the date of such sale, assignment or transfer.
6.2 DELIVERY EXPENSES. If the Purchaser surrenders any Preferred Stock
pursuant to this Agreement, or if the Company issues any new certificate
representing Preferred Stock pursuant to this Agreement, the Company shall pay
all reasonable costs and expenses of delivery of the surrendered Preferred Stock
and any certificate or certificates issued in exchange or replacement for, or on
registration of transfer of, the surrendered Preferred Stock or any such new
certificate, as the case may be, in each case insured to the Purchaser's
reasonable satisfaction.
6.3 ISSUANCE TAXES. The Company will pay all taxes in connection with
the execution and delivery of this Agreement and the Other Agreements and the
issuance and sale of the Preferred Stock, and any modification of this Agreement
or the Preferred Stock, and will save the Purchaser and any subsequent holder of
the Preferred Stock harmless, without limitation as to time, against any and all
liabilities (including, without limitation, any interest or penalty for
nonpayment or delay in payment, or any income taxes paid by the Purchaser in
connection with any reimbursement by the Company) with respect to all such taxes
(other than income taxes due resulting from a transfer of the Preferred Stock).
The obligations of the Company under this Section 6.3 shall survive the
termination of this Agreement.
SECTION 7. REGISTRATION, EXCHANGE AND REPLACEMENT OF PREFERRED STOCK
CERTIFICATES.
7.1 PREFERRED STOCK REGISTER. The Company shall cause to be kept at its
principal office a register for the registration and transfer of the Preferred
Stock. The name and address of the Purchaser, the transfer thereof and the name
and address of any transferee of the Preferred Stock shall be recorded in such
register.
7.2 ISSUANCE OF NEW PREFERRED STOCK CERTIFICATES UPON EXCHANGE OR
TRANSFER. Upon surrender for exchange or registration of transfer of shares of
Preferred Stock to a transferee at the office of the Company designated for
notices in accordance with Section 13.1 hereof, the Company shall execute and
deliver, at its expense, one or more new certificates of any authorized
denomination requested by the Purchaser of the surrendered Preferred Stock,
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each dated the date to which dividends have been paid on the Preferred Stock so
surrendered (or, if no dividends have been paid, the date of the surrendered
Preferred Stock), but in the same aggregate unpaid principal amount as the
surrendered Preferred Stock, and registered in the name of such Person or
Persons as shall be designated in writing by the Purchaser. Every share of
Preferred Stock surrendered for registration of transfer shall be duly endorsed,
or be accompanied by a written instrument of transfer duly executed, by the
Purchaser or by his attorney duly authorized in writing and the transferee.
7.3 REPLACEMENT OF PREFERRED STOCK CERTIFICATE. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of a Preferred Stock certificate and, in the case of any such loss,
theft or destruction, upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company or, in the event of
such mutilation upon surrender and cancellation of a Preferred Stock
certificate, the Company, without charge to the Purchaser, will make and deliver
a new Preferred Stock certificate of like tenor in lieu of such lost, stolen,
destroyed or mutilated Preferred Stock certificate. If any such lost, stolen or
destroyed Preferred Stock certificate is owned by the Purchaser or any other
holder whose credit is satisfactory to the Company, then the affidavit of an
authorized officer of such owner setting forth the fact of loss, theft or
destruction and of its ownership of the Preferred Stock certificate at the time
of such loss, theft or destruction shall be accepted as satisfactory evidence
thereof, and no further indemnity shall be required as a condition to the
execution and delivery of a new Preferred Stock certificate, other than a
written agreement of such owner (in form reasonably satisfactory to the Company)
to indemnify the Company.
SECTION 8. CERTAIN COVENANTS OF THE COMPANY.
The Company covenants and agrees that so long as any Preferred
Stock shall remain outstanding:
8.1 CORPORATE EXISTENCE. The Company will (a) take and fulfill, or
cause to be taken and fulfilled, all actions and conditions necessary to
preserve and keep in full force and effect its existence, rights and privileges
as a corporation, and will not liquidate or dissolve, and (b) take and fulfill,
or cause to be taken and fulfilled, all actions and conditions necessary to
qualify, and to preserve and keep in full force and effect its qualification, to
do business as a foreign corporation in the jurisdictions in which the conduct
of its business or the ownership or leasing of its properties requires such
qualification unless the Board of Directors of the Company determines in good
faith that failure to so qualify would not have a MAE; provided, however, that
this Section 8.1 shall not be deemed to prohibit any transaction permitted by
Section 8.6 hereof.
8.2 GENERAL MAINTENANCE OF PROPERTIES AND BUSINESS, ETC.
(a) The Company will, and will cause its Subsidiary to,
maintain its properties and assets in normal working order and condition and
make all necessary repairs, renewals, replacements, additions, betterments and
improvements thereto, ordinary wear and tear excepted, all as in the judgment of
the Company may be necessary so that the business carried on
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in connection therewith may be properly and advantageously conducted at all
times; provided, however, that nothing in this Section 8.2 shall prevent the
Company or its Subsidiary from discontinuing the operation and maintenance of
any of its properties if such discontinuance is, in the judgment of the Company
or such Subsidiary, desirable in the conduct of its business, and if in the good
faith determination of the Board of Directors of the Company the anticipated
effect of such discontinuance is not adverse in any material respect to the
Purchaser.
(b) The Company will, and will cause its Subsidiary to,
maintain with financially sound and reputable insurers, such insurance as may be
required by law and such other insurance, to such extent and against such
hazards and liabilities, as it in good faith determines is customarily
maintained by companies similarly situated with like properties.
(c) The Company will, and will cause its Subsidiary to, keep
true and accurate books of records and accounts in which full and correct
entries will be made with respect to all of its business transactions in
accordance with sound business practices, and reflect in its financial
statements adequate accruals and appropriations to reserves, all in accordance
with generally accepted accounting principles.
(d) The Company will, and will cause its Subsidiary to, do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights and franchises, except to the extent permitted by
this Agreement and except in such cases where the Board of Directors of the
Company determines in good faith that failure to do so would not have a MAE.
(e) The Company will, and will cause its Subsidiary to, pay
prior to delinquency all taxes, assessments and governmental levies which if not
paid would have a MAE, and except as contested in good faith and by appropriate
proceedings.
8.3 COMPLIANCE WITH LAW, ETC. Neither the Company nor its Subsidiary
will (a) violate any law, ordinance, governmental rule or regulations to which
it is or may become subject, the violation of which would have a MAE; or (b)
fail to obtain or maintain any patents, trademarks, service marks, trade names,
copyrights, design patents, licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or to the conduct of
its business, except where the failure so to obtain or maintain the foregoing
would not, individually or in the aggregate, have a MAE.
8.4 PAYMENT OF TAXES AND CLAIMS. The Company and its Subsidiary each
will pay and discharge promptly when due:
(a) all taxes, assessments and governmental charges and levies
imposed upon it, its income or profits or any of its properties, before the same
shall become delinquent; and
(b) all lawful claims of materialmen, mechanics, carriers,
warehousemen, landlords and other similar Persons for labor, materials, supplies
and rentals that, if unpaid, might by law become a Lien upon any of its
property;
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provided, however, that none of the foregoing need be paid while the same is
being contested in good faith by appropriate proceedings diligently conducted so
long as adequate reserves shall have been established in accordance with
generally accepted accounting principles with respect thereto, title of the
Company or such Subsidiary, as the case may be, to the particular property shall
not be divested thereby and its right to use the particular property shall not
be materially and adversely affected thereby.
8.5 ERISA.
(a) The Company and its Subsidiary will (and with respect to
any Title IV Plan, will use reasonable best efforts to cause any ERISA Affiliate
to) continue any and all Plans in compliance with all applicable requirements of
the Code, ERISA and the rules and regulations adopted thereunder, in each case
as in effect at the time, until such Plans are terminated, and the liabilities
thereof discharged, in accordance with applicable law.
(b) Neither the Company nor any of its ERISA Affiliates will
(i) have any accumulated funding deficiency with respect to any Title IV Plan,
(ii) incur any excise tax or civil penalty under Section 4975 of the Code or
Section 502(i) of ERISA (respectively) with respect to any prohibited
transaction involving any Plan in an amount which could reasonably be expected
to have an MAE, nor (iii) become obligated to make any contributions to any
multi-employer plan (as defined in Section 2.10(g) hereof).
(c) Neither the Company nor its Subsidiary (or, solely with
respect to a Title IV Plan, any ERISA Affiliate) will permit any event or
condition to occur or exist with respect to any Plan if, as a result of such
event or condition (together with all other such events or conditions), the
Company or any ERISA Affiliate would incur or be reasonably likely to incur a
liability to a Plan or the PBGC (or any combination of the foregoing) which is
or could be materially adverse in relation to the consolidated financial
position of the Company and its Subsidiary.
8.6 MERGER; CONSOLIDATION. The Company will not merge into or
consolidate with any other Person or permit any other Person to merge into or
consolidate with it, transfer all or substantially all of its assets, or
liquidate, dissolve or otherwise transfer all if its assets unless (i) the
corporation which survives such merger or results from such consolidation (the
"surviving corporation") shall be organized under the laws of the United States
of America or a jurisdiction thereof, (ii) (A) the Company shall be the
surviving corporation or (B) the due and punctual payment of dividends, if any,
on the Preferred Stock, and the due and punctual performance and observance of
all the covenants in this Agreement, the Articles and the Other Agreements to be
performed or observed by the Company, shall be expressly assumed in writing by
the surviving corporation by an instrument reasonably satisfactory in form and
substance to the holders of at least a majority of the Preferred Stock then
outstanding, (iii) immediately after the consummation of the transaction, and
after giving effect thereto, Consolidated Tangible Net Worth of the surviving
corporation shall not be less than the Consolidated Tangible Net Worth of the
Company immediately before consummation of the transaction, and (iv) an opinion
of counsel (reasonably satisfactory in form and substance to the holders of at
least a majority of the
15
Preferred Stock then outstanding) is delivered to the Purchaser upon
consummation of the transaction to the effect that the conditions in this
Section 8.6 have been satisfied and to the effect that this Agreement, the
Preferred Stock and the instrument referred to in clause (ii) (B) of this
Section 8.6 are legal, valid and binding obligations of the surviving
corporation, enforceable against the surviving corporation in accordance with
their respective terms.
8.7 RIGHT OF FIRST REFUSAL.
(a) If the Company or the Parent wishes to sell or otherwise
transfer any shares of the Company's Capital Stock or the Parent's Capital
Stock, it shall first give written notice (an "Option Notice") to the Purchaser
setting forth the terms and conditions of any such sale or transfer (the
"Offer"). The shares of Capital Stock subject to such Offer are referred to in
this Section 8.8 as the "Offered Shares."
(b) Upon the delivery of an Option Notice by the Company or
the Parent, the Purchaser shall have the right (the "First Refusal Right") to
purchase, at the price, on the terms and subject to the conditions specified in
the Offer, all, but not less than all, of the Offered Shares covered by the
Option Notice. Within ten (10) days after the delivery of the Option Notice (the
"Exercise Period"), the Purchaser shall notify the Company or the Parent, as
applicable (the "First Refusal Notice"), whether the Purchaser intends to
exercise the First Refusal Right. Failure to deliver the First Refusal Notice
within the Exercise Period shall constitute a waiver of the First Refusal Right.
(c) If the Purchaser exercises the First Refusal Right as to
all of the Offered Shares within the Exercise Period, the Company or the Parent,
as applicable, shall have the obligation to sell the Offered Shares to the
Purchaser at the price, on the terms and subject to the conditions specified in
the Offer.
(d) If the Purchaser does not exercise the First Refusal Right
as to all of the Offered Shares within the Exercise Period, for a period of
sixty (60) days commencing immediately upon the expiration of the Exercise
Period (the "Third Party Offer Period"), the Company or the Parent, as
applicable, may offer to sell the Offered Shares to a third party on terms not
more favorable to any such third party than those contained in the Offer (the
"Third Party Offer"). If any such Third Party Offer is not consummated within
the Third Party Offer Period, the Offered Shares shall again be subject to the
restrictions set forth in this Section 8.8.
(e) The closing for any purchase of Offered Shares by the
Purchaser shall occur at such time and place as the parties shall agree. At the
closing, the Purchaser shall pay for the Offered Shares in accordance with the
terms of the Offer. The Company or the Parent, as applicable, shall deliver
certificates representing the Offered Shares, free and clear of all liens,
charges and encumbrances, and properly endorsed for transfer.
SECTION 9. PREFERENCES.
Except as otherwise provided in the Subordination Agreement, nothing
contained in this Section 9 or elsewhere in this Agreement or in the Other
Agreements is intended to or shall
16
impair, as among the Company, its creditors other than holders of the Senior
Indebtedness and the Purchaser, the obligation of the Company, which is absolute
and unconditional, to pay to the Purchaser the dividends due on the Preferred
Stock as and when the same shall become due and payable in accordance with the
Articles, or is intended to or shall affect the relative rights of the
Purchaser, the creditors of the Company other than the holders of Senior
Indebtedness and any other holder of Capital Stock, nor shall anything herein or
therein prevent the Purchaser from exercising all remedies otherwise permitted
by applicable law under this Agreement in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
Nothing contained in this Section 9 or elsewhere in this Agreement or
in the Other Agreements is intended to or shall affect the obligation of the
Company to make or prevent the Company from making dividend payments at any time
with respect to the Preferred Stock.
SECTION 10. INFORMATION TO BE FURNISHED TO THE PURCHASER.
10.1 OTHER INFORMATION. The Company will deliver to the Purchaser the
following:
(a) promptly after submission thereof to the Company, copies
of any detailed reports submitted to the Company by its independent certified
public accountants in connection with each annual or interim audit of the
accounts of the Company made by such accountants;
(b) promptly upon distribution thereof, copies of all
financial, other statements (including proxy statements and annual environmental
audits) and reports or notices, excluding borrowing notices, as the Company
shall send to any class of its shareholders (in such capacity), any of the
Senior Lenders or any holder of any of its Indebtedness;
(c) promptly and, in any event, within 30 days thereafter,
notice of the institution of any suit, action or proceeding against the Company,
which could, in the reasonable judgment of the Company, have an MAE;
(d) promptly upon becoming aware of the occurrence of any (i)
"reportable event" (within the meaning of Section 4043 of ERISA) or (ii)
prohibited transaction, that could result in a material tax or penalty on the
Company or any ERISA Affiliate in connection with any Plan, a written notice
specifying the nature thereof, what action the Company or any ERISA Affiliate is
taking or proposes to take with respect thereto and, when known, any action
taken by the Internal Revenue Service, the United States Department of Labor or
the PBGC with respect thereto;
(e) promptly after receipt of notice of the exercise of any
remedy by a secured party with respect to any of the assets or property of the
Company or its Subsidiary;
(f) promptly upon request therefor, such other data, filings
and information as the Purchaser may from time to time reasonably request; and
17
(g) promptly upon the formation or the acquisition thereof,
notice of the formation or acquisition, as the case may be, of any new
subsidiary.
10.2 CONFIDENTIALITY. The Purchaser agrees that it will keep any
information obtained by it pursuant to Section 10.1 confidential; provided,
however, that the Purchaser may disclose any such information (a) as has become
generally available to the public, (b) as may be required in any report,
statement or testimony required to be submitted to any municipal, state or
Federal regulatory body having or claiming to have jurisdiction over it or to
the National Association of Insurance Commissioners, The Nasdaq Stock Market or
similar organizations or their successors, (c) as may be required in response to
any summons or subpoena or in connection with any litigation, (d) to the extent
that the Purchaser believes it appropriate in order to comply with any law,
order, regulation or ruling applicable to it, (e) subject to Section 13.3
hereof, to the prospective transferee in connection with any contemplated
transfer of any of the Preferred Stock; and (f) to the Senior Lenders.
SECTION 11. INTERPRETATION OF AGREEMENT.
11.1 DEFINITIONS. Except as the context shall otherwise require, the
following terms shall have the following meanings for all purposes of this
Agreement (the definitions to be applicable to both the singular and the plural
form of the terms defined, where either such form is used in this Agreement):
The term "Administrative Agent" shall mean the agent for the
Senior Lenders under the Designated Senior Indebtedness.
The term "Affiliate," with respect to any Person (hereinafter
"such Person"), shall mean any other Person (a) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, such Person or another Affiliate of such Person, (b) which
beneficially owns or holds 10% or more of the shares of any class of the Voting
Stock of such Person, or (c) 10% or more of the shares of any class of Voting
Stock of which is beneficially owned or held by such Person or any Affiliate of
such Person. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Stock, by contract or otherwise.
The term "Affiliate," when used herein without reference to any Person, shall
mean an Affiliate of the Company.
The term "Articles" shall have the meaning set forth in
Section 1.1 hereof.
The term "Board Of Directors" when used herein without
reference to any particular Person shall mean the Board of Directors of the
Company.
The term "Business Day" shall mean any day on which commercial
banks are not authorized or required to close in San Francisco, California and
Atlanta, Georgia.
The term "Capital Lease" shall mean any lease that is required
to be capitalized on a balance sheet of the lessee in accordance with generally
accepted accounting principles.
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The term "Capital Stock" of any Person (and when used herein
and without reference to any particular Person shall mean the Capital Stock of
the Company) means any and all shares, interests, participations or other
equivalents (however designated) of corporate stock or any other equity interest
of such Person. Indebtedness that is convertible into equity securities shall
not be deemed to constitute Capital Stock.
The term "Closing Date" shall have the meaning set forth in
Section 1.4 hereof.
The term "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
The term "Company" shall mean Crescent Jewelers, a California
corporation.
The term "Designated Senior Indebtedness" shall mean
Indebtedness consisting of (i) revolving credit or other bank loans incurred by
the Company for general working capital purposes and (ii) the Indebtedness and
other amounts owing under the Senior Loan Agreement including any amendments,
renewals, modifications, extensions, increases, substitutions or replacements of
or under the Senior Loan Agreement.
The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
The term "ERISA Affiliate" shall mean any Person that is under
"common control" with the Company within the meaning of Section 4001(b) of
ERISA.
The term "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time.
The term "Financial Statements" shall have the meaning set
forth in Section 2.3 hereof.
The term "Fiscal Quarter" shall mean each of the four
consecutive quarterly periods collectively forming a Fiscal Year.
The term "Fiscal Year" shall mean any period of four
consecutive quarters ending on the closest Saturday to July 31 of each year.
The term "generally accepted accounting principles" or "GAAP"
shall mean, as of the date of any determination with respect thereto, United
States generally accepted accounting principles consistently applied and
maintained throughout the periods indicated.
The term "Indebtedness," with respect to any Person, shall
mean all items (other than Capital Stock, capital surplus, retained earnings and
deferred credits) which, in accordance with GAAP, would be included in
determining total liabilities as shown on the liability side of a balance sheet
as at the date on which indebtedness is to be determined. The term
"Indebtedness"
19
shall also include, whether or not so reflected, (a) indebtedness, obligations
and liabilities secured by any Lien on property of such Person whether or not
the indebtedness secured thereby shall have been assumed by such Person, (b) all
obligations in respect of Capital Leases and (c) all guaranties.
The term "Indebtedness for Money Borrowed," with respect to
any Person, shall mean and include the aggregate amount of, without duplication:
(a) all obligations of such Person for borrowed money; (b) all obligations of
such Person evidenced by bonds, debentures, notes, or other similar instruments;
(c) all obligations of such Person under Capital Leases; (d) all obligations or
liabilities of others secured by a Lien on any asset owned by such Person,
irrespective of whether such obligation or liability is assumed, to the extent
of the lesser of such obligation or liability or the fair market value of such
asset; (e) all Indebtedness for property or services acquired by such Person,
except accounts payable and accrued liabilities arising in the ordinary course
of business that are not overdue by more than 90 days or that are being
contested in good faith; and (f) any guarantee of Indebtedness described in any
of clauses (a) through (f) above, including obligations in respect of letters of
credit.
The term "Lien" shall mean any interest in property securing
an obligation owed to, or a claim by, any Person other than the owner of the
property, whether such interest shall be based on the common law, statute or
contract, whether or not such interest shall be recorded or perfected and
whether or not such interest shall be contingent upon the occurrence of some
future event or events or the existence of some future circumstance or
circumstances, and including the lien or security interest arising from a
mortgage, encumbrance, pledge, adverse claim or charge, conditional sale or
trust receipt, or from a lease, consignment or bailment for security purposes.
The term "Lien" shall also include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting property. For the purposes of this
Agreement, a Person shall be deemed to be the owner of any property that such
Person shall have acquired or shall hold subject to a conditional sale agreement
or other arrangement (including a leasing arrangement) pursuant to which title
to the property shall have been retained by or vested in some other Person for
security purposes.
The term "MAE" shall have the meaning set forth in Section 2.2
hereof.
The term "Note" shall mean the Company's Senior Subordinated
Note due August 28, 2007, issued in an aggregate principal amount of $35,000,000
pursuant to the Note Purchase Agreement, dated of even date herewith, between
the Company, the Parent and the Purchaser.
The term "Officer's Certificate" shall mean a certificate
executed on behalf of a corporation by any of its Chief Executive Officer,
President, Vice President of Finance or Chief Financial Officer.
The term "Other Agreements" means any and all other
agreements, instruments and documents (including, without limitation, notes,
guarantees, powers of attorney, consents, assignments, contracts, notices,
subordination agreements and all other agreements or
20
instruments), and all renewals, modifications and extensions thereof, whether
heretofore, now or hereafter executed by or on behalf of the Company and
delivered to and for the benefit of the Purchaser with respect to this Agreement
or any of the transactions contemplated by this Agreement.
The term "Parent" shall mean Crescent Jewelers, Inc., a
Delaware corporation and the parent company of the Company.
The term "PBGC" shall mean the Pension Benefit Guaranty
Corporation or any successor thereof.
The term "Permitted Liens" shall mean (i) statutory liens of
landlords, carriers, warehousemen, processors, mechanics, materialmen or
suppliers incurred in the ordinary course of business and securing amounts not
yet due or declared to be due by the claimant thereunder, (ii) liens or security
interests in favor of the Purchaser (iii) liens or security interests in favor
of the Administrative Agent, for the benefit of Administrative Agent and Senior
Lenders, (iv) zoning restrictions and easements, licenses, covenants and other
restrictions affecting the use of real property that do not individually or in
the aggregate have a material adverse effect on the Company's ability to use
such real property for its intended purpose in connection with Company's
business, and (v) liens specifically permitted by the Purchaser in writing.
The term "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint stock company, trust, estate,
unincorporated organization or government (or any agency or political
subdivision thereof).
The term "Preferred Stock" shall mean the Company's Series A
Preferred Stock as further described in the Articles issued and sold pursuant to
the terms of this Agreement.
The term "Purchase Price" shall have the meaning set forth in
Section 1.3 hereof.
The term "Securities Act" shall mean the Securities Act of
1933, as amended from time to time.
The term "Seller Take-Back Paper" shall mean any Indebtedness
of the Company incurred in connection with the acquisition of any property,
which Indebtedness is owed to the Person or any Affiliate thereof from which
such property was acquired.
The term "Senior Lenders" shall mean the lenders as defined in
the Senior Loan Agreement and/or the lenders under any Designated Senior
Indebtedness.
The term "Senior Loan Agreement" means the Credit Agreement,
dated August 28, 2002, by and between the Company, the Parent and certain of
their subsidiaries, the lenders named therein, Bank of America, N.A., as
administrative agent, and The CTI Group/Business Credit, Inc., as syndication
agent and all documents and instruments executed and delivered pursuant thereto
in connection with the loans and advances made thereunder or contemplated
thereby, and all amendments, renewals, modifications, extensions, increases,
substitutions or
21
replacements of or to such agreements, documents and instruments whether with
the same or different lenders or in different amounts or under different terms.
The term "Senior Indebtedness" shall mean, as of any date, the
principal of, and any accrued and unpaid interest on, Designated Senior
Indebtedness; provided, however, that "Senior Indebtedness" shall not include:
(a) any Indebtedness if the terms of the instrument creating or evidencing such
Indebtedness provides that such Indebtedness is not senior in right of payment
to the Note, including without limitation, all Indebtedness, accrued interest
and other amounts owing under or in respect of the Note; (b) any Indebtedness of
the Company to an Affiliate thereof (unless such Indebtedness is Designated
Senior Indebtedness); (c) any Indebtedness consisting of accounts payable or
accrued liabilities arising in the ordinary course of business; and (d) Seller
Take-Back Paper.
The term "Senior Subordinated Obligations" means and includes
any and all Indebtedness and/or liabilities of the Company to the Purchaser of
every kind, nature and description, direct or indirect, secured or unsecured,
joint, several, joint and several, absolute or contingent, due or to become due,
now existing or hereafter arising, under this Agreement or any Other Agreement
(regardless of how such Indebtedness or liabilities arise or by what agreement
or instrument they may be evidenced or whether evidenced by any agreement or
instrument) and all obligations of the Company to the Purchaser to perform acts
or refrain from taking any action under any of the aforementioned documents,
together with all renewals, modifications, extensions, increases, substitutions
or replacements of any of such Indebtedness.
The term "Subordination Agreement" shall mean that certain
Subordination Agreement dated August 28, 2002 by and among the Parent, the
Company, the Purchaser and its Subsidiaries and the Administrative Agent.
The term "Subsidiary," with respect to any Person, shall mean
any corporation or partnership (including any joint venture) at least 50% of the
outstanding shares of Voting Stock or similar interest of which are owned,
directly or indirectly, by such Person. The term "Subsidiary," when used herein
without reference to any particular Person, shall mean, the sole Subsidiary of
the Company, Sparkle Insurance Company, a corporation organized under the laws
of the Turks and Caicos, British West Indies.
The term "this Agreement" shall mean this Series A Preferred
Stock Purchase Agreement (including the annexed Exhibits and Schedules), as it
may from time to time be amended, supplemented or modified in accordance with
its terms.
The term "Voting Stock," with respect to a corporation, shall
mean the stock of such corporation the holders of which are ordinarily, in the
absence of contingencies, entitled to elect members of the Board of Directors
(or other governing body) of such corporation, and, with respect to any
partnership, any partnership interest entitling the holder thereof to share in
distributions of partnership income or capital or to make decisions binding such
partnership in accordance with the partnership agreement or other governing
instrument or applicable law.
22
11.2 DIRECTLY OR INDIRECTLY. Any provision in this Agreement referring
to action to be taken by any Person, or that such Person is prohibited from
taking, shall be applicable whether such action is taken directly or indirectly
by such Person.
11.3 ACCOUNTING TERMS All accounting terms used herein that are not
otherwise expressly defined shall have the respective meanings given to them in
accordance with generally accepted accounting principles at the particular time.
11.4 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the law of the State of New York.
11.5 HEADINGS. The headings of the Sections and other subdivisions of
this Agreement have been inserted for convenience of reference only, and shall
not be deemed to constitute a part hereof.
11.6 INDEPENDENCE OF COVENANTS. Each covenant made by the Company
herein is independent of each other covenant so made. The fact that the
operation of any such covenant permits a particular action to be taken or
condition to exist does not mean that such action or condition is not
prohibited, restricted or conditioned by the operation of the provisions of any
other covenant herein.
SECTION 12. MISCELLANEOUS.
12.1 NOTICES. All communications under this Agreement, the Other
Agreements or the Preferred Stock shall be in writing and shall be delivered or
mailed (i) if to the Purchaser, at the address set forth in Schedule 6.1 hereto,
marked for attention as there indicated, or at such other address as the
Purchaser may have furnished to the Company in writing, (ii) if to any other
holder Preferred Stock, to it at its address listed in the books for the
registration and registration of transfer of Preferred Stock required to be
maintained by the Company pursuant to Section 7.1 hereof, or at such other
address as such holder shall have furnished to the Company in writing, and (iii)
if the Company, at the address set forth in Schedule 6.1 hereto, marked for
attention as there indicated, or at such other address as the Company may have
furnished to the Purchaser and all other holders of the Preferred Stock then
outstanding in writing. Any written communication so addressed and mailed by
certified mail, return receipt requested, shall be deemed to have been given
when so mailed. All other written communications shall be deemed to have been
given upon receipt thereof.
12.2 SURVIVAL. All representations, warranties and covenants made by
the Parent or the Company herein or by the Company or any Subsidiary in any
certificate or other instrument delivered under or in connection with this
Agreement shall be considered to have been relied upon by the Purchaser and
shall survive the delivery of the Preferred Stock to the Purchaser regardless of
any investigation made by the Purchaser or on its behalf. All statements in any
such certificate or other instrument shall constitute representations and
warranties of the Company hereunder.
23
12.3 ASSIGNMENT; SALE OF INTEREST. The Company may not sell, assign or
transfer this Agreement or any portion thereof, including, without limitation,
the Company's rights, title, interests, remedies, powers and/or duties
hereunder. The Purchaser may only sell, assign, transfer or otherwise dispose of
(collectively, a "Transfer") this Agreement or the Preferred Stock, or any
portion hereof or thereof, including, without limitation, the Purchaser's
rights, title, interests, remedies, powers and/or duties hereunder or thereunder
to a Subsidiary of the Purchaser without the prior consent of the Company.
12.4 SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns.
12.5 INDEMNIFICATION. IN ADDITION TO AND NOT IN LIMITATION OF THE OTHER
INDEMNITIES PROVIDED FOR HEREIN OR IN ANY OTHER AGREEMENTS, THE COMPANY HEREBY
INDEMNIFIES AND HOLDS HARMLESS THE PURCHASER AND ITS AFFILIATES, AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, FROM ANY CLAIMS, ACTIONS,
DAMAGES, COSTS, ATTORNEYS' FEES AND EXPENSES (INCLUDING ANY OF THE SAME ARISING
OUT OF THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE PERSON TO BE INDEMNIFIED (BUT
EXCLUDING THEIR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT)) TO WHICH ANY OF THEM
MAY BECOME SUBJECT, INSOFAR AS SUCH LOSSES, LIABILITIES, CLAIMS, ACTIONS,
DAMAGES, COSTS AND EXPENSES ARISE FROM OR RELATE TO THIS AGREEMENT OR THE OTHER
AGREEMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY, OR FROM ANY
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION,
ANY THREATENED INVESTIGATION, LITIGATION OR OTHER PROCEEDING RELATING TO ANY OF
THE FOREGOING, OR FROM ANY VIOLATION OR CLAIM OF VIOLATION OF ANY APPLICABLE
ENVIRONMENTAL LAWS WITH RESPECT TO ANY REAL OR PERSONAL PROPERTY, OR FROM ANY
GOVERNMENTAL OR JUDICIAL CLAIM, ORDER OR JUDGMENT WITH RESPECT TO ANY REAL OR
PERSONAL PROPERTY OF THE COMPANY, OR FROM ANY BREACH OF THE WARRANTIES,
REPRESENTATIONS OR COVENANTS CONTAINED IN THIS AGREEMENT OR THE OTHER
AGREEMENTS. THE FOREGOING INDEMNIFICATION INCLUDES ANY SUCH CLAIMS, ACTIONS,
DAMAGES, COSTS, AND EXPENSES INCURRED BY REASON OF THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF THE PERSON TO BE INDEMNIFIED, BUT EXCLUDES ANY OF THE SAME
INCURRED BY REASON OF SUCH PERSON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
12.6 AMENDMENT AND WAIVER. This Agreement and the Preferred Stock may
be amended or supplemented, and the observance of any term hereof or thereof may
be waived, with the written consent of the Company and the Purchaser.
12.7 COUNTERPARTS. This Agreement may be executed and delivered to the
Company and the Purchaser simultaneously in one or more counterparts, each of
which shall be deemed an original, but all such counterparts shall together
constitute but one and the same instrument.
[Signatures on next page]
24
IN WITNESS WHEREOF, the Parent, the Company and the Purchaser have
caused this Agreement to be executed and delivered by their respective duly
authorized officers as of the date first written above.
▇▇▇▇▇▇▇▇'▇ INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇
Vice President
CRESCENT JEWELERS
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President, Chief Financial
Officer Secretary and Treasurer
CRESCENT JEWELERS INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President, Chief Financial
Officer Secretary and Treasurer
25
SCHEDULE 2.3
FINANCIAL INFORMATION EXCEPTIONS
None.
SCHEDULE 2.7
LIST OF REQUIRED CONSENTS
None.
SCHEDULE 2.10
PLAN ASSETS INVESTED IN EMPLOYER SECURITIES
None.
SCHEDULE 2.11
LIST OF LITIGATION
None.
SCHEDULE 2.20
LABOR RELATIONS
The Company is party to a collective bargaining agreement that covers 29 of the
Company's 1010 employees (numbers are an approximate but substantially
accurate).
SCHEDULE 2.22
BROKER'S OR FINDER'S COMMISSIONS
None.
SCHEDULE 6.1
PURCHASER: THE COMPANY:
▇▇▇▇▇▇▇▇'▇ Inc. Crescent Jewelers
▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
CRESCENT JEWELERS
TABLE OF CONTENTS
Page
----
SECTION 1. ISSUANCE OF NOTES. ................................................................. 1
Section 1.1 Authorization of Notes .................................................... 1
Section 1.2 Purchase and Sale of Initial Note ......................................... 1
Section 1.3 Closing ................................................................... 1
Section 1.4 Use of Proceeds ........................................................... 2
Section 1.5 Definitions ............................................................... 2
SECTION 2. GENERAL REPRESENTATIONS AND WARRANTIES ............................................. 2
Section 2.1 Capital Stock; Subsidiaries ............................................... 2
Section 2.2 Organization and Authority ................................................ 2
Section 2.3 Financial Statements and Other Information; Financial Condition ........... 3
Section 2.4 Changes ................................................................... 3
Section 2.5 Licenses, Registrations, etc .............................................. 3
Section 2.6 Title to Properties; Leases ............................................... 4
Section 2.7 Compliance with Other Instruments, etc .................................... 4
Section 2.8 No Materially Adverse Contracts, etc ...................................... 4
Section 2.9 Compliance with Law, etc .................................................. 5
Section 2.10 Compliance with ERISA ..................................................... 5
Section 2.11 Pending Litigation, etc ................................................... 6
Section 2.12 Taxes ..................................................................... 6
Section 2.13 Investment Company Act .................................................... 7
Section 2.14 Outstanding Securities .................................................... 7
Section 2.15 Corporate Proceedings ..................................................... 7
Section 2.16 Consent, etc .............................................................. 7
Section 2.17 Compliance with Environmental Laws ........................................ 7
Section 2.18 Full Disclosure ........................................................... 8
Section 2.19 Validity of Agreements and Notes .......................................... 8
Section 2.20 Labor Relations ........................................................... 8
Section 2.21 Broker's or Finder's Commissions .......................................... 9
Section 2.22 Insurance ................................................................. 9
Section 2.23 Offerees .................................................................. 9
SECTION 3. REPRESENTATIONS OF THE PURCHASER ................................................... 9
Section 3.1 Existence ................................................................. 9
Section 3.2 Authority ................................................................. 9
Section 3.3 Investor Status ........................................................... 10
Section 3.4 Investment For Own Account; Restriction on Transfer ....................... 10
Section 3.5 No ERISA Plan Assets ...................................................... 10
SECTION 4. CONDITIONS OF OBLIGATION TO PURCHASE NOTES ......................................... 10
Section 4.1 Purchase Agreement ........................................................ 10
i
Section 4.2 Preferred Stock Certificate ............................................... 10
Section 4.3 Performance of Obligations ................................................ 11
Section 4.4 Representations True; No Event of Default ................................. 11
Section 4.5 Senior Loan Agreement ..................................................... 11
Section 4.6 Subordination Agreement ................................................... 11
Section 4.7 Legality .................................................................. 11
Section 4.8 Proceedings, Instruments, etc ............................................. 11
SECTION 5. EXPENSES ........................................................................... 11
SECTION 6. CERTAIN SPECIAL RIGHTS ............................................................. 12
Section 6.1 Home Office Payment ....................................................... 12
Section 6.2 Delivery Expenses ......................................................... 12
Section 6.3 Issuance Taxes ............................................................ 12
SECTION 7. REGISTRATION, EXCHANGE AND REPLACEMENT OF PREFERRED STOCK CERTIFICATES ............. 12
Section 7.1 Preferred Stock Register .................................................. 12
Section 7.2 Issuance of New Preferred Stock Certificates Upon Exchange or Transfer .... 12
Section 7.3 Replacement of Preferred Stock Certificate ................................ 13
SECTION 8. CERTAIN COVENANTS OF THE COMPANY ................................................... 13
Section 8.1 Corporate Existence ....................................................... 13
Section 8.2 General Maintenance of Properties and Business, etc ....................... 13
Section 8.3 Compliance with Law, etc .................................................. 14
Section 8.4 Payment of Taxes and Claims ............................................... 14
Section 8.5 ERISA ..................................................................... 15
Section 8.6 Merger; Consolidation ..................................................... 15
Section 8.7 Right of First Refusal .................................................... 16
SECTION 9. PREFERENCES ........................................................................ 16
SECTION 10. INFORMATION TO BE FURNISHED TO THE PURCHASER ....................................... 17
Section 10.1 Other Information ......................................................... 17
Section 10.2 Confidentiality ........................................................... 18
SECTION 11. INTERPRETATION OF AGREEMENT ........................................................ 18
Section 11.1 Definitions ............................................................... 18
Section 11.2 Directly or Indirectly ..................................................... 23
Section 11.3 Accounting Terms .......................................................... 23
Section 11.4 Governing Law ............................................................. 23
Section 11.5 Headings .................................................................. 23
Section 11.6 Independence of Covenants .................................................. 23
SECTION 12. MISCELLANEOUS ...................................................................... 23
Section 12.1 Notices ................................................................... 23
Section 12.2 Survival .................................................................. 23
ii
Section 12.3 Assignment, Sale of Interest .............................................. 244
Section 12.4 Successors and Assigns .................................................... 244
Section 12.5 Indemnification ........................................................... 244
Section 12.6 Amendment and Waiver ...................................................... 244
Section 12.7 Counterparts .............................................................. 244
iii