EXHIBIT 10.21
_________________________________________________________________
_________________________________________________________________
BOOTS & ▇▇▇▇▇ INTERNATIONAL WELL CONTROL, INC.
$30,000,000
11.28% SENIOR SUBORDINATED NOTES DUE JULY 23, 2006
AND
COMMON STOCK PURCHASE WARRANTS
_______________
SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
_______________
DATED AS OF JULY 23, 1998
_________________________________________________________________
_________________________________________________________________
NOTE: This Agreement contains
confidentiality obligations
(paragraph 12H)
TABLE OF CONTENTS
(Not Part of Agreement)
Page
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1. AUTHORIZATION OF ISSUE OF SECURITIES.................................... 1
1A. Authorization of Issue of Notes..................................... 1
1B. Authorization of Issue of Warrants.................................. 1
2. PURCHASE AND SALE OF SECURITIES......................................... 2
2A. Purchase and Sale of Notes.......................................... 2
2B. Purchase and Sale of Warrants....................................... 2
3. CONDITIONS PRECEDENT.................................................... 2
3A. Certain Documents................................................... 2
3B. Representations and Warranties; No Default; No Material Adverse
Change.............................................................. 5
3C. Purchase Permitted By Applicable Laws............................... 5
3D. Proceedings......................................................... 6
3E. Related Proceedings................................................. 6
3F. Consummation of Acquisition......................................... 6
3G. Private Placement Number............................................ 6
3H. Fees................................................................ 6
4. PREPAYMENTS............................................................. 7
4A. Required Prepayments................................................ 7
4B. Optional Prepayment of Notes with Yield Maintenance Amount.......... 7
4B(1). Optional Prepayment of Notes................................. 7
4B(2). Optional Prepayment of Notes Upon Material Public Offering... 8
4C. Offer to Prepay Notes in the Event of a Change in Control........... 8
4D. Partial Payments Pro Rata........................................... 9
4E. Retirement of Notes................................................. 10
5. AFFIRMATIVE COVENANTS................................................... 10
5A. Financial Statements................................................ 10
5B. Information Required by Rule 144A................................... 13
5C. Inspection of Property.............................................. 13
5D. Covenant to Secure Notes Equally.................................... 14
5E. Taxes, Existence, Regulations, Property, Etc........................ 14
5F. Maintenance of Insurance............................................ 14
5G. Maintenance of Directors' and Officers' Insurance................... 14
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5H. ERISA Compliance.................................................... 14
5I. Maintenance of Committed Credit Facility............................ 15
5J. Collateral; New Subsidiaries; Foreign Subsidiaries.................. 15
5K. Enforcement of Acquisition Documents................................ 17
5L. Maintenance of Books of Record; Reserves............................ 17
6. NEGATIVE COVENANTS...................................................... 17
6A. Financial Covenants................................................. 17
6A(1). Total Debt to EBITDA Ratio................................... 17
6A(2). Consolidated Net Worth....................................... 17
6A(3). Current Ratio................................................ 17
6A(4). EBITDA to Consolidated Interest Expense and Preferred
Dividends Ratio.............................................. 17
6A(5). EBITDA to Consolidated Interest Expense and Preferred
Dividends plus Scheduled Principal Payments Ratio............ 18
6A(6). Priority Debt................................................ 18
6B. Limitation on Restricted Payments................................... 18
6C. Liens, Indebtedness, and Other Restrictions......................... 18
6C(1). Liens........................................................ 18
6C(2). Limitation on Indebtedness................................... 19
6C(3). Loans and Investments........................................ 19
6C(4). Mergers, Consolidations and Acquisitions, Dispositions of
Assets, etc.................................................. 20
6C(5). Limitation on Asset Dispositions............................. 20
6C(6). Sale or Discount of Receivables.............................. 21
6C(7). Transactions With Affiliates................................. 21
6C(8). Limitation on Sale-Leaseback Transactions.................... 21
6C(9). Prepayment of Certain Indebtedness........................... 21
6D. Nature of Business.................................................. 21
6E. Certificates of Incorporation; Bylaws; Trade Names.................. 21
6F. Other Agreements.................................................... 22
6G. Limitation on Certain Restrictive Agreements........................ 22
6H. Prohibition Against Layering........................................ 22
6I. Limitation on Subsidiaries Activities............................... 22
6J. Limitation on Issuance of Preferred Stock........................... 22
7. SUBORDINATION OF NOTES.................................................. 23
7A. Subordination....................................................... 23
7B. Obligation of the Company Unconditional............................. 24
7C. Subrogation......................................................... 25
7D. Subordination Definitions........................................... 25
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8. EVENTS OF DEFAULT..................................................... 26
8A. Acceleration...................................................... 26
8B. Rescission of Acceleration........................................ 29
8C. Notice of Acceleration or Rescission.............................. 29
8D. Other Remedies.................................................... 29
9. REPRESENTATIONS, COVENANTS AND WARRANTIES............................. 29
9A. Organization and Qualification.................................... 29
9B. Financial Statements.............................................. 30
9C. Actions Pending................................................... 30
9D. Outstanding Indebtedness.......................................... 30
9E. Title to Properties............................................... 31
9F. Possession of Franchises, Licenses................................ 31
9G. Taxes............................................................. 31
9H. Conflicting Agreements and Other Matters.......................... 31
9I. Authorized Capital Stock.......................................... 32
9J. Offering of the Securities........................................ 32
9K. Use of Proceeds................................................... 32
9L. ERISA............................................................. 33
9M. Governmental Consent.............................................. 33
9N. Environmental Compliance.......................................... 33
9O. Fiscal Year....................................................... 33
9P. Disclosure........................................................ 33
9Q. Investment Company Act............................................ 34
9R. Acquisition Representations and Warranties........................ 34
10. REPRESENTATIONS OF THE PURCHASER...................................... 34
10A. Nature of Purchase............................................... 34
10B. Source of Funds.................................................. 34
11. DEFINITIONS........................................................... 34
11A. Yield Maintenance Terms.......................................... 35
11B. Other Terms...................................................... 36
11C. Accounting Principles, ▇▇▇▇▇ and Determinations.................. 50
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12. MISCELLANEOUS......................................................... 50
12A. Note Payments.................................................... 50
12B. Expenses......................................................... 51
12C. Consent to Amendments............................................ 51
12D. Form, Registration, Transfer and Exchange of Notes; Lost Notes... 51
12E. Persons Deemed Owners; Participations............................ 52
12F. Survival of Representations and Warranties; Entire Agreement..... 52
12G. Successors and Assigns........................................... 52
12H. Disclosure to Other Persons...................................... 53
12I. Notices.......................................................... 53
12J. Payments Due on Non-Business Days................................ 53
12K. Satisfaction Requirement......................................... 54
12L. Governing Law.................................................... 54
12M. Waiver of Jury Trial; Consent to Jurisdiction.................... 54
12N. Severability..................................................... 55
12O. Descriptive Headings............................................. 55
12P. Maximum Interest Payable......................................... 55
12Q. Counterparts..................................................... 55
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PURCHASER SCHEDULE
SCHEDULE 9A -- LIST OF SUBSIDIARIES
SCHEDULE 9D -- EXISTING DEBT AND LIENS
SCHEDULE 9H -- LIST OF AGREEMENTS RESTRICTING DEBT
SCHEDULE 9I -- LIST OF WARRANTS, OPTIONS AND CONVERTIBLE
SECURITIES
SCHEDULE 9K -- USE OF PROCEEDS
EXHIBIT A -- FORM OF NOTE
EXHIBIT B -- FORM OF WARRANT
EXHIBIT C -- FORM OF OPINION OF COMPANY'S COUNSEL
EXHIBIT D -- FORM OF COMPLIANCE CERTIFICATE
EXHIBIT E -- FORM OF GUARANTY AGREEMENT
EXHIBIT F -- FORM OF MORTGAGE
EXHIBIT G -- FORM OF PARTICIPATION RIGHTS AGREEMENT
EXHIBIT H -- FORM OF PLEDGE AGREEMENT
EXHIBIT I -- FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT J -- FORM OF SECURITY AGREEMENT
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BOOTS & ▇▇▇▇▇ INTERNATIONAL WELL CONTROL, INC.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
As of July 23, 1998
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
$30,000,000 11.28% SENIOR SUBORDINATED NOTES DUE 2006
COMMON STOCK PURCHASE WARRANTS
Ladies and Gentlemen:
The undersigned, Boots & ▇▇▇▇▇ International Well Control, Inc., a Delaware
corporation (the "COMPANY"), hereby agrees with you as follows:
PARAGRAPH 1. AUTHORIZATION OF ISSUE OF SECURITIES.
1A. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the issue of
its 11.28% senior subordinated notes in the aggregate principal amount of
$30,000,000, to be dated the date of issue thereof, to mature July 23, 2006, to
bear interest on the unpaid balance thereof from the date thereof until the
principal thereof shall have become due and payable at a rate of 11.28% per
annum and on overdue payments at the rate specified therein; such 11.28% senior
subordinated notes shall be substantially in the form of Exhibit A attached
hereto. The term "NOTES" as used herein shall include each such 11.28% senior
subordinated note delivered pursuant to any provision of this Agreement and each
such 11.28% senior subordinated note delivered in substitution or exchange for
any other Note pursuant to any such provision. Capitalized terms used herein
have the meanings specified in paragraph 11.
1B. AUTHORIZATION OF ISSUE OF WARRANTS. The Company will also authorize the
issue of its Common Stock Purchase Warrants (any such Common Stock Purchase
Warrants which have been issued pursuant to this Agreement, and any such Common
Stock Purchase Warrants which may be issued in substitution or exchange
therefor, herein collectively called the "WARRANTS") evidencing rights to
purchase from the Company an aggregate of 3,165,396 shares of the Company's
common stock, par value $0.00001 per share (the "COMMON STOCK"), at an initial
exercise price per share of
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$6.70, at any time or from time to time after July 23, 2000 (subject to the
exceptions set forth in section 1H of the Warrants), and prior to 5:00 p.m., New
York City time, on the later of (i) July 23, 2008 and (ii) six months after the
date the Notes are fully retired, all subject to the terms, conditions and
adjustments set forth in the Warrants; such Warrants shall be substantially in
the form of Exhibit B attached hereto.
PARAGRAPH 2. PURCHASE AND SALE OF SECURITIES.
2A. PURCHASE AND SALE OF NOTES. The Company hereby agrees to sell to you and,
subject to the terms and conditions herein set forth, you agree to purchase from
the Company, Notes in the aggregate principal amount of $30,000,000 at 100% of
such aggregate principal amount. The Company will deliver to you, at the offices
of ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P. at 910 Louisiana, Houston, Texas 77002, one or more
Notes registered in your name, evidencing the aggregate principal amount of
Notes to be purchased by you and in the denomination or denominations specified
in the Purchaser Schedule attached hereto, against payment of the purchase price
thereof by transfer of immediately available funds for credit to the Company's
account specified in the letter from the Company described in paragraph 3A(xv),
on the date of closing, which shall be July 23, 1998 or any other date on or
before July 31, 1998 upon which the Company and you may mutually agree (the
"CLOSING" or the "DATE OF CLOSING").
2B. PURCHASE AND SALE OF WARRANTS. The Company hereby agrees to sell to you
and, subject to the terms and conditions herein set forth, you agree to purchase
from the Company Warrants evidencing rights to purchase an aggregate of
3,165,396 shares of Common Stock. The aggregate purchase price for the Warrants
shall be $10.00. The Company will deliver to you, at the offices of ▇▇▇▇▇ &
▇▇▇▇▇, L.L.P. at 910 Louisiana, Houston, Texas 77002, one or more Warrants,
registered in your name, evidencing rights to purchase an aggregate of 3,165,396
shares of Common Stock, such Warrant or Warrants to evidence rights to purchase
the number of shares of Common Stock specified in the Purchaser Schedule
attached hereto, against payment of the purchase price for the Warrants by
transfer of immediately available funds for credit to the Company's account
specified in the letter from the Company described in paragraph 3A(xv), on the
Date of Closing.
PARAGRAPH 3. CONDITIONS PRECEDENT.
3. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the
Securities to be purchased by you hereunder is subject to the satisfaction, on
or before the Date of Closing, of the following conditions:
3A. CERTAIN DOCUMENTS. You shall have received the following, each
dated the Date of Closing (unless a different date is indicated below), and each
in form, scope and substance satisfactory to you:
(i) the Notes to be purchased by you;
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(ii) the Warrants to be purchased by you;
(iii) certified copies of the resolutions of the Board of Directors
of each of the Transaction Parties approving each of the Subordinated Note
Documents to which each is a party, and certified copies of all documents
evidencing other necessary corporate action and governmental approvals, if
any, with respect to each of the Subordinated Note Documents to which each
is a party;
(iv) a certificate of the Secretary or an Assistant Secretary of each
of the Transaction Parties certifying the names and true signatures of the
officers of such Transaction Party authorized to sign the Subordinated
Note Documents to which it is a party and the other documents to be
delivered hereunder by such Transaction Party;
(v) certified copies of the Certificate or Articles of Incorporation
(certified by the Secretary of State or other governmental authority, as
applicable, within 10 Business Days of the Date of Closing) and bylaws,
each as amended to date, of each of the Transaction Parties;
(vi) a favorable opinion of ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., counsel to
the Transaction Parties, substantially in the form of Exhibit C attached
hereto;
(vii) a favorable opinion of ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., who are acting as
special counsel for you in connection with this transaction, as to such
matters incident to the matters herein contemplated as you may reasonably
request;
(viii) reliance letters in respect of all legal opinions delivered in
connection with the Acquisition and the other transactions related thereto;
(ix) certified copies of Requests for Information or Copies (Form UCC-
11) or equivalent reports, dated within 20 days of the Date of Closing,
listing all effective financing statements which name any of the
Transaction Parties or the Acquired Company (under any of their present
names and any previous names) as debtor and which are filed in all
jurisdictions in which any of the Transaction Parties or the Acquired
Company own property or conduct business, together with copies of such
financing statements;
(x) the Registration Rights Agreement, ▇▇▇▇ executed and delivered by
the Company;
(xi) the Participation Rights Agreement, duly executed and delivered
by the Company and the Company's stockholders parties thereto;
3
(xii) certified copies of each of the Acquisition Documents, the terms
and conditions of which shall be reasonably satisfactory to you and in full
force and effect and shall not have been amended, modified or waived except
with your prior consent;
(xiii) copies of (a) a pro forma consolidated balance sheet for the
Transaction Parties as at the Closing Date, reflecting the issuance of the
Notes hereunder, the issuance of the Indebtedness under the Bridge Loan
Agreement, and the consummation of the Acquisition, certified by an
authorized financial officer of the Company and (b) good-faith management
projections and pro forma financial statements for the Transaction Parties
for fiscal years 1998 through 2002;
(xiv) Guaranty Agreements, duly executed and delivered by each
Domestic Subsidiary of the Company;
(xv) written instructions from a Responsible Officer of the Company,
set forth on the Company's letterhead, authorizing and directing you to pay
the purchase price of the Securities by transfer of immediately available
funds for credit to the bank account of the Company identified in such
instructions;
(xvi) a letter from each of (a) the Chairman of the Company and (b)
an authorized representative of the Company's financial advisors with
respect to the issuance of the Contemplated Preferred Stock, that describe,
in scope and substance satisfactory to you, the progress made as of the
Date of Closing toward the issuance of the Contemplated Preferred Stock.
(xvii) the Security Documents, ▇▇▇▇ executed and delivered by each of
the Company and the other Transaction Parties thereto;
(xviii) all Uniform Commercial Code financing statements deemed
necessary or appropriate by you to perfect the Liens in favor of the
Collateral Agent arising under the Security Documents, duly executed and
delivered by the appropriate Transaction Parties, to be recorded with the
appropriate filing offices;
(xix) evidence satisfactory to you and your special counsel that the
Company or one of its Subsidiaries has good and marketable title to the
real property encumbered by the Mortgages and that the Collateral Agent
possesses mortgage liens with respect to such real property, which evidence
may include, without limitation, mortgagee policies of the title insurance,
title reports and title opinions;
(xx) certificates of insurance naming the Collateral Agent as loss
payee and the Collateral Agent and all holders of Notes as additional
insureds, as required by paragraph 5F;
4
(xxi) the Bridge Loan Documents, duly executed and delivered by each
of the Company and the other Transaction Parties thereto;
(xxii) evidence satisfactory to you and your special counsel that (a)
all Indebtedness of the Company and any Transaction Party to Geneva
Associates, L.L.C. or to Main Street Merchant Partners II, L.P., and any
Liens with respect thereto, have been transferred to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
pursuant to the terms of the Assigned Loan Documents, (b) all Liens
securing Indebtedness of the Company or any Transaction Party to ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ have been transferred to Prudential Securities Credit Corporation
pursuant to the Assigned Loan Documents, (c) all Indebtedness of the
Company and any Transaction Party to Prudential Securities Credit
Corporation, and any Liens with respect thereto, have been transferred to
you pursuant to the Bridge Loan Documents and (d) that all Indebtedness of
the Company or any Transaction Party to Prudential Securities Credit
Corporation, and any Liens with respect thereto, have been terminated, and
you shall have received all UCC termination statements or other
documentation necessary or required by you or your special counsel to
effectuate or evidence the requirements of the foregoing clauses (a)
thought (d); and
(xxiii) copies of all Assigned Loan Documents, certified as true,
complete and correct by a Responsible Officer;
(xxiv) copies of all stock certificates of the Company subject to the
Participation Rights Agreement legended pursuant to the Participation
Rights Agreement;
(xxv) evidence satisfactory to you and your special counsel that
Arizona Securities Group, Inc. and Paradise Valley Securities Group, Inc.
have each waived its right to enforce the provisions of that certain
Placement Agent Agreement, dated August 7, 1997, that restrict the
Company's ability to issue the Warrants and you shall and your special
counsel be satisfied that the execution and delivery of the Warrants does
not, and the sale of the Common Stock thereunder will not, conflict with
the terms of such agreement (after giving effect to the waiver required
hereby).
3B. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; NO MATERIAL ADVERSE CHANGE.
The representations and warranties of the Company and each of the other
Transaction Parties contained in this Agreement, the other Subordinated Note
Documents and in the Acquisition Documents shall be true on and as of the Date
of Closing, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the Date of Closing no Event of Default or
Default; there shall exist or have occurred no condition, event or act which
could reasonably be expected to have a Material Adverse Effect and the Company
and each of the other Transaction Parties shall have delivered to you an
Officer's Certificate, dated the Date of Closing, to both such effects.
3C. PURCHASE PERMITTED BY APPLICABLE LAWS. The offer by the Company of, and
the purchase of and payment for, the Securities to be purchased by you on the
Date of Closing on the terms and conditions herein provided (including the use
of the proceeds of such Securities by the
5
Company) shall not violate any applicable law or governmental regulation
(including, without limitation, section 5 of the Securities Act or Regulation U
or X of the Board of Governors of the Federal Reserve System) and shall not
subject you to any tax, penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation, and you shall have
received such certificates or other evidence as you may request to establish
compliance with this condition.
3D. PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to you, and you
shall have received all such counterpart originals or certified or other copies
of such documents as you may reasonably request.
3E. RELATED PROCEEDINGS. All corporate and other proceedings taken or
to be taken in connection with (i) the Acquisition, (ii) the execution and
delivery of, and performance under, the Bridge Loan Agreement and the other
Bridge Loan Documents, (iii) the assignment, termination or release of the
Indebtedness of the Company or any Transaction Party (other than Indebtedness
owing to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇), and any Liens relating thereto, under any of the
Assigned Loan Documents and (iv) the other transactions contemplated thereby,
and all documents incident thereto, shall be satisfactory in substance and form
to you, and you shall have received all such counterpart originals or certified
or other copies of such documents as you may reasonably request.
3F. CONSUMMATION OF ACQUISITION. You shall have received satisfactory
evidence that the Acquisition has been consummated prior to or concurrently with
issuance of the Securities pursuant to and in accordance with the terms and
conditions of the Acquisition Documents (no material terms thereof having been
amended, supplemented, waived or otherwise modified without your prior written
consent).
3G. PRIVATE PLACEMENT NUMBER. Private Placement numbers issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for the Notes and for the Warrants.
3H. FEES. (i) You shall have received (a) the structuring fee with
respect to this Agreement in the amount of $150,000 (b) the structuring fee with
respect to the Bridge Loan Agreement in the amount of $75,000 and (c) all other
fees which are due and payable on or before the Closing Date pursuant to any
written agreement between the Company and you, and (ii) without limiting the
provisions of paragraph 12B, your special counsel shall have received its fees,
charges and disbursements to the extent reflected in a statement of such special
counsel rendered to the Company at least one Business Day prior to the Closing.
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PARAGRAPH 4. PREPAYMENTS.
4. PREPAYMENTS. The Notes shall be subject to prepayment only with respect to
the prepayments specified in paragraphs 4A, 4B and 4C.
4A. REQUIRED PREPAYMENTS. Until the Notes shall be paid in full, the
Company shall apply to the prepayment of the Notes, without premium, the sum of
$6,000,000 on July 23 in each of the years 2002, 2003, 2004 and 2005, and such
principal amounts of the Notes, together with interest thereon to the prepayment
dates, shall become due on such prepayment dates. The remaining outstanding
principal amount of the Notes, together with interest accrued thereon, shall
become due on the maturity date of the Notes.
4B. OPTIONAL PREPAYMENT OF NOTES WITH YIELD MAINTENANCE AMOUNT.
4B(1). OPTIONAL PREPAYMENT OF NOTES.
(i) The Notes shall be subject to prepayment, on any Business Day
after the date hereof, in whole at any time or from time to time in part
(in integral multiples of $1,000,000), at the option of the Company, at
100% of the principal amount so prepaid, plus interest thereon to the
prepayment date and the Yield Maintenance Amount, if any, with respect to
each Note so prepaid. Any partial prepayment of the Notes pursuant to this
paragraph 4B(1) shall be applied in satisfaction of required prepayments of
principal under paragraph 4A in inverse order of their scheduled due dates.
(ii) The Company shall give the holder of each Note irrevocable
written notice of any prepayment pursuant to this paragraph 4B(1) not less
than ten Business Days prior to the prepayment date, specifying such
prepayment date and the principal amount of the Notes, and of the Notes
held by such holder, to be prepaid on such date and stating that such
prepayment is to be made pursuant to this paragraph 4B(1). Notice of
prepayment having been given as aforesaid, the principal amount of the
Notes specified in such notice, together with interest thereon to the
prepayment date and together with the Yield Maintenance Amount, if any,
with respect thereto, shall become due and payable on such prepayment date.
The Company shall, on or before the day on which it gives written notice of
any prepayment pursuant to this paragraph 4B(1), give telephonic notice of
the principal amount of the Notes to be prepaid and the prepayment date to
each holder which shall have designated a recipient of such notices in the
Purchaser Schedule attached hereto or by notice in writing to the Company.
On the Business Day preceding the date of prepayment the Company shall
deliver to each holder of Notes being prepaid a statement showing the Yield
Maintenance Amount due in connection with such prepayment and setting forth
the details of the computation of such amount.
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4B(2). OPTIONAL PREPAYMENT OF NOTES UPON MATERIAL PUBLIC OFFERING.
(i) In connection with a Material Public Offering, up to 35% of the
principal amount of Notes originally issued shall be subject to prepayment
with the proceeds of such Material Public Offering, on any Business Day
that is 30 Business Days after the closing of such Material Public
Offering, in whole at any time or from time to time in part (in integral
multiples of $1,000,000), at the option of the Company, at 100% of the
principal amount so prepaid plus interest thereon to the prepayment date
and the Yield Maintenance Amount, if any, with respect to each Note so
prepaid. Any partial prepayment of the Notes pursuant to this paragraph
4B(2) shall be applied in satisfaction of required prepayments of principal
under paragraph 4A in inverse order of their scheduled due dates.
(ii) The Company shall give the holder of each Note irrevocable
written notice of any prepayment pursuant to this paragraph 4B(2) not less
than ten Business Days prior to the prepayment date, specifying such
prepayment date and the principal amount of the Notes, and of the Notes
held by such holder, to be prepaid on such date and stating that such
prepayment is to be made pursuant to this paragraph 4B(2). Notice of
prepayment having been given as aforesaid, the principal amount of the
Notes specified in such notice, together with interest thereon to the
prepayment date and together with the Yield Maintenance Amount, if any,
with respect thereto, shall become due and payable on such prepayment date.
The Company shall, on or before the day on which it gives written notice of
any prepayment pursuant to this paragraph 4B(2), give telephonic notice of
the principal amount of the Notes to be prepaid and the prepayment date to
each holder which shall have designated a recipient of such notices in the
Purchaser Schedule attached hereto or by notice in writing to the Company.
On the Business Day preceding the date of prepayment the Company shall
deliver to each holder of Notes being prepaid a statement showing the Yield
Maintenance Amount due in connection with such prepayment and setting forth
the details of the computation of such amount.
4C. OFFER TO PREPAY NOTES IN THE EVENT OF A CHANGE IN CONTROL.
(i) Notice of Impending Change in Control. The Company will not take
any action that consummates or finalizes a Change in Control unless at
least 30 days prior to such action it shall have given to each holder of
Notes written notice of such impending Change in Control.
(ii) Notice of Occurrence of Change in Control. The Company will,
within five Business Days after obtaining Knowledge of the occurrence of
any Change in Control, give written notice of such Change in Control to
each holder of Notes. If a Change in Control has occurred, such notice
shall contain and constitute an offer to prepay the Notes as described in
clause (iii) of this paragraph 4C and shall be accompanied by the
certificate described in clause (vi) hereof.
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(iii) Offer to Prepay Notes. The offer to prepay Notes contemplated by
the foregoing clause (ii) shall be an offer to prepay, in accordance with
and subject to this paragraph 4C, all, but not less than all, the Notes
held by each holder (in this case only, "holder" in respect of any Note
registered in the name of a nominee for a disclosed beneficial owner shall
mean such beneficial owner) on a date specified in such offer (the
"PROPOSED PREPAYMENT DATE"). Such Proposed Prepayment Date shall be not
less than 30 days and not more than 60 days after the date of such offer
(if the Proposed Prepayment Date shall not be specified in such offer, the
Proposed Prepayment Date shall be the 30th day after the date of such
offer).
(iv) Rejection; Acceptance. A holder of Notes may accept the offer
made pursuant to this paragraph 4C to prepay all, but not less than all,
the Notes held by such holder by causing a notice of such acceptance to be
delivered to the Company at least five days prior to the Proposed
Prepayment Date. A failure by a holder of Notes to respond to an offer to
prepay made pursuant to this paragraph 4C shall be deemed to constitute a
rejection of such offer by such holder.
(v) Prepayment; Reduction of Required Prepayments. Prepayment of the
Notes to be prepaid pursuant to this paragraph 4C shall be at 100% of the
principal amount of such Notes, plus the Yield Maintenance Amount
determined for the date of prepayment with respect to such principal
amount, together with interest on such Notes accrued to the date of
prepayment. On the Business Day preceding the date of prepayment, the
Company shall deliver to each holder of Notes being prepaid a statement
showing the Yield Maintenance Amount due in connection with such prepayment
and setting forth the details of the computation of such amount. The
prepayment shall be made on the Proposed Prepayment Date. Upon any partial
prepayment of Notes pursuant to this paragraph 4C, the principal amount of
the required prepayment of the Notes becoming due under paragraph 4A on or
after the date of such prepayment shall be reduced in the same proportion
as the aggregate unpaid principal amount of Notes is reduced as a result of
such prepayment.
(vi) Officer's Certificate. Each offer to prepay the Notes pursuant
to this paragraph 4C shall be accompanied by a certificate, executed by a
Responsible Officer of the Company and dated the date of such offer,
specifying: (a) the Proposed Prepayment Date; (b) that such offer is made
pursuant to this paragraph 4C; (c) the principal amount of each Note
offered to be prepaid; (d) the estimated Yield Maintenance Amount due in
connection with such prepayment (calculated as if the date of such notice
were the date of the prepayment) and the details of such calculation; (e)
the interest that would be due on each Note offered to be prepaid, accrued
to the Proposed Prepayment Date; (f) that the conditions of this paragraph
4C have been fulfilled; and (g) in reasonable detail, the nature and date
of the Change in Control.
4D. PARTIAL PAYMENTS PRO RATA. Upon any partial prepayment of Notes
pursuant to paragraph 4A or 4B, the principal amount so prepaid shall be
allocated to all Notes at the time
9
outstanding (including, for the purpose of this paragraph 4D only, all such
Notes prepaid or otherwise retired or purchased or otherwise acquired by the
Company or any of its Subsidiaries or Affiliates other than by prepayment
pursuant to paragraph 4A, 4B or 4C) in proportion to the respective outstanding
principal amounts thereof. Upon any partial prepayment of Notes pursuant to
paragraph 4C, the principal amount so prepaid shall be allocated to all Notes at
the time outstanding and held by holders who have accepted the Company's offer
of prepayment made pursuant to paragraph 4C in proportion to the respective
outstanding principal amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit
any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or
in part prior to their stated final maturity (other than by prepayment pursuant
to paragraph 4A, 4B or 4C or upon acceleration of such final maturity pursuant
to paragraph 8A), or purchase or otherwise acquire, directly or indirectly,
Notes held by any holder unless the Company or such Subsidiary or Affiliate
shall have offered to prepay or otherwise retire or purchase or otherwise
acquire, as the case may be, the same proportion of the aggregate principal
amount of Notes held by each other holder of Notes at the time outstanding upon
the same terms and conditions. Any Notes so prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates shall not be deemed to be outstanding for any purpose under this
Agreement, except as provided in paragraph 4D.
PARAGRAPH 5. AFFIRMATIVE COVENANTS.
5. AFFIRMATIVE COVENANTS.
So long as any Note shall remain unpaid (or, if no Note shall remain unpaid
but any Warrant shall remain outstanding, (i) if at the time in question the
Common Stock is listed or admitted to trading on any national securities
exchange or is traded in the over-the-counter market and is subject to bid and
asked prices with respect thereto being quoted in the NASDAQ National Market,
then only with respect to the covenants of the Company set forth in paragraphs
5A(i), (ii) and (iii) and 5B, or (ii) if the Common Stock is not so listed,
admitted to trading or subject to such bid and asked prices being so quoted,
then only with respect to the covenants of the Company set forth in paragraphs
5A, 5B and 5C) the Company covenants that:
5A. FINANCIAL STATEMENTS. The Company will deliver to each holder in
duplicate:
(i) as soon as practicable and in any event within 45 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year, consolidating and consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for
the period from the beginning of the current fiscal year to the end of such
quarterly period, and a consolidating and consolidated balance sheet of the
Company and its Subsidiaries as at the end of such quarterly period,
setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year, all in reasonable detail
and satisfactory in form to the Required Holder(s) and certified by an
authorized financialofficer of the Company, subject to changes resulting
from year-end adjustment; provided,
10
that delivery pursuant to clause (iii) below of copies of the Quarterly
Report on Form 10-Q or 10-QSB, as the case may be, of the Company for such
quarterly period filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this clause (i) with respect to
consolidated financial statements if such financial statements are included
in such report;
(ii) as soon as practicable and in any event within 90 days after the
end of each fiscal year, consolidating and consolidated statements of
income and cash flows and a consolidated statement of stockholders' equity
of the Company and its Subsidiaries for such year, and a consolidating and
consolidated balance sheet of the Company and its Subsidiaries as at the
end of such year, setting forth in each case in comparative form
corresponding consolidated figures from the preceding annual audit, all in
reasonable detail and satisfactory in form to the Required Holder(s) and,
as to the consolidated statements, reported on by independent public
accountants of recognized national standing selected by the Company whose
report shall be without limitation as to the scope of the audit and
satisfactory in substance to the Required Holder(s) and, as to the
consolidating statements, certified by an authorized financial officer of
the Company; provided, that delivery pursuant to clause (iii) below of
copies of the Annual Report on Form 10-K or 10-KSB, as the case may be, of
the Company for such fiscal year filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this clause (ii)
with respect to consolidated financial statements if such financial
statements are included in such report;
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration statements
(without exhibits) and all reports which it files with the Securities and
Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Company or any Subsidiary;
(v) as soon as practicable and in any event within five Business Days
after obtaining Knowledge (a) of any condition or event which, in the
opinion of management of the Company, would have a Material Adverse Effect,
(b) that any Person has given any notice to the Company or any of its
Subsidiaries or taken any other action with respect to a claimed default or
event or condition of the type referred to in clause (iii) of paragraph 8A,
(c) of the institution of any litigation involving claims against the
Company or any of its Subsidiaries equal to or greater than $100,000 with
respect to any single cause of action or of any adverse determination in
any court proceeding in any litigation involving a potential liability to
the Company or any of its Subsidiaries equal to or greater than $500,000
with respect to any single cause of action which makes the likelihood of an
adverse determination in such litigation against the Company or such
Subsidiary substantially more probable or (d)
11
of any regulatory proceeding which may have a Material Adverse Effect, an
Officer's Certificate specifying the nature and period of existence of any
such condition or event, or specifying the notice given or action taken by
such Person and the nature of any such claimed default, event or condition,
or specifying the details of such proceeding, litigation or dispute and
what action the Company or any of its Subsidiaries has taken, is taking or
proposes to take with respect thereto;
(vi) (a) within five Business Days after receipt, a copy of any notice
of complete or partial withdrawal liability under Title IV of ERISA and any
notice from the PBGC under Title IV of ERISA of an intent to terminate or
appoint a trustee to administer any Plan, (b) if requested by any holder of
the Notes, promptly after the filing thereof with the United States
Secretary of Labor or the PBGC or the Internal Revenue Service, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (c) immediately upon becoming aware of the occurrence of any
"reportable event," as such term is defined in Section 4043 of ERISA, for
which the disclosure requirements of Regulation Section 2615.3 promulgated
by the PBGC have not been waived, or of any "prohibited transaction," as
such term is defined in Section 4975 of the Code, in connection with any
Plan or any trust created thereunder, a written notice signed by an
authorized officer of the Company or the applicable member of the
Controlled Group specifying the nature thereof, what action the Company or
the applicable member of the Controlled Group is taking or proposes to take
with respect thereto, and, when known, any action taken by the PBGC, the
Internal Revenue Service or the Department of Labor with respect thereto,
(d) promptly after the filing or receiving thereof by the Company or any
member of the Controlled Group of any notice of the institution of any
proceedings or other actions which may result in the termination of any
Plan, and (e) each request for waiver of the funding standards or extension
of the amortization periods required by Sections 303 and 304 of ERISA or
Section 412 of the Code promptly after the request is submitted by the
Company or any member of the Controlled Group to the Secretary of the
Treasury, the Department of Labor or the Internal Revenue Service, as the
case may be;
(vii) promptly upon delivery thereof to the Bank, copies of all such
notices, reports and other materials which the Company or any Subsidiary is
required under the Credit Agreement to deliver to the Bank;
(viii) promptly upon completion thereof on an annual basis within 60
days following each fiscal year end, a copy of each operating budget and
projection of financial performance prepared by or for the Company or any
of its Subsidiaries;
(ix) within five Business Days after the removal or resignation of, or
the death or disability of any Executive Officer or Responsible Officer or
senior firefighter of the Company or any of its Subsidiaries, written
notice thereof, together with information in reasonable detail with respect
thereto; and
12
(x) with reasonable promptness, such other information respecting the
condition or operations, financial or otherwise, of the Company or any of
its Subsidiaries as such holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder an Officer's
Certificate in the form of Exhibit D attached hereto demonstrating (with
computations in reasonable detail) compliance by the Company and its
Subsidiaries with the provisions of paragraphs 6A, 6C(2), 6C(3)and 6C(5) and
stating that there exists no Event of Default or Default, or, if any Event of
Default or Default exists, specifying the nature and period of existence thereof
and what action the Company proposes to take with respect thereto. Together
with each delivery of financial statements required by clause (ii) above, the
Company will deliver to each Significant Holder a certificate of such
accountants stating that, in making the audit necessary for their report on such
financial statements, they have obtained no knowledge of any Event of Default or
Default, or, if they have obtained knowledge of any Event of Default or Default,
specifying the nature and period of existence thereof. Such accountants,
however, shall not be liable to anyone by reason of their failure to obtain
knowledge of any Event of Default or Default which would not be disclosed in the
course of an audit conducted in accordance with generally accepted auditing
standards.
The Company also covenants that immediately after obtaining Knowledge of an
Event of Default or Default, it will deliver to each Significant Holder an
Officer's Certificate specifying the nature and period of existence thereof and
what action the Company proposes to take with respect thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the
request of the holder of any Security, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Notes or Warrants, except at
such times as the Company is subject to the reporting requirements of section 13
or 15(d) of the Exchange Act. For the purpose of this paragraph 5B, the term
"qualified institutional buyer" shall have the meaning specified in Rule 144A
under the Securities Act.
5C. INSPECTION OF PROPERTY. The Company will permit any Person
designated by any Significant Holder in writing, at the Company's expense during
the continuance of a Default or Event of Default and otherwise at such
Significant Holder's expense, to visit and inspect, on behalf of such holder,
any of the properties of the Company and its Subsidiaries, to examine the
corporate books and financial records of the Company and its Subsidiaries and
make copies thereof or extracts therefrom and to discuss the affairs, finances
and accounts of any of such corporations with the principal officers of the
Company and its independent public accountants, all at such reasonable times and
as often as such holder may reasonably request; provided, that such Significant
Holder and such other Person shall have agreed to comply with the
confidentiality provisions set forth in paragraph 12H.
13
5D. COVENANT TO SECURE NOTES EQUALLY. The Company will, if it or any
Subsidiary shall create or assume any Lien upon any of its property or assets,
whether now owned or hereafter acquired, other than Liens permitted by the
provisions of paragraph 6C(1) (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to paragraph 12C), make or
cause to be made effective provision whereby the Notes will be secured by such
Lien equally and ratably with any and all other Indebtedness thereby secured so
long as any such other Indebtedness shall be so secured pursuant to such
agreements and instruments as shall be approved by the Required Holder(s), and
the Company will cause to be delivered to the holder of each Note an opinion of
independent counsel to the effect that such agreements and instruments are
enforceable in accordance with their terms and that the Notes are equally and
ratably secured with such other Indebtedness.
5E. TAXES, EXISTENCE, REGULATIONS, PROPERTY, ETC. The Company will at
all times, except where failure or noncompliance could not reasonably be
expected to have a Material Adverse Effect: (i) pay when due all taxes and
governmental charges of every kind upon it or against its income, profits or
Property, unless and only to the extent that the same shall be contested
diligently in good faith and adequate reserves in accordance with GAAP have been
established therefor; (ii) do all things necessary to preserve its existence,
qualifications, rights and franchises; (iii) comply with all applicable Legal
Requirements (including without limitation Requirements of Environmental Law) in
respect of the conduct of its business and the ownership of its Property, and
(iv) cause its Property to be protected, maintained and kept in good repair and
make all replacements and additions to such Property as may be reasonably
necessary to conduct its business properly and efficiently.
5F. MAINTENANCE OF INSURANCE. The Company will carry and maintain, and
cause each Subsidiary to carry and maintain, insurance (subject to customary
deductibles and retentions) in at least such amounts and against such
liabilities and hazards and by such methods as customarily maintained by other
companies operating similar businesses. The Collateral Agent and all holders of
Securities shall be named as additional insureds, and the Collateral Agent shall
be named as loss payee, on each insurance policy obtained or maintained by the
Company and its Subsidiaries with respect to their properties and businesses.
5G. MAINTENANCE OF DIRECTORS' AND OFFICERS' INSURANCE. The Company
will carry and maintain directors' and officers' liability insurance in at least
such amounts and against such liabilities and hazards and by such methods as
customarily maintained by other companies operating similar businesses which, in
any event, shall be in at least such amounts (subject to customary deductibles
and retentions) and against such liabilities and by such methods as are
maintained by the Company as of the Date of Closing.
5H. ERISA COMPLIANCE. To the extent required under applicable
statutory funding requirements, the Company will fund, or will cause the
applicable member of the Controlled Group to fund, all current service pension
liabilities as they are incurred under the provisions of all Plans from time to
time in effect, and comply with all applicable provisions of ERISA, in each
case, except
14
to the extent that failure to do the same could not reasonably be expected to
have a Material Adverse Effect. The Company covenants that it shall and shall
cause each member of the Controlled Group to (i) make contributions to each Plan
in a timely manner and in an amount sufficient to comply with the contribution
obligations under such Plan and the minimum funding standards requirements of
ERISA; (ii) prepare and file in a timely manner all notices and reports required
under the terms of ERISA including but not limited to annual reports; and (iii)
pay in a timely manner all required PBGC premiums, in each case, except to the
extent that failure to do the same could not reasonably be expected to have a
Material Adverse Effect.
5I. MAINTENANCE OF COMMITTED CREDIT FACILITY. The Company will at all
times after the earlier of (i) January 6, 1999 or (ii) the effective date of the
initial Credit Agreement maintain a committed revolving credit facility of not
less than $2,500,000 and maintain its ability to satisfy all conditions
precedent to its ability to obtain advances thereunder, and the remaining
commitment period with respect to such facility shall at all times be at least
12 months.
5J. COLLATERAL; NEW SUBSIDIARIES; FOREIGN SUBSIDIARIES.
(i) It is the intent of the parties that all obligations of the
Company and its Subsidiaries under the Subordinated Note Documents shall be
secured by, among other things, substantially all the property and assets
(whether now existing or hereafter acquired) of the Company and its
Domestic Subsidiaries and Significant Foreign Subsidiaries and, during the
existence of a Default or an Event of Default, each Subsidiary (in each
case, whether now existing or hereafter acquired or created), including,
without limitation, real property and other properties acquired subsequent
to the Date of Closing and whether owned by existing Subsidiaries or by
subsequently acquired or organized Subsidiaries.
(ii) At its expense the Company shall execute and deliver, and shall
cause its Subsidiaries to execute and deliver, any and all documents,
financing statements, agreements and instruments, and take all action
(including, without limitation, filing Uniform Commercial Code and other
financing statements, mortgages and deeds of trust and any notices or other
documents customarily filed with the U.S. Patent and Trademark Office or
the U.S. Copyright Office) that may be required under applicable law, or
that the Required Holders or the Collateral Agent may reasonably request,
in order to effectuate the transactions contemplated by the Subordinated
Note Documents and in order to grant, preserve, protect and perfect the
validity and priority of the security interests and ▇▇▇▇▇ created or
purported to be created by the Security Documents or in order to effectuate
the intent of the parties set forth in clause (i) of this paragraph 5J.
(iii) At the cost and expense of the Company, the Company will (a)
cause each subsequently acquired or organized Domestic Subsidiary
(contemporaneously with such acquisition or organization) to execute and
deliver a Guaranty Agreement in favor of the holders of the Notes and each
Security Document that the Collateral Agent or the Required Holders may
request in order to grant the Collateral Agent a valid, perfected pledge or
15
security interest in the assets and properties, including, without
limitation, the capital stock or other equity interest of such Domestic
Subsidiary in its Domestic Subsidiaries, (b) cause any Domestic Subsidiary
that has not executed a Pledge Agreement and that itself has a subsequently
acquired or organized Domestic Subsidiary to execute and deliver a Pledge
Agreement pledging all of the capital stock or other equity interests of
such subsequently acquired or organized Domestic Subsidiary in favor of the
Collateral Agent and (c) pursuant to any applicable Pledge Agreement of the
Company or a Subsidiary, deliver, or cause such Subsidiary to deliver, to
the Collateral Agent the certificates, stock powers and notices required by
such Pledge Agreement with respect to such subsequently acquired or
organized Domestic Subsidiary (or take or cause such Subsidiary to take
such other actions as are necessary to provide the Collateral Agent with a
perfected pledge of, or security interest in, the capital stock or other
equity interests of such subsequently acquired or organized Domestic
Subsidiary that is the subject of such Pledge Agreement).
(iv) At the cost and expense of the Company and upon the request of
the Collateral Agent or the Required Holders, the Company will (a) cause
each Significant Foreign Subsidiary (or, during the existence of a Default
or an Event of Default, any Subsidiary) to execute and deliver a Guaranty
Agreement, in favor of the holder of the Notes, and each Security Document
that the Collateral Agent or the Required Holders may request in order to
grant the Collateral Agent a valid, perfected pledge or security interest
in the assets and properties, including, without limitation, the capital
stock or other equity interest owned by such Significant Foreign Subsidiary
in its own Subsidiaries, (b) cause any Subsidiary that has not executed a
Pledge Agreement and that itself has a Significant Foreign Subsidiary (or,
during the existence of a Default or an Event of Default, a Subsidiary that
is not a Domestic Subsidiary) to execute and deliver a Pledge Agreement
pledging all of the capital stock or other equity interests of such
Subsidiary in favor of the Collateral Agent and (c) pursuant to any
applicable Pledge Agreement of the Company or a Subsidiary, deliver or
cause such Subsidiary to deliver to the Collateral Agent the certificates,
stock powers and notices required by such Pledge Agreement with respect to
such Subsidiary (or take or cause such Subsidiary to take such other
actions as are necessary to provide the Collateral Agent with a perfected
pledge of or security interest in the capital stock or other equity
interests of the Subsidiary covered by such Pledge Agreement).
(v) Any security interests and Liens granted by the Company and its
Subsidiaries pursuant to this paragraph 5J will be created under the
Security Documents and any other security agreements, mortgages, deeds of
trust, other instruments and documents in form, scope and substance
satisfactory to the Required Holders and the Collateral Agent and, at its
expense, the Company will deliver or cause to be delivered to the
Collateral Agent, all such instruments and documents (including, without
limitation, legal opinions, title insurance policies, surveys and lien
searches or searches for liens on encumbrances upon intellectual property)
as the Required Holders or the Collateral Agent shall reasonably request to
evidence compliance with this paragraph 5J. The Company agrees to provide
from time to
16
time such evidence as the Required Holders or the Collateral Agent shall
reasonably request as to the perfection and priority status of each such
security interest and Lien.
5K. ENFORCEMENT OF ACQUISITION DOCUMENTS. The Company will enforce,
and will cause each of its Subsidiaries parties thereto to enforce (except where
failure to so enforce could not have a Material Adverse Effect), all covenants,
agreements and other obligations contained in the Acquisition Documents which
are binding upon the other parties thereto and which survive the consummation of
the Acquisition, including, without limitation, all indemnification obligations.
5L. MAINTENANCE OF BOOKS OF RECORD; RESERVES. The Company, both
individually and on a consolidated basis, will keep proper books of record and
account and set aside appropriate reserves, all in accordance with GAAP.
PARAGRAPH 6. NEGATIVE COVENANTS.
6. NEGATIVE COVENANTS. So long as any Note shall remain unpaid the Company
covenants that:
6A. FINANCIAL COVENANTS. The Company will not permit:
6A(1). TOTAL DEBT TO EBITDA RATIO. At any time during the period set
forthbelow, the ratio of Total Debt to EBITDA for the four fiscal quarters
most recently ended, commencing with the four fiscal quarters ended on June
30, 1998, to be greater than the ratio set forth opposite such period
below:
Period Maximum Ratio
------ -------------
Date of Closing through June 30, 1999 4.25 to 1.00
July 1, 1999 through June 30, 2000 3.75 to 1.00
July 1, 2000 through June 30, 2001 3.50 to 1.00
July 1, 2001 until all Notes have been paid 3.25 to 1.00
6A(2). CONSOLIDATED NET WORTH. At any time Consolidated Net Worth
to be less than the sum of (i)$17,476,800 plus (ii) 75% of any Net Equity
Proceeds plus (iii) the cumulative total of 80% of Consolidated Net Income
for each fiscal quarter after the Date of Closing in which Consolidated Net
Income is positive.
6A(3). CURRENT RATIO. At any time, the ratio of (i)(a) Consolidated
Current Assets plus (b) the unused commitments, if any, under the Credit
Agreement to (ii) Consolidated Current Liabilities to be less than 1.00 to
1.00.
6A(4). EBITDA TO CONSOLIDATED INTEREST EXPENSE AND PREFERRED
DIVIDENDS RATIO. At any time, the ratio of EBITDA to Consolidated Interest
Expense and Preferred
17
Dividends, each for the four fiscal quarters most recently ended, to be
greater than 1.75 to 1.00.
6A(5). EBITDA TO CONSOLIDATED INTEREST EXPENSE AND PREFERRED
DIVIDENDS PLUS SCHEDULED PRINCIPAL PAYMENTS RATIO. At any time, the ratio
of EBITDA to Consolidated Interest Expense and Preferred Dividends, plus
Scheduled Principal Payments, each for the four fiscal quarters most
recently ended, to be greater than 1.25 to 1.00.
6A(6). PRIORITY DEBT. At any time, Priority Debt to exceed 5% of
Consolidated Net Worth.
6B. LIMITATION ON RESTRICTED PAYMENTS. The Company will not and will
not permit any Subsidiary to directly or indirectly declare, order, pay, make or
set apart any sum for any Restricted Payment.
6C. LIENS, INDEBTEDNESS, AND OTHER RESTRICTIONS. The Company will not
and will not permit any Subsidiary to:
6C(1). LIENS. Create, assume or suffer to exist any Lien upon any
of its properties or assets, whether now owned or hereafter acquired
(whether or not provision is made for the equal and ratable securing of the
Notes in accordance with the provisions of paragraph 5D), except:
(i) Liens in favor of the Collateral Agent securing the Notes and
the payment, performance and observance of the other obligations under
this Agreement and the other Subordinated Note Documents;
(ii) Liens securing Senior Debt of the Company and its
Subsidiaries to the Senior Lenders under the applicable Senior Loan
Agreement and other Senior Loan Documents;
(iii) Liens on property of the Company and its Subsidiaries
outstanding on the Date of Closing, described in Schedule 9D attached
hereto, and securing Indebtedness permitted by paragraph 6C(2);
(iv) statutory Liens incidental to the conduct of business or the
ownership of properties of the Company and its Subsidiaries (including
Liens in connection with worker's compensation, unemployment insurance
and other like laws (other than ▇▇▇▇▇ ▇▇▇▇▇), warehousemen's and
mechanic's liens and statutory landlord's liens) and Liens to secure
the performance of bids, tenders or purchase, construction or sales
contracts, or to secure statutory obligations, property taxes and
assessments or governmental charges, surety or appeal bonds or other
Liens of like general nature which in each case are incurred in the
ordinary course of business and not in
18
connection with the borrowing of money, the obtaining of advances or
credit or the payment of the deferred purchase price of property and
which do not in any event materially impair the value or use of the
property encumbered thereby in the operation of the business of the
Company and its Subsidiaries; provided in each case, that the
obligation secured is not overdue;
(v) any Lien created to secure all or any part of the purchase
price, or to secure Indebtedness incurred or assumed to pay all or any
part of the purchase price, of property acquired by the Company or its
Subsidiaries after the Date of Closing, provided, that any such Lien
shall be confined solely to the item or items of property so acquired
and, if required by the terms of the instrument originally creating
such Lien, other property which is an improvement to or is acquired
for specific use in connection with such acquired property; and
(vi) Liens securing the Permitted Subordinated Debt so long as
the Liens granted pursuant to the Security Documents, that secure
payment and performance of this Agreement, the Notes and the other
Subordinated Note Documents, remain in effect.
6C(2). LIMITATION ON INDEBTEDNESS. Create, incur, assume or permit
to exist any Indebtedness other than:
(i) Indebtedness incurred pursuant to this Agreement, as
evidenced by the Notes, and the guaranty obligations of the Company's
Subsidiaries with respect thereto;
(ii) Indebtedness incurred pursuant to the applicable Senior Loan
Agreement not in excess of $55,000,000 and the guaranty obligations of
the Company's Subsidiaries with respect thereto;
(iii) trade payables and current Indebtedness (other than for
borrowed money) incurred in, and deposits and advances accepted in,
the ordinary course of business;
(iv) Indebtedness of the Company and its Subsidiaries outstanding
on the Date of Closing and described in Schedule 9D attached hereto;
(v) Indebtedness secured by the Liens permitted pursuant to
clause (v) of paragraph 6C(1); and
(vi) the Permitted Subordinated Debt.
6C(3). LOANS AND INVESTMENTS. Make any loan, advance, extension of
credit or capital contribution to, or make or have any Investment in, any
Person, or make any commitment to make any such extension of credit or
Investment, except (i) Permitted Investments; (ii) normal and reasonable
advances in the ordinary course of business to
19
officers and employees; (iii) accounts receivable and accounts payable
arising in the ordinary course of business; (iv) deposits in money market
funds investing exclusively in Permitted Investments; (v) Investments
disclosed in the financial statements delivered pursuant to paragraph 5A;
(vi) routine advances by any Transaction Party to another Transaction Party
(or any Subsidiary of a Transaction Party) in the ordinary course of
business other than Investments, not to exceed $500,000 in the aggregate at
any time; and (vii) other Investments not to exceed $500,000 in the
aggregate at any time.
6C(4). MERGERS, CONSOLIDATIONS AND ACQUISITIONS, DISPOSITIONS OF
ASSETS, ETC. (i) In any single transaction or series of transactions,
directly or indirectly: (a) liquidate or dissolve provided that any
Subsidiary of the Company may liquidate, dissolve or take action to wind-up
its operations if (1) the Company determines such action to be in the best
interests of the Company and its Subsidiaries, (2) liquidating dividends
are paid to the Company, and (3) the Company gives the holder of each Note
and the Collateral Agent written notice of such action at least thirty (30)
days prior to taking such action; (b) be a party to any merger or
consolidation unless and so long as (1) no Default or Event of Default has
occurred that is then continuing, (2) immediately thereafter and giving
effect thereto, no event will occur and be continuing which constitutes a
Default or an Event of Default, (3) a Transaction Party is the surviving
Person (provided, that the Company must be the surviving Person in a merger
or consolidation that involves the Company); (4) the surviving Person
ratifies and assumes each Subordinated Note Document to which any party to
such merger was a party, and (5) the holder of each Note and the Collateral
Agent are given at least 30 days' prior notice of such merger or
consolidation; or (c) except for Liens securing Senior Debt of the Company
and its Subsidiaries to the Senior Lenders under the applicable Senior Loan
Agreement and other Senior Loan Documents and Liens in favor of the
Collateral Agent, pledge, transfer or otherwise dispose of any equity
interest in any of the Company's Subsidiaries or any Indebtedness of any of
the Company's Subsidiaries or issue or permit any Subsidiary of the Company
to issue any additional equity interest other than stock dividends subject
to a Lien in favor of the Collateral Agent or the Senior Lenders under the
applicable Senior Loan Agreement or the other Senior Loan Documents or (ii)
acquire any real Property or any material personal Property after the Date
of Closing with respect to which the aggregate consideration for a single
transaction in the form of cash and assumed Indebtedness would exceed
$5,000,000.
6C(5). LIMITATION ON ASSET DISPOSITIONS. Except as permitted under
paragraph 6C(4), make or permit to be made in any consecutive twelve month
period, any Asset Disposition or series of Asset Dispositions that,
individually or in the aggregate, involve more than 3% of the Consolidated
Tangible Assets of the Company and its Subsidiaries as determined on last
day of the most recently ended fiscal quarter.
20
6C(6). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse,
discount (other than to the extent of finance and interest charges included
therein) or otherwise sell for less than face value thereof, any of its
notes or accounts receivable, except notes or accounts receivable the
collection of which is doubtful in accordance with GAAP.
6C(7). TRANSACTIONS WITH AFFILIATES. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease
any property to, or otherwise deal with, in the ordinary course of business
or otherwise (i) any Affiliate, (ii) any Person owning, beneficially or of
record, directly or indirectly, either individually or together with all
other Persons to whom such Person is related by blood, adoption or
marriage, stock of the Company (of any class having ordinary voting power
for the election of directors) aggregating 5% or more of such voting power
or (iii) any Person related by blood, adoption or marriage to any Person
described or coming within the provisions of clause (i) or (ii) of this
paragraph 6C(7), except in the ordinary course and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.
6C(8). LIMITATION ON SALE-LEASEBACK TRANSACTIONS. Enter into any
arrangement with any lender or investor or to which such lender or investor
is a party providing for the leasing by the Company or any Subsidiary of
real or personal property which has been or is to be sold or transferred by
the Company or any Subsidiary to such lender or investor or to any Person
to whom funds have been or are to be advanced by such lender or investor on
the security of such property or rental obligations of the Company or any
Subsidiary (each such arrangement, a "SALE-LEASEBACK TRANSACTION").
6C(9). PREPAYMENT OF CERTAIN INDEBTEDNESS. Pay, purchase, prepay,
acquire or otherwise retire prior to maturity or in violation of the
provisions of that certain Subordination Agreement, dated as of July 23,
1998, between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and you, in whole or in part, any
Indebtedness of the Company to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ unless (i) such
Indebtedness is prepaid out of the proceeds of the Credit Agreement or the
issuance of the Permitted Subordinated Debt or the Contemplated Preferred
Stock and (ii) no Default or Event of Default exists either immediately
prior to, or after giving effect to, such prepayment.
6D. NATURE OF BUSINESS. The Company will not and will not permit any
Subsidiary to change the nature of its business or enter into any business which
is substantially dissimilar from the businesses in which it is presently engaged
or presently proposes to engage as described in public filings of the Company as
of the date hereof.
6E. CERTIFICATES OF INCORPORATION; BYLAWS; TRADE NAMES. The Company
will not and will not permit any Subsidiary to amend, alter, modify or restate
its Certificate of Incorporation or bylaws in any way which would (i) change its
corporate name or adopt a trade name, or (ii) in any
21
manner adversely affect the obligations or covenants of the Company and its
Subsidiaries hereunder or under any of the other Subordinated Note Documents.
6F. OTHER AGREEMENTS. The Company will not and will not permit any of
its Subsidiaries to enter into or permit to exist any agreement (i) which would
cause a Default or Event of Default hereunder or (ii) which contains any
provision which would be violated or breached by the performance of the
obligations of the Company and its Subsidiaries hereunder or under any of the
other Subordinated Note Documents.
6G. LIMITATION ON CERTAIN RESTRICTIVE AGREEMENTS. The Company will
not, and will not permit any of its Subsidiaries to, enter into or suffer to
exist any contractual obligation, other than the applicable Senior Loan
Agreement and the other Senior Loan Documents and the Subordinated Note
Documents, which in any way restricts the ability of the Company or any of its
Subsidiaries to (i) create, incur, assume or suffer to exist any Lien upon any
of its property, assets or revenues, (ii) make any prepayments or purchases of
the Notes required under this Agreement, (iii) make any dividends or
distributions, or any payments required under this Agreement or any other
Subordinated Note Document or (iv) transfer any of its property or assets
(whether as a dividend or otherwise) to the Company or a Wholly Owned Subsidiary
of the Company.
6H. PROHIBITION AGAINST LAYERING. The Company will not and will not
permit any Subsidiary to incur, create, issue, assume, guarantee or in any other
manner become directly or indirectly liable with respect to or responsible for,
or permit to remain outstanding, any Indebtedness (including, without
limitation, Indebtedness permitted pursuant to paragraphs 6A and 6C(2)), that is
subordinate or junior in right of payment to any Senior Debt or any Guarantee in
respect thereof other than Permitted Subordinated Debt.
6I. LIMITATION ON SUBSIDIARIES ACTIVITIES. (i) The Company will not
permit any Subsidiary to issue any Voting Stock of such Subsidiary or other
equity interest in such Subsidiary except to the Company or a Wholly Owned
Subsidiary, (ii) the Company will not and will not permit any Subsidiary to sell
or transfer any Indebtedness or Voting Stock of another Subsidiary or other
equity interests in such other Subsidiary except to the Company or a Wholly
Owned Subsidiary and (iii) the Company will not and will not permit any
Subsidiary to form, create or acquire any Subsidiary, except that the Company
may (subject to the other provisions of this Agreement) form, create or acquire
a Wholly Owned Subsidiary so long as (a) immediately thereafter and giving
effect thereto, no event will occur and be continuing which constitutes a
Default; (b) such Subsidiary (and, where applicable, the Company) shall execute
and deliver a Guaranty Agreement and such Security Documents as the Required
Holders may reasonably require, and (c) the holder of each Note and the
Collateral Agent is given at least 30 days' prior notice of such formation,
creation or acquisition.
6J. LIMITATION ON ISSUANCE OF PREFERRED STOCK. At any time prior to
July 23, 1999, the Company will not issue, and will not permit to remain
outstanding, any shares of capital stock of the Company that are entitled to
preference or priority over any other shares of the capital stock of the
22
Company in respect of payment of dividends or distribution of assets upon
liquidation other than the Existing Preferred Stock and the Contemplated
Preferred Stock.
PARAGRAPH 7. SUBORDINATION OF NOTES.
7. SUBORDINATION OF NOTES.
7A. SUBORDINATION. Anything in this Agreement to the contrary
notwithstanding, the indebtedness evidenced by the Notes, for the principal,
Yield Maintenance Amount, if any, and interest, shall be subordinate and junior
to the extent set forth in subparagraphs (i) to (v), inclusive, below, to all
Senior Debt.
(i) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company, and in the
event of any proceedings for voluntary liquidation, dissolution or other
winding up of the Company, whether or not involving insolvency or
bankruptcy proceedings, then all Senior Debt shall first be paid in full
before any payment of or on account of principal, Yield Maintenance Amount,
if any, or interest is made by the Company upon the Notes.
The consolidation of the Company with, or the merger of the Company with or
into, another corporation or entity or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation or entity upon the terms
and conditions provided in paragraph 6C(4) shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this paragraph if
such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in paragraph 6C(4).
(ii) In any of the proceedings referred to in subparagraph (i) above,
any payment or distribution of any kind or character, whether in cash,
property, stock or obligations, which may be payable or deliverable by the
Company in respect of the Notes shall be paid or delivered directly to the
holders of Senior Debt (or to a banking institution selected by the court
or Person making the payment or delivery or designated by any holder of
Senior Debt) for application in payment thereof in accordance with the
priorities then existing among such holders, unless and until all Senior
Debt shall have been paid in full; provided, however, that
(a) if the payment or delivery by the Company of such cash,
property, stock or obligations to the holders of the Notes is authorized by
an order or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of the Notes to Senior Debt, and made
in a reorganization proceeding under any applicable bankruptcy or
reorganization law, no payment or delivery by the Company of such cash,
property, stock or obligations payable or deliverable with respect to the
Notes shall be made to the holders of Senior Debt; and
23
(b) no such delivery shall be made to holders of Senior Debt of
stock or obligations which are issued pursuant to reorganization
proceedings if such stock or obligations are subordinate and junior
(whether by law or agreement) at least to the extent provided in this
paragraph 7 to the payment of all Senior Debt then outstanding and to the
payment of any stock or obligations which are issued in exchange or
substitution for any Senior Debt then outstanding.
(iii) If the Company shall default in the payment of any principal
of or interest on any Senior Debt in an amount in excess of $250,000 owing
under any single instrument when the same becomes due and payable, whether
at maturity or at a date fixed for prepayment or by declaration of
acceleration or otherwise, then, unless and until the date on which such
default shall have been remedied by payment in full or waived, no holder of
the Notes shall accept or receive any direct or indirect payment of or on
account of any indebtedness in respect of the Notes.
(iv) Upon the occurrence and during the continuance of any Default
Subordination Event (other than under circumstances when the terms of
subparagraph (i) above are applicable), no holder of the Notes shall accept
or receive any direct or indirect payment by set-off or otherwise of or on
account of any indebtedness in respect of the Notes during the Stand-Still
Period, provided that (a) there shall be no more than two Stand-Still
Periods during the term of the Notes and only one in any period of 365
consecutive days and (b) in the case of any payment on or in respect of any
Notes which would (in the absence of any such Default Subordination Event)
have been due and payable on any date during such Stand-Still Period, the
provisions of this subparagraph (iv) shall not prevent such payment on or
after the date immediately following the termination of such Stand-Still
Period.
(v) If any payment or distribution of any character, whether in cash,
securities or other property, shall be received by any holder of Notes in
contravention of any of the terms of this paragraph 7 and before all the
Senior Debt shall have been paid in full, such payment or distribution
shall be received in trust for the benefit of the holders of the Senior
Debt at the time outstanding and shall forthwith be paid over or delivered
and transferred to the holders of Senior Debt.
7B. OBLIGATION OF THE COMPANY UNCONDITIONAL. The provisions of this
paragraph 7 are for the purpose of defining the relative rights of the holders
of Senior Debt on the one hand, and the holders of the Notes on the other hand,
against the Company and its property, and nothing herein shall impair, as
between the Company and the holders of the Notes, the obligation of the Company,
which is unconditional and absolute, to pay to the holders thereof the principal
thereof and Yield Maintenance Amount, if any, and interest thereon in accordance
with their terms and the provisions
24
hereof, nor shall anything herein prevent the holders of the Notes from
exercising all remedies otherwise permitted by applicable law or hereunder upon
default hereunder or under the Notes (including, without limitation, the right
to demand payment and sue for performance hereof and of the Notes and to
accelerate the maturity thereof as provided in paragraph 8A), subject to the
rights, if any, under this paragraph 7 of holders of Senior Debt to receive
cash, property, stock or obligations otherwise payable or deliverable by the
Company to the holders of the Notes.
7C. SUBROGATION. Upon full and final payment of Senior Debt, the
holders of the Notes shall be subrogated to the rights of the holders of the
Senior Debt to receive payments or distributions of assets of the Company made
on Senior Debt until the principal of and Yield Maintenance Amount, if any, and
interest on the Notes shall be paid in full, and, for the purposes of such
subrogation, no payments to the holders of Senior Debt of any cash, property,
stock or obligations to which the holders of the Notes would be entitled (except
for the provisions of paragraph 7A(ii) above) shall, as between the Company, its
creditors (other than the holders of the Senior Debt) and the holders of the
Notes, be deemed to be a payment by the Company to or on account of Senior Debt.
7D. SUBORDINATION DEFINITIONS.
"DEFAULT SUBORDINATION EVENT" shall mean the existence of all of the
following: (i) a Subordination Event of Default shall have occurred and be
continuing in respect of any Senior Debt, (ii) the holders of the Notes shall
have received a notice from or on behalf of any holder of such Senior Debt
identifying each Subordination Event of Default which has occurred and is
continuing and that such notice constitutes a "DEFAULT SUBORDINATION NOTICE" and
(iii) no other Default Subordination Notice shall have been delivered by any
holder of Senior Debt within the 365 day period immediately preceding the giving
of such notice; provided that no fact or circumstances or a Subordinated Event
of Default existing on the date of such Default Subordinated Notice may be used
as a basis for any subsequent Default Subordination Notice. The "STAND-STILL
PERIOD" relating to any Default Subordination Event shall be deemed to continue
until the earlier of (x) the Subordination Event of Default under the Senior
Debt giving rise thereto shall have been cured or waived, (y) a period of 90
days shall have elapsed from the giving of the Default Subordination Notice
relating thereto and (z) the maturity of such Senior Debt shall have been
accelerated.
"SENIOR DEBT" shall mean Indebtedness for borrowed money, principal,
interest and premium, if any, outstanding under the applicable Senior Loan
Agreement not incurred in violation of any covenant contained in this Agreement.
"SUBORDINATION EVENT OF DEFAULT" shall mean (i) any default in the payment
of any principal or interest on any Senior Debt in an amount of $250,000 or less
owing under any single instrument when the same becomes due and payable, or (ii)
any event of default under any agreement evidencing Senior Debt arising as a
result of a breach of covenants which would entitle the holders of such Senior
Debt to accelerate the obligations under such Senior Debt.
25
PARAGRAPH 8. EVENTS OF DEFAULT.
8. EVENTS OF DEFAULT.
8A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or Yield
Maintenance Amount payable with respect to any Note, in either case, when
the same shall become due, either by the terms thereof or otherwise as
herein provided; or
(ii) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the date due; or
(iii) the Company or any Subsidiary (a) defaults (whether as primary
obligor or as guarantor or other surety) in any payment of principal of or
interest on any other obligation for money borrowed (or any Capitalized
Lease Obligation, any obligation under a conditional sale or other title
retention agreement, any obligation issued or assumed as full or partial
payment for property whether or not secured by a purchase money mortgage or
any obligation under notes payable or drafts accepted representing
extensions of credit) beyond any period of grace provided with respect
thereto or (b) fails to perform or observe any other agreement, term or
condition contained in any agreement under which any such obligation is
created (or if any other event thereunder or under any such agreement shall
occur and be continuing) and the effect of such failure or other event is
to cause such obligation to become due (or to be repurchased by the Company
or any Subsidiary) prior to any stated maturity; provided, that the
aggregate amount of all obligations as to which such a payment default
shall occur and be continuing or such a failure or other event causing
acceleration (or sale to the Company or any Subsidiary) shall occur and be
continuing exceeds $2,500,000; or
(iv) any representation or warranty made by the Company or any of its
Subsidiaries herein or in any of the other Subordinated Note Documents, or
by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement shall be false in any
material respect on the date as of which made; or
(v) the Company fails to perform or observe any term, covenant or
agreement contained in paragraph 6; or
(vi) the Company or any Subsidiary fails to perform or observe any
other agreement, covenant, term or condition contained herein or in any of
the other Subordinated Note Documents and such failure continues unremedied
for a period of 30 days after (a) notice thereof is given by the holder of
any Note to the Company or (b) the Company otherwise obtains Knowledge of
such default, whichever is earlier; or
26
(vii) the Company or any Significant Subsidiary makes an assignment
for the benefit of creditors or is generally not paying its debts as such
debts become due; or
(viii) any decree or order for relief in respect of the Company or
any Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law, whether now or hereafter in effect (the "BANKRUPTCY LAW"),
of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to any
Tribunal for, or consents to, the appointment of, or taking possession by,
a trustee, receiver, custodian, liquidator or similar official of the
Company or any Subsidiary, or of any substantial part of the assets of the
Company or any Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Company or any Subsidiary under the Bankruptcy Law of any
other jurisdiction; or
(x) any such petition or application is filed, or any such proceedings
are commenced, against the Company or any Subsidiary and the Company or
such Subsidiary by any act indicates its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 30
days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary which requires the divestiture of assets representing
10% or more of the Consolidated Net Worth, or the divestiture of assets or
stock of a Significant Subsidiary, and such order, judgment or decree
remains unstayed and in effect for more than 30 days; or
(xiii) any judgment or order, or series of judgments or orders, in an
amount in excess of $500,000, is rendered against the Company or any
Subsidiary and either (i) enforcement proceedings have been commenced by
any creditor upon such judgment or order or (ii) within 60 days after entry
thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within 60 days after the expiration of any such stay,
such judgment is not discharged; or
(xiv) any Termination Event with respect to a Plan shall have
occurred and, within 30 days after the occurrence thereof, (a) such
Termination Event (if correctable) shall not
27
have been corrected and (b) the then present value of such Plan's vested
benefits exceeds the then current value of assets accumulated in such Plan
by more than the amount of $1,000,000 (or in the case of a Termination
Event involving the withdrawal of a "substantial employer" (as defined in
Section 4001(a) (2) of ERISA), the withdrawing employer's proportionate
share of such excess shall exceed such amount); or
(xv) the Company or any of its ERISA Affiliates as employer under a
Multiemployer Plan shall have made a complete or partial withdrawal from
such Multiemployer Plan and the plan sponsor of such Multiemployer Plan
shall have notified such withdrawing employer that such employer has
incurred a withdrawal liability in an aggregate amount exceeding
$1,000,000; or
(xvi) any Guaranty Agreement shall for any reason cease to be valid
and binding on the applicable guarantor or any party to a Guaranty
Agreement states to any holder of a Note or asserts in writing that the
applicable Guaranty Agreement is not valid and binding on such guarantor;
or
(xvii) any Security Document shall for any reason cease to be valid
and binding on the Company or any Subsidiary that is a party thereto, the
Company or any Subsidiary that is a party to a Security Document states to
any holder of a Note or asserts in writing that the applicable Security
Document is not valid and binding against it or any Security Document shall
for any reason cease to create a valid, perfected Lien in all or a
substantial portion of the Collateral purported to be covered thereby;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 8A, the holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare such Note to be, and such Note shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company, (b) if such event is an Event of Default
specified in clause (viii), (ix) or (x) of this paragraph 8A, all of the Notes
at the time outstanding shall automatically become immediately due and payable
together with interest accrued thereon and together with the Yield Maintenance
Amount, if any, with respect to each Note, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Company, and (c) if
such event is not an Event of Default specified in clause (viii), (ix) or (x) of
this paragraph 8A, the Required Holder(s) may at its or their option, by notice
in writing to the Company, declare all of the Notes to be, and all of the Notes
shall thereupon be and become, immediately due and payable together with
interest accrued thereon and together with the Yield Maintenance Amount, if any,
with respect to each Note, without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company.
The Company acknowledges, and the parties hereto agree, that each holder of a
Note has the right to maintain its investment in the Notes free from repayment
by the Company (except as herein specifically provided for) and that the
provisions for payment of the Yield Maintenance Amount by
28
the Company in the event that the Notes are prepaid or are accelerated as a
result of an Event of Default are intended to provide compensation for the
deprivation of such right under such circumstances.
8B. RESCISSION OF ACCELERATION. At any time after any or all of the
Notes shall have been declared immediately due and payable pursuant to paragraph
8A, the Required Holder(s) may, by notice in writing to the Company, rescind and
annul such declaration and its consequences if (i) the Company shall have paid
all overdue interest on the Notes, the principal of the Notes which has become
due otherwise than by reason of such declaration, and interest on such overdue
interest and overdue principal at the rate specified in the Notes, (ii) the
Company shall not have paid any amounts which have become due solely by reason
of such declaration, (iii) all Events of Default and Defaults, other than non-
payment of amounts which have become due solely by reason of such declaration,
shall have been cured or waived pursuant to paragraph 12C, and (iv) no judgment
or decree shall have been entered for the payment of any amounts due pursuant to
the Notes or this Agreement. No such rescission or annulment shall extend to or
affect any subsequent Event of Default or Default or impair any right arising
therefrom.
8C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 8A or any such
declaration shall be rescinded and annulled pursuant to paragraph 8B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
8D. OTHER REMEDIES. If any Event of Default or Default shall occur and
be continuing, (i) the holder of any Note may proceed to protect and enforce its
rights under this Agreement, such Note and the other Subordinated Note Documents
by exercising such remedies as are available to such holder in respect thereof
under applicable law, either by suit in equity or by action at law, or both,
whether for specific performance of any covenant or other agreement contained in
this Agreement or the other Subordinated Note Documents or in aid of the
exercise of any power granted in this Agreement or the other Subordinated Note
Documents, and (ii) both the Collateral Agent and the holders of the Notes may
exercise any rights or remedies in their respective capacities under the
Security Documents in accordance with the provisions thereof. No remedy
conferred in this Agreement or the other Subordinated Note Documents upon the
holder of any Note or the Collateral Agent is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter exist ing
at law or in equity or by statute or otherwise.
PARAGRAPH 9. REPRESENTATIONS, COVENANTS AND WARRANTIES.
9. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows:
9A. ORGANIZATION AND QUALIFICATION. Each of the Transaction Parties is
a corporation duly organized and validly existing in good standing under the
laws of its state of incorporation, and
29
is duly licensed and in good standing as a foreign corporation in each
jurisdiction in which the nature of the business transacted or the property
owned is such as to require licensing or qualification as a foreign corporation.
The Company has no Subsidiaries other than the Subsidiaries listed on Schedule
9A, each of which is a Wholly Owned Subsidiary of the Company. The execution,
delivery and performance by the Company of the Notes, the Warrants, this
Agreement, the other Subordinated Note Documents and the Acquisition Documents
to which it is a party, and the execution, delivery and performance by each of
the other Transaction Parties of the Subordinated Note Documents and Acquisition
Documents to which it is a party, are within the Company's and the other
Transaction Parties' respective corporate powers and have been duly authorized
by all necessary corporate action.
9B. FINANCIAL STATEMENTS. The Company has furnished you with the
following financial statements, identified by a principal financial officer of
the Company: (i) consolidated balance sheets of the Company and its
Subsidiaries as at December 31, 1997, and consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for the
six months ended December 31,1997, all reported on by ▇▇▇▇ + Associates, LLP;
(ii) consolidated balance sheets of the Company and its Subsidiaries as at June
30 in each of the years 1996 and 1997 and consolidated statements of income,
stockholders' equity and cash flows for the fiscal years ended on each such
date, reported on by ▇▇▇▇ + Associates, LLP; and (iii) consolidated balance
sheets of the Company and its Subsidiaries as of March 31, 1998, and
consolidated statements of income, stockholders' equity and cash flows for the
three months ended March 31, 1998, prepared by the Company. Such financial
statements (including any related schedules and/or notes) are true and correct
in all material respects (subject, as to interim statements, to changes
resulting from audits and year-end adjustments), have been prepared in
accordance with GAAP consistently followed through out the periods involved and
show all liabilities, direct and contingent, of the Company and its Subsidiaries
required to be shown in accordance with such principles. The balance sheets
fairly present the condition of the Company and its Subsidiaries as at the dates
thereof, and the statements of income, stockholders' equity and cash flows
fairly present the results of the operations of the Company and its Subsidiaries
and their cash flows for the periods indicated. There has been no Material
Adverse Effect since December 31, 1997.
9C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which, if adversely determined, might result in a liability
of greater than $100,000 or might otherwise result in any Material Adverse
Effect. There is no action, suit, investigation or proceeding pending or
threatened against the Company or any of its Subsidiaries which purports to
affect the validity or enforceability of this Agreement, any Note, any Warrant,
any of the other Subordinated Note Documents or any of the Acquisition
Documents.
9D. OUTSTANDING INDEBTEDNESS. Neither the Company nor any of its
Subsidiaries has outstanding any Indebtedness except as permitted by paragraphs
6A and 6C(2), all of which Indebtedness is described in Schedule 9D attached
hereto. There exists no default under (and no
30
waiver of default is currently in effect with respect to) the provisions of any
instrument evidencing such Indebtedness or of any agreement relating thereto,
and no event or condition exists with respect to any Indebtedness of the Company
or any Subsidiary that would permit (or that with notice or the lapse of time,
or both, would permit) one or more Persons to cause such Indebtedness to become
due and payable before its stated maturity or before its regularly scheduled
dates of payment.
9E. TITLE TO PROPERTIES. The Company has and each of its Subsidiaries
has good and marketable title to its respective real properties (other than
properties which it leases) and good title to all of its other respective
properties and assets, including the properties and assets reflected in the
balance sheet as at December 31, 1997 referred to in paragraph 9B (other than
properties and assets disposed of in the ordinary course of business), subject
to no Lien of any kind except Liens permitted by paragraph 6C(1). All leases
necessary in any material respect for the conduct of the respective businesses
of the Company and its Subsidiaries are valid and subsisting and are in full
force and effect.
9F. POSSESSION OF FRANCHISES, LICENSES. The Company and each of its
Subsidiaries possesses all franchises, certificates, licenses, permits and other
authorizations from governmental political subdivisions or regulatory
authorities, free from burdensome restrictions, that are necessary in any
material respect for the ownership, maintenance and operation of its respective
properties and assets, and none of the Company or any of its Subsidiaries is in
violation of any thereof in any material respect.
9G. TAXES. The Company has and each of its Subsidiaries has filed all
federal, state and other income tax returns which, to the Knowledge of the
Company, are required to be filed, and each has paid all taxes as shown on such
returns and on all assessments received by it to the extent that such taxes have
become due, except such taxes as are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established in
accordance with GAAP.
9H. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor any of
its Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction which could reasonably be expected to
have a Material Adverse Effect. Neither the execution nor delivery of this
Agreement, the Notes, the Warrants, the other Subordinated Note Documents or the
Acquisition Documents, nor the offering, issuance and sale of the Notes and the
Warrants, nor fulfillment of nor compliance with the terms and provisions of
this Agreement, the Notes, the Warrants, the other Subordinated Note Documents
or the Acquisition Documents will conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or result in
any violation of, or result in the creation of any Lien (except Liens created
under the Security Documents) upon any of the properties or assets of the
Company or any of its Subsidiaries pursuant to, the charter or bylaws of the
Company or any of its Subsidiaries, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation to which the Company or any of its
Subsidiaries is subject. Neither the Company nor any of its Subsidiaries is a
party to, or otherwise subject to any provision contained in, any instrument
evidencing Indebtedness of the Company or such Subsidiary,
31
any agreement relating thereto or any other contract or agreement (including its
charter) which limits the amount of, or otherwise imposes restrictions on the
incurring of, Indebtedness of the Company of the type to be evidenced by the
Notes except as set forth in the agreements listed in Schedule 9H attached
hereto.
9I. AUTHORIZED CAPITAL STOCK. The authorized capital stock of the
Company consists of 50,000,000 shares of common stock, $0.00001 per share par
value, and 5,000,000 shares of preferred Stock, $0.00001 per share par value.
The outstanding capital stock of the Company consists of 32,331,517 shares of
Common Stock and the Existing Preferred Stock. All of the outstanding shares of
Common Stock are duly authorized, validly issued, fully paid and nonassessable.
The Company does not have outstanding any warrants, options, convertible
securities or other rights for the purchase or acquisition of shares of its
capital stock other than (a) the Warrants and (b) the agreements described in
Schedule 9I attached hereto. The Warrants and the shares of Common Stock
issuable upon the exercise of the Warrants have been duly and validly
authorized, and such shares of Common Stock have been duly reserved for issuance
upon exercise of the Warrants. No shareholder of the Company or any other
Person is entitled to preemptive or similar rights with respect to the shares of
Common Stock which are issuable upon exercise of the Warrants and, if and when
issued upon exercise of the Warrants in accordance with the provisions thereof,
such shares will be validly issued, fully paid and nonassessable shares.
9J. OFFERING OF THE SECURITIES. Neither the Company nor any agent
acting on its behalf has, directly or indirectly, offered the Securities or any
similar security of the Company for sale to, or solicited any offers to buy the
Securities or any similar security of the Company from, or otherwise approached
or negotiated with respect thereto with, any Person other than institutional
investors, and neither the Company nor any agent acting on its behalf has taken
or will take any action which would subject the issuance or sale of the
Securities to the provisions of section 5 of the Securities Act or to any
similar provisions of any securities or Blue Sky law of any applicable
jurisdiction.
9K. USE OF PROCEEDS. Neither the Company nor any Subsidiary owns or
has any present intention of acquiring any "margin stock" as defined in
Regulation U (12 CFR Part 221) of the Board of Governors of the Federal Reserve
System ("MARGIN STOCK"). The proceeds of sale of the Securities will be used as
set forth in Schedule 9K. None of such proceeds will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock or for the purpose of maintaining,
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry any stock that is currently a margin stock or for any other purpose
which might constitute this transaction a "purpose credit" within the meaning of
such Regulation U. Neither the Company nor any agent acting on its behalf has
taken or will take any action which might cause this Agreement or the Securities
to violate Regulation U or any other regulation of the Board of Governors of the
Federal Reserve System or to violate the Exchange Act, in each case as in effect
now or as the same may hereafter be in effect.
32
9L. ERISA. No accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by the Company, any
Subsidiary or any ERISA Affiliate which is or would be a Material Adverse
Effect. Neither the Company, any Subsidiary nor any ERISA Affiliate has incurred
or presently expects to incur any withdrawal liability under Title IV of ERISA
with respect to any Multiemployer Plan which is or would be a Material Adverse
Effect. The execution and delivery of this Agreement and the issuance and sale
of the Securities will be exempt from, or will not involve any transaction which
is subject to, the prohibitions of section 406 of ERISA and will not involve any
transaction in connection with which a penalty could be imposed under section
502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code.
The representation by the Company in the next preceding sentence is made in
reliance upon and subject to the accuracy of your representation in paragraph
10B.
9M. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Securities is such as to require any authorization, consent, approval, exemption
or other action by or notice to or filing with any court or administrative or
governmental or regulatory body (other than routine filings after the Date of
Closing with the Securities and Exchange Commission and/or state Blue Sky
authorities and the possible requirement that a filing be made pursuant to the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 in connection with an
exercise of the Warrants) in connection with the execution and delivery of this
Agreement, the other Subordinated Note Documents or the Acquisition Documents
and the offering, issuance, sale or delivery of the Securities or fulfillment of
or compliance with the terms and provisions of this Agreement, the Registration
Rights Agreement or the Participation Rights Agreement or of the Securities.
9N. ENVIRONMENTAL COMPLIANCE. The Company and its Subsidiaries and all
of their respective properties and facilities have complied at all times and in
all respects with all federal, state, local and regional statutes, laws,
ordinances and judicial or administrative orders, judgments, rulings and
regulations relating to protection of the environment except, in any such case,
where failure to comply would not result in a Material Adverse Effect.
9O. FISCAL YEAR. The fiscal year of the Company and each of its
Subsidiaries ends as of December 31 of each year.
9P. DISCLOSURE. Neither this Agreement, the other Subordinated Note
Documents nor any other document, certificate or statement furnished to you by
or on behalf of the Company in connec tion herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading. There
is no fact peculiar to the Company or any of its Subsidiaries which constitutes
a Material Adverse Effect
33
or in the future may (so far as the Company can now foresee) constitute a
Material Adverse Effect and which has not been set forth in this Agreement, the
other Subordinated Note Documents or in the other documents, certificates and
statements furnished to you by or on behalf of the Company prior to the date
hereof in connection with the transactions contemplated hereby. The pro forma
financial projections dated as of June 3, 1998 and previously delivered to you
by the Company are reasonable based on the assumptions stated therein and the
best information available to the officers of the Company.
9Q. INVESTMENT COMPANY ACT. Neither the Company, any of its
Subsidiaries nor any Person controlling the Company or any of its Subsidiaries
is an "investment company," or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
9R. ACQUISITION REPRESENTATIONS AND WARRANTIES. To induce you to enter
into this Agreement and to purchase the Securities, the Company agrees that you
shall be entitled to rely upon each of the representations and warranties of the
Company or any of its Subsidiaries set forth in any of the Acquisition Documents
as fully as if set forth in this Agreement.
PARAGRAPH 10. REPRESENTATIONS OF THE PURCHASER.
10. REPRESENTATIONS OF THE PURCHASER. You represent as follows:
10A. NATURE OF PURCHASE. You are not acquiring the Securities to be
purchased by you hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of your property shall at all times be and remain within your
control.
10B. SOURCE OF FUNDS. No part of the funds being used by you to pay
the purchase price of the Securities being purchased by you hereunder
constitutes assets allocated to any separate account maintained by you in which
any employee benefit plan, other than employee benefit plans identified on a
list which has been furnished by you to the Company, participates to the extent
of 10% or more. For the purpose of this paragraph 10B the terms "separate
account" and "employee benefit plan" shall have the respective meanings
specified in section 3 of ERISA.
PARAGRAPH 11. DEFINITIONS.
11. DEFINITIONS. For the purpose of this Agreement, the terms defined in the
introductory sentence and elsewhere in this Agreement shall have the respective
meanings specified therein, and the following terms shall have the meanings
specified with respect thereto below (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
34
11A. YIELD MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to paragraph 4B or 4C or is declared to
be immediately due and payable pursuant to paragraph 8A, as the context
requires.
"DESIGNATED SPREAD" shall mean, (i) with respect to the Called Principal of
any Note that is prepaid pursuant to paragraphs 4B(2) or 4C, 2.50% (250 basis
points), and (ii) in all other cases 1.00% (100 basis points).
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" shall mean the sum of the Designated Spread and the
yield to maturity implied by (i) the yields reported, as of 10:00 a.m. (New York
City time) on the Business Day next preceding the Settlement Date with respect
to such Called Principal, on the display designated as "Page 678" on the Bridge
Telerate (or such other display as may replace Page 678 on the Bridge Telerate
for actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date, or
if such yields shall not be reported as of such time or the yields reported as
of such time shall not be ascertainable, (ii) the Treasury Constant Maturity
Series yields reported, for the latest day for which such yields shall have been
so reported as of the Business Day next preceding the Settlement Date with
respect to such Called Principal, in Federal Reserve Statistical Release H.15
(519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such implied yield
shall be determined, (a) if necessary, by (x) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted financial
practice and (y) interpolating linearly between yields reported for various
maturities and (b) by converting all such implied yields to a quarterly payment
basis in accordance with accepted financial practice.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called Principal
of any Note, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by (b) the number of years (calculated
to the nearest one-twelfth year) which will elapse between the Settlement Date
with respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after
35
the Settlement Date with respect to such Called Principal if no payment of such
Called Principal were made prior to its scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or 4C or is declared to be immediately due and payable pursuant to
paragraph 8A, as the context requires.
"YIELD MAINTENANCE AMOUNT" shall mean, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Called Principal of
such Note over the sum of (i) such Called Principal plus (ii) interest accrued
thereon as of (including interest due on) the Settlement Date with respect to
such Called Principal. The Yield Maintenance Amount shall in no event be less
than zero.
11B. OTHER TERMS.
"ACQUIRED COMPANY" shall mean Elmagco, Inc., a Delaware corporation doing
business as Baylor Company.
"ACQUISITION" shall mean the purchase of all of the issued and outstanding
capital stock of the Acquired Company by the Company, pursuant to the
Acquisition Documents.
"ACQUISITION AGREEMENT" shall mean the Stock Purchase Agreement dated as of
June 22, 1998 by and among the Company, the Acquired Company and Begemann, Inc.,
a Delaware corporation as the same has been amended prior to the Date of
Closing.
"ACQUISITION DOCUMENTS" shall mean the Acquisition Agreement and all other
written agreements, documents, instruments and certificates now or hereafter
executed and delivered by any Person which are required by the terms of the
Acquisition Agreement to be delivered to consummate the Acquisition, and any and
all amendments, supplements and other modifications thereof and all renewals,
extensions, restatement or substitutions from time to time of all or any of the
foregoing.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Subsidiary. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.
"AGREEMENT" means this Subordinated Note and Warrant Purchase Agreement,
as it may from time to time be amended, modified, restated or supplemented.
"ASSET DISPOSITION" shall mean, with respect to the Company or any
Subsidiary, any transaction or series of related transactions in which such
Person sells, conveys, transfers or leases
36
(as lessor) or parts with control of (collectively, for purposes of this
definition, a "transfer"), directly or indirectly, any of its property or
assets, including, without limitation, any Indebtedness of any Subsidiary or
capital stock of or other equity interests in any Subsidiary (including the
issuance of such stock or other equity interests by such Subsidiary), other than
transfers of cash or cash equivalents; provided, that a sale of equipment by the
Company or any of its Subsidiaries shall not be an Asset Disposition if (i) at
the time of such sale the Company or such Subsidiary intends in good faith to
replace the equipment so sold with similar equipment of the same or greater Fair
Market Value, (ii) within 60 days of such sale the Company or such Subsidiary
actually replaces the equipment so sold with similar equipment of the same or
greater Fair Market Value, and (iii) such sale comports with the past business
practices of the Company or such Subsidiary.
"ASSIGNED LOAN DOCUMENTS" shall mean any and all credit agreements, loan
agreements, promissory notes, assignment agreements, option agreements,
subordination agreements and guaranty agreements executed in connection with the
incurrence or maintenance of the Indebtedness of the Company or any Transaction
Party to Geneva Associates, L.L.C., Main Street Merchant Partners II, L.P.,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or Prudential Securities Credit Corporation, and any and all
security agreements, pledge agreements, mortgages or deeds of trust, financing
statements, assignments, pledges, lien entry forms, documents and other writings
executed and delivered from time to time to secure the Indebtedness incurred
pursuant to the foregoing and the obligations owed to any lenders in connection
therewith and all other instruments, certificates, documents and other writings
now or hereafter executed and delivered by any Transaction Party or any other
Person pursuant to or in connection with any of the foregoing or any of the
transactions contemplated thereby, and any and all amendments, restatements,
supplements and other modifications to any of the foregoing.
"BANK" shall mean a financial institution, reasonably acceptable to the
Required Holders, that is designated as the "lead lender" (or fulfills a similar
role) pursuant to the Credit Agreement and its successors and assigns with
respect to the Credit Agreement.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 8A.
"BRIDGE LOAN AGREEMENT" shall mean, that certain Senior Loan Agreement
(Bridge Facility), dated as of July 6, 1998, as amended by that certain First
Amendment to Senior Loan Agreement (Bridge Facility), dated as of July 23, 1998,
between the Company and you, as the same may be further amended, supplemented
and otherwise modified from time to time.
"BRIDGE LOAN DOCUMENTS" shall mean the Bridge Loan Agreement and all
promissory notes, guaranty agreements, security agreements, pledge agreements,
mortgages or deeds of trust, financing statements, assignments, pledges, lien
entry forms, documents and other writings executed and delivered from time to
time to secure the Indebtedness incurred pursuant to the Bridge Loan Agreement
and the obligations owed to any lenders in connection with the Bridge Loan
Agreement and all other instruments, certificates, documents and other writings
now or hereafter
37
executed and delivered by any Transaction Party or any other Person pursuant to
or in connection with any of the foregoing or any of the transactions
contemplated thereby, and any and all amendments, restatements, supplements and
other modifications to any of the foregoing.
"BUSINESS DAY" shall mean any day on which banks are open for business in
New York City (other than a Saturday, a Sunday or a legal holiday in the States
of New York or New Jersey).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under GAAP, would be required to be capitalized on the books of the Company or
any Subsidiary, taken at the amount thereof accounted for as indebtedness (net
of interest expense) in accordance with such principles.
"CHANGE IN CONTROL" shall mean (i) the acquisition (other than an
acquisition by the heirs, legatees, descendants, or blood relatives of a
shareholder as a result of the death of such shareholder) by (a) any person (as
such term is used in section 13(d) and section 14(d)(2) of the Exchange Act as
in effect on the Date of the Closing) or (b) related persons constituting a
group (as such term is used in Rule 13d-5 under the Exchange Act as in effect on
the Date of the Closing), of beneficial ownership of 25% or more of the
outstanding shares of Voting Stock of the Company or (ii) an event or series of
events that results in the resignation or removal of a majority of (a) the
Executive Officers or (b) the Board of Directors of the Company.
"CLOSING" or "DATE OF CLOSING" shall have the meaning specified in
paragraph 2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
"COLLATERAL" shall mean the collateral described in the Security Documents
which secures payment of the Notes and payment, performance and observance of
the obligations of the Company and its Subsidiaries under this Agreement and the
other Subordinated Note Documents.
"COLLATERAL AGENT" shall mean (i) The Prudential Insurance Company of
America, in its capacity as Collateral Agent for the holders of Notes, as
provided under documentation, if any, satisfactory to the Required Holders or
(ii) any financial institution that is mutually acceptable to the Required
Holders and the Company that is designated as the Collateral Agent.
"COMMON STOCK" shall have the meaning specified in paragraph 1B.
"CONFIDENTIAL INFORMATION" shall mean any material non-public information
regarding the Company or any of its Subsidiaries that is marked by the Company
as confidential and is provided to the holder of a Note, any Person that
purchases a participation in a Note or any offeree of a Note or of a
participation therein pursuant to this Agreement, other than information (i)
that was
38
publicly known or otherwise known to such holder, such Person or such offeree at
the time of disclosure, (ii) that subsequently becomes publicly known through no
act or omission of such holder, such Person or such offeree or (iii) that
otherwise becomes known to such holder, such Person or such offeree other than
through disclosure by the Company or any Subsidiary.
"CONSOLIDATED INTEREST EXPENSE" shall mean, with respect to any period, the
sum (without duplication) of the following (in each case, eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP): (i) all interest and prepayment charges in respect of
Indebtedness of the Company and its Subsidiaries (including imputed interest in
respect of Capitalized Lease Obligations and net costs of Swaps) deducted in
determining consolidated net income for such period, together with all interest
capitalized or deferred during such period and not deducted in determining
consolidated net income for such period, and (ii) all debt discount and expense
amortized or required to be amortized in the determination of Consolidated Net
Income for such period.
"CONSOLIDATED NET INCOME" shall mean, with respect to any period, the net
income (or loss) of the Company and its Subsidiaries for such period (taken as a
cumulative whole), as determined in accordance with GAAP, after eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries, in
accordance with GAAP.
"CONSOLIDATED CURRENT ASSETS" shall mean, on any date as of which the
amount thereof is to be determined, the total assets of the Company and its
Subsidiaries which would be shown as current assets on a balance sheet of the
Company and its Subsidiaries prepared in accordance with GAAP at such time.
"CONSOLIDATED CURRENT LIABILITIES" shall mean, on any date as of which the
amount thereof is to be determined, the total liabilities of the Company and its
Subsidiaries which would be shown as current liabilities on a balance sheet of
the Company and its Subsidiaries prepared in accordance with GAAP at such time.
"CONSOLIDATED NET WORTH" shall mean, on any date as of which the amount
thereof is to be determined, the sum of the following for the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP: (i)
the amount of stated capital (less cost of treasury shares) plus (ii) the amount
of surplus and retained earnings (or, in the case of a surplus or retained
earnings deficit, minus the amount of such deficit).
"CONSOLIDATED TANGIBLE ASSETS" means, at any time, the total assets of the
Company and its Subsidiaries which would be shown as assets on a consolidated
balance sheet of the Company and its Subsidiaries as of such time prepared in
accordance with GAAP, after eliminating all amounts properly attributable to
minority interests, if any, in the stock and surplus of Subsidiaries
39
minus the net book amount of all Intangibles of the Company and its Subsidiaries
(after deducting any reserves applicable thereto).
"CONTEMPLATED PREFERRED STOCK" shall mean the preferred stock that is
issued, in an amount and upon such other terms satisfactory to the Required
Holders, pursuant to the Contemplated Preferred Stock Documents.
"CONTEMPLATED PREFERRED STOCK AGREEMENT" shall mean an agreement, in form
and substance satisfactory to the Required Holders, by and among the Company and
Halliburton Company ("HALLIBURTON"), or some other purchaser which purchaser is
reasonably satisfactory to the Required Holders, pursuant to which the Company
will issue the Contemplated Preferred Stock to Halliburton or such other
purchaser.
"CONTEMPLATED PREFERRED STOCK DOCUMENTS" shall mean the Contemplated
Preferred Stock Agreement, the certificate of designation with respect to the
Contemplated Preferred Stock, and all other written agreements, documents,
instruments and certificates, all in form and substance satisfactory to the
Required Holders, that have been or will be executed and delivered by any Person
which are required by the terms of the Contemplated Preferred Stock Agreement to
be delivered to consummate the purchase and sale of the Contemplated Preferred
Stock, and any and all amendments, supplements and other modifications thereof
and all renewals, extensions, restatement or substitutions from time to time of
all or any of the foregoing.
"CONTROLLED GROUP" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414 of the Code.
"CONVERTIBLE SECURITIES" shall mean any debt instrument that is by its
terms convertible, in whole or in part, into an equity interest in the Company
or any of its Subsidiaries.
"CREDIT AGREEMENT" shall mean a credit agreement, in form and substance
satisfactory to the Required Holders, by and among the Company, the Bank, you
and the other lenders or parties from time to time party thereto that is entered
into in replacement of the Bridge Facility, as such credit agreement may be
amended, supplemented and otherwise modified from time to time.
"CREDIT AGREEMENT DOCUMENTS" shall mean the Credit Agreement and all
promissory notes, guaranty agreements, security agreements, pledge agreements,
mortgages or deeds of trust, financing statements, assignments, pledges, lien
entry forms, documents and other writings executed and delivered from time to
time to secure the Indebtedness incurred pursuant to the Credit Agreement and
the obligations owed to any lenders in connection with the Credit Agreement and
all other instruments, certificates, documents and other writings now or
hereafter executed and delivered by any Transaction Party or any other Person
pursuant to or in connection with any of the
40
foregoing or any of the transactions contemplated thereby, and any and all
amendments, restatements, supplements and other modifications to any of the
foregoing.
"DOMESTIC SUBSIDIARY" shall mean any Subsidiary that is organized under the
laws of the United States, one of the several states thereof or the District of
Columbia.
"EBITDA" shall mean, for any period, the sum of (i) Consolidated Net
Income, plus (ii) to the extent deducted in the determination of Consolidated
Net Income, (a) all provisions for federal, state and other income tax, (b)
Consolidated Interest Expense and (c) provisions for depreciation and
amortization, provided however, that so long as the Company shall have delivered
to the holder of each Note financial information in form and substance
satisfactory to the Required Holders regarding the Property acquired which
disclose the prior operating results of such Property, the pro forma effect of
any acquisition by the Company or any of its Subsidiaries of any Subsidiary
during such 12-month period may (in the reasonable discretion of the Required
Holders) be included in EBITDA for the Company or such Subsidiary as if such
acquisition occurred on the first day of such period.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the U.S. Department
of Labor thereunder.
"ERISA AFFILIATE" shall mean any corporation which is a member of the same
controlled group of corporations as the Company within the meaning of section
414(b) of the Code, or any trade or business which is under common control with
the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph 8A,
provided that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event or act, and "DEFAULT" shall mean any of such events,
whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXECUTIVE OFFICER" shall mean the chairman of the board, chief executive
officer, president, chief operating officer, chief financial officer or chief
accounting officer of the Company.
"EXISTING PREFERRED STOCK" shall mean the 196,000 shares of 10% Junior
Redeemable Convertible Preferred Stock of the Company that has been issued as of
the Date of Closing pursuant to the Certificate of Designation of Rights and
Preferences Relating to 10% Junior Redeemable Convertible Preferred Stock.
"FAIR MARKET VALUE" shall mean, at any time and with respect to any
property, the sale value of such property that would be realized in an arm's-
length sale at such time between an
41
informed and willing buyer and an informed and willing seller (neither being
under a compulsion to buy or sell).
"GAAP" shall have the meaning specified in paragraph 11B.
"GOVERNMENTAL AUTHORITY" shall mean any foreign governmental authority, the
United States of America, any State of the United States, and any political
subdivision of any of the foregoing, and any central bank, agency, department,
commission, board, bureau, court or other tribunal having jurisdiction over the
holder of any Note, any Transaction Party or their respective Property.
"GUARANTEE" shall mean, with respect to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including, without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or services regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of the obligation
guaranteed or such lesser amount to which the maximum exposure of the guarantor
shall have been specifically limited.
"GUARANTY AGREEMENTS" shall mean the Senior Subordinated Guaranty
Agreements, dated as of July 23, 1998, made by each Domestic Subsidiary of the
Company, each in favor of you and all subsequent holders of the Notes,
substantially in the form of Exhibit E attached hereto, and any Senior
Subordinated Guaranty Agreement hereafter executed by any Subsidiary as
contemplated under paragraph 5J, as each may be amended, restated, supplemented
and otherwise modified from time to time.
"HAZARDOUS SUBSTANCE" shall mean petroleum products and any hazardous or
toxic waste or substance defined or regulated as such from time to time by any
law, rule, regulation or order described in the definition of "Requirements of
Environmental Law".
42
"INDEBTEDNESS" shall mean, with respect to any Person or consolidated group
of Persons, without duplication, (i) all items (excluding items of contingency
reserves or of reserves for deferred income taxes) which in accordance with GAAP
would be included in determining total liabilities as shown on the liability
side of a balance sheet of such Person or consolidated group of Persons as of
the date on which Indebtedness is to be determined; (ii) all indebtedness
secured by any Lien on, or payable out of the proceeds of production from, any
property or asset owned or held by such Person subject thereto, whether or not
the indebtedness secured thereby shall have been assumed; (iii) redemption
obligations in respect of mandatorily redeemable preferred stock; (iv) Swaps;
(v) unfunded pension liabilities; (vi) obligations as an account party in
respect of letters of credit; and (vii) Guarantees of Indebtedness of other
Persons of the types described in the foregoing clauses (i) through (vi).
"INTANGIBLES" shall include, without limitation, (i) deferred charges;
(ii) the amount of any write-up in the book value of any acquired assets in
excess of fair market value and (iii) the aggregate of all amounts appearing on
the assets side of any such balance sheet for franchises, licenses, permits,
patents, patent applications, copyrights, trademarks, trade names, goodwill,
treasury stock, experimental or organizational expenses and other like
intangibles.
"INVESTMENT" shall mean the purchase or other acquisition of any securities
or Indebtedness of, or the making of any loan, advance, transfer of Property
(other than transfers in the ordinary course of business) or capital
contribution to, or the incurring of any liability (other than accounts arising
in the ordinary course of business), contingently or otherwise, in respect of
the Indebtedness of, any Person.
"KNOWLEDGE" of the Company shall mean the actual knowledge of any Executive
Officer.
"LEGAL REQUIREMENT" shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, or regulation (or interpretation of any of
the foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, whether presently existing or arising in the future.
"LIEN" shall mean any mortgage, pledge, priority, security interest,
encumbrance, contractual deposit arrangement, lien (statutory or otherwise) or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any production payment, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction) or
any other type of preferential arrangement for the purpose, or having the
effect, of protecting a creditor against loss or securing the payment or
performance of an obligation.
"MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect on the
ability of the Company or any of its Subsidiaries to perform its obligations
under any Subordinated Note Document to which it is a party or on the business,
condition (financial or otherwise), results of
43
operations, assets, liabilities or prospects of the Company and its Subsidiaries
on a consolidated basis.
"MATERIAL PUBLIC OFFERING" shall mean any offering of securities of the
Company that is registered (otherwise than on Form S-4 or S-8 or their successor
forms) under the Securities Act and that generates a least $25,000,000 in net
cash proceeds for the Company. The term "NET CASH PROCEEDS" as used in this
definition of Material Public Offering shall mean an amount equal to the
difference of (i) the aggregate amount of the consideration actually received by
the Company in respect of the offering contemplated by the preceding sentence of
this definition (valued at the Fair Market Value of such consideration at the
time of the consummation of such offering) minus (ii) all ordinary and
reasonable out-of-pocket costs and expenses actually incurred by the Company in
connection with such offering.
"MORTGAGES" shall mean the mortgages, deeds of trust or other real estate
security documents executed, acknowledged and delivered by the Company or one or
more of its Subsidiaries, whether (i) as of the Date of Closing and
substantially in the form of Exhibit F attached hereto or (ii) after the Date of
Closing as contemplated under paragraph 5J and substantially in the form of
Exhibit F attached hereto, pursuant to which mortgage liens in and to the
Collateral described therein shall be provided in favor of the Collateral Agent,
and any and all amendments, restatements, supplements and other modifications to
any of the foregoing.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"NET EQUITY PROCEEDS" shall mean the aggregate sum of (i) the net proceeds
received after the Date of Closing by the Company from the sale of Common Stock
or other equity interests, plus (ii) the net proceeds received after the Date of
Closing by the Company upon (a) the exercise of the Warrants, or any other
warrants, options or similar instruments issued by the Company and (b) the
conversion of any Convertible Securities into Common Stock or other equity
interests in the Company. The term "NET PROCEEDS" as used in this definition of
Net Equity Proceeds shall mean an amount equal to the difference of (y) the
aggregate amount of the consideration actually received by the Company in
respect of a sale, exercise or conversion contemplated by clauses (i) or (ii) of
this definition (valued at the Fair Market Value of such consideration at the
time of the consummation of such sale, exercise or conversion) minus (z) all
ordinary and reasonable out-of-pocket costs and expenses actually incurred by
the Company in connection with such sale, exercise or conversion.
"NOTES" shall have the meaning specified in paragraph 1A.
"OBLIGATIONS" shall mean, as at any date of determination thereof, the
sum of the following: (i) the aggregate principal amount of Notes outstanding
on such date, plus (ii) all other outstanding liabilities, obligations and
Indebtedness of any Transaction Party under this Agreement, any Note, the
Guaranty Agreements, the Security Documents or any of the other Subordinated
Note Documents on such date.
44
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of a
Transaction Party by its President, one of its Vice Presidents or its Treasurer.
"PARTICIPATION RIGHTS AGREEMENT" shall mean the Participation Rights
Agreement, dated of even date herewith, substantially in the form of Exhibit G
attached hereto, by and among you, the Company and certain holders of the
Company's common stock as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED INVESTMENTS" shall mean: (i) readily marketable securities
issued or fully guaranteed by the United States of America with maturities of
not more than one year; (ii) commercial paper rated "Prime 1" by ▇▇▇▇▇'▇
Investors Service, Inc. or "A-1" by Standard and Poor's Ratings Services with
maturities of not more than 180 days, (iii) certificates of deposit or
repurchase obligations issued by any U.S. domestic bank having capital surplus
of at least $100,000,000 or by any other financial institution acceptable to
you, all of the foregoing not having a maturity of more than one year from the
date of issuance thereof, and (iv) the 50% of the Voting Stock of ▇▇▇▇▇▇▇▇ owned
by the Acquired Company on the Date of Closing.
"PERMITTED SUBORDINATED DEBT" shall mean subordinated Indebtedness of the
Company (and Guarantees thereof by any Domestic Subsidiary) that (i) has
principal payments and prepayments due on the same dates and in the same
relative amounts as the Notes, (ii) is pari passu with the Indebtedness incurred
pursuant to this Agreement or the Guaranty Agreements, as applicable, (iii) is
issued on terms (including, without limitation, interest rate, yield and voting
rights) substantially identical to the terms of this Agreement and the Guaranty
Agreements, respectively, (iv) the issuance of which does not violate any term
or covenant of this Agreement or any other Subordinated Note Document and (v) in
connection therewith, the Required Holders and each Person to which the Company
has issued such subordinated Indebtedness shall have entered into an
intercreditor agreement with respect to such subordinated Indebtedness in form
and substance reasonably satisfactory to the Required Holders.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department or agency thereof.
"PLAN" shall mean an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and is either (i) maintained by the Company or any member of the
Controlled Group for employees of the Company or any member of the Controlled
Group or (ii) maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions and to
which the Company or any member of the Controlled Group is then making or
45
accruing an obligation to make contributions or has within the preceding five
plan years made contributions.
"PLEDGE AGREEMENTS" shall mean (i) the Third Amendment to Stock Pledge
Agreement dated as of July 23, 1998, executed and delivered by the Company, (ii)
the Second Amendment to Stock Pledge Agreement dated as of July 23, 1998,
executed and delivered by IWC Services, Inc., (iii) the Stock Pledge Agreement,
dated as of July 23, 1998, substantially in the form of Exhibit H attached
hereto, executed and delivered by the Acquired Company, and (iv) all stock
pledge agreements hereafter executed by any Subsidiary as contemplated under
paragraph 5J, as each may be amended, restated, supplemented and otherwise
modified from time to time.
"PREFERRED DIVIDENDS" shall mean, with respect to any period, dividends or
other charges in respect of shares of the capital stock of the Company that are
entitled to preference or priority over any other shares of the capital stock of
the Company in respect of payment of dividends or distribution of assets upon
liquidation.
"PRIORITY DEBT" shall mean, at any time, without duplication, an amount
equal to the sum of the amount of all Indebtedness of Subsidiaries, other than
Indebtedness in the form of Guarantees in respect of Indebtedness of the Company
outstanding pursuant to the applicable Senior Loan Agreement or this Agreement
or the agreement pursuant to which Permitted Subordinated Debt is outstanding
(in each case, whether or not secured by any Lien), outstanding at such time
plus the amount of all Indebtedness of the Company and its Subsidiaries
outstanding at such time that is secured by one or more Liens not otherwise
permitted under clauses (i), (ii), (iv) or (vi) of paragraph 6C(1).
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"PROPOSED PREPAYMENT DATE" shall have the meaning specified in clause (iii)
of paragraph 4C.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement, dated of even date herewith, substantially in the form of Exhibit I
attached hereto, by and between you and the Company as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least 66 2/3%
of the aggregate principal amount of the Notes from time to time outstanding.
"REQUIREMENTS OF ENVIRONMENTAL LAW" shall mean all requirements imposed
by any law (including for example and without limitation The Resource
Conservation and Recovery Act and The Comprehensive Environmental Response,
Compensation, and Liability Act), rule, regulation, or order of any federal,
state or local executive, legislative, judicial, regulatory or
46
administrative agency, board or authority in effect at the applicable time which
relate to (i) noise; (ii) pollution, protection or clean-up of the air, surface
water, ground water or land; (iii) solid, gaseous or liquid waste generation,
treatment, storage, disposal or transportation; (iv) exposure to Hazardous
Substances; (v) the safety or health of employees or (vi) regulation of the
manufacture, processing, distribution in commerce, use, discharge or storage of
Hazardous Substances.
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of a
Transaction Party.
"RESTRICTED PAYMENT" shall mean (i) the declaration of any dividend on, or
the incurrence of any liability to make any other payment or distribution in
respect of any capital stock or equity equivalent (except, in the case of a
Subsidiary, dividends or other payments or distributions in respect of its
capital stock to the Company or a Wholly Owned Subsidiary) or (ii) the
distribution on account of the purchase, redemption or other retirement of any
such capital stock (except, in the case of a Subsidiary, purchases, redemptions
or other retirements of its capital stock from the Company or a Wholly Owned
Subsidiary), provided, however, that so long as no Default or Event of Default
is then exiting or would result therefrom, (a) the declaration and payment of
any dividends to be paid in respect of the Existing Preferred Stock or the
Contemplated Preferred Stock, (b) the redemption, if any, of the Existing
Preferred Stock prior to the nine month anniversary of the issuance thereof (as
contemplated by subparagraph 4A of the Certificate of Designation of Rights and
Preferences Relating to the Existing Preferred Stock) or (c) the declaration and
payment of dividends in respect of common stock payable solely in common stock,
shall not constitute Restricted Payments.
"SALE-LEASEBACK TRANSACTION" shall have the meaning specified in paragraph
6C(8).
"SCHEDULED PRINCIPAL PAYMENTS" shall mean scheduled principal payments due
with respect to Indebtedness of the Company or any of its Subsidiaries (other
than any amounts due upon the maturity of the Senior Loan Agreement) whether
such scheduled payment is due because of amortization or maturity of such
Indebtedness.
"▇▇▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇▇▇, Inc., a Delaware corporation.
"SECURITIES" shall mean the Notes and the Warrants.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY AGREEMENTS" shall mean the Third Amendments to Security
Agreement, each dated as of July 23, 1998, and those Security Agreements
substantially in the form of Exhibit J attached hereto, executed and delivered
by each of the Transaction Parties respectively in favor of the Collateral
Agent, and all security agreements hereafter executed by any Subsidiary as
contemplated under paragraph 5J, as each may be amended, restated, supplemented
and otherwise modified from time to time.
47
"SECURITY DOCUMENTS" shall mean the Security Agreements, the Pledge
Agreements, the Mortgages and all financing statements, assignments, pledges,
lien entry forms, documents and other writings executed and delivered from time
to time to secure the Notes and the obligations owed to the holders of Notes in
connection therewith, and any and all amendments, supplements and other
modifications thereto.
"SENIOR LENDER" shall mean (i) initially, you, in your capacity as a lender
under the Bridge Loan Agreement, and (ii) upon termination of the Bridge Loan
Agreement and the effectiveness of the Credit Agreement, the Bank, in its
capacity as a lender under the Credit Agreement, you, in your capacity as a
lender under the Credit Agreement, and any other lender or lenders from time to
time party to the Credit Agreement.
"SENIOR LOAN AGREEMENT" shall mean (i) initially, the Bridge Loan Agreement
and (ii) upon termination of the Bridge Loan Agreement and the effectiveness of
the Credit Agreement, the Credit Agreement.
"SENIOR LOAN DOCUMENTS" shall mean (i) initially, the Bridge Loan Documents
and (ii) upon termination of the Bridge Loan Agreement and the effectiveness of
the Credit Agreement, the Credit Agreement Documents.
"SIGNIFICANT FOREIGN SUBSIDIARY" shall mean, at any time, any Subsidiary
that is not a Domestic Subsidiary and that accounts for 5% or more of (i) the
Company's and its Subsidiaries' total assets, determined in accordance with
GAAP, at such time, (ii) EBITDA (a) for the fiscal year most recently ended or
(b) for the current fiscal year (as reasonably estimated by the Company in good
faith) or (iii) Consolidated Net Worth at such time.
"SIGNIFICANT HOLDER" shall mean (i) you, so long as you shall hold any
Note, or (ii) any other holder of at least 5% of the aggregate principal amount
of the Notes from time to time outstanding.
"SIGNIFICANT SUBSIDIARY" shall mean any Subsidiary that accounts for 10% or
more of (i) the Company's and its Subsidiaries' total assets, determined in
accordance with GAAP, at any time, (ii) EBITDA (a) for the fiscal year most
recently ended or (b) for the current fiscal year (as reasonably estimated by
the Company in good faith) or (iii) Consolidated Net Worth at any time.
"SUBORDINATED NOTE DOCUMENTS" shall mean this Agreement, the Notes, the
Warrants, the Participation Rights Agreement, the Registration Rights Agreement,
the Guaranty Agreements, the Security Documents and all other instruments,
certificates, documents and other writings now or hereafter executed and
delivered by any Transaction Party or any other Person pursuant to or in
connection with any of the foregoing or any of the transactions contemplated
thereby, and any and all amendments, restatements, supplements and other
modifications to any of the foregoing.
48
"SUBSIDIARY" shall mean (i) any corporation, at least 50% of the total
combined voting power of all classes of Voting Stock of which shall, at the time
as of which any determination is being made, be owned by the Company, either
directly or through Subsidiaries (including, without limitation, the Acquired
Company), and (ii) any partnership, limited liability company, joint venture or
similar entity if at least a 50% interest in the profits or capital thereof is
owned by the Company, either directly or through Subsidiaries (unless such
entity can and does ordinarily take major business actions without the prior
approval, direct or indirect, of the Company), provided, however, that
notwithstanding anything to the contrary contained in the foregoing, the term
Subsidiary shall not include ▇▇▇▇▇▇▇▇, as long as the Company, either directly
or through Subsidiaries, does not own more than 50% of the total combined voting
power of all classes of Voting Stock of ▇▇▇▇▇▇▇▇.
"SWAPS" shall mean with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"TERMINATION EVENT" shall mean (i) a Reportable Event described in Section
4043 of ERISA and the regulations issued thereunder (other than a Reportable
Event not subject to the provision for 30-day notice to the PBGC under such
regulations), or (ii) the withdrawal of the Company or any of its ERISA
Affiliates from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, or (iv) the institution of proceedings
to terminate a Plan by the PBGC, or (v) any other event or condition that might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
"TOTAL DEBT" shall mean the total Indebtedness of the Company and its
Subsidiaries on a consolidated basis, provided, that Total Debt shall not
include (i) Indebtedness of the Company and its Subsidiaries permitted by clause
(iii) of paragraph 6C(2) and (ii) until the earlier of (a) the date on which the
Indebtedness under the Bridge Loan Agreement is paid in full and (b) January 6,
1999, $7,000,000 principal amount of Indebtedness owing by the Company to ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇.
"TRANSACTION PARTIES" shall mean the Company, its Domestic Subsidiaries and
the Acquired Company.
"TRANSFEREE" shall mean any direct or indirect transferee of all or any
part of any Note or Warrant purchased by you under this Agreement.
49
"TRIBUNAL" shall mean any municipal, state, commonwealth, federal, foreign,
territorial or other sovereign, governmental entity, governmental department,
court, commission, board, bureau, agency or instrumentality.
"VOTING STOCK" shall mean securities or other equity interest of any class
or classes, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election or removal of corporate
directors or persons (such as general partners or managers) performing similar
functions in the case of business entities other than corporations.
"WARRANTS" shall have the meaning specified in paragraph 1B.
"WHOLLY OWNED SUBSIDIARY" shall mean any Subsidiary all of the equity
interests (except directors' qualifying shares) of which are owned, directly or
indirectly, by the Company or other Wholly Owned Subsidiaries.
11C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references
in this Agreement to "GAAP" shall be deemed to refer to generally accepted
accounting principles in effect in the United States at the time of application
thereof. Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all determinations with respect to accounting matters
hereunder shall be made, and all unaudited financial statements and certificates
and reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with generally accepted accounting principles, applied
on a basis consistent with the most recent audited consolidated financial
statements of the Company and its Subsidiaries delivered pursuant to clause (ii)
of paragraph 5A or, if no such statements have been so delivered, the most
recent audited financial statements referred to in clause (i) of paragraph 9B.
PARAGRAPH 12. MISCELLANEOUS.
12. MISCELLANEOUS.
12A. NOTE PAYMENTS. So long as you shall hold any Note, the Company
will make payments of principal of, interest on and Yield Maintenance Amount, if
any, with respect to such Note, which comply with the terms of this Agreement,
by wire transfer of immediately available funds for credit (not later than 12:00
noon, New York City time, on the date due) to your account or accounts as
specified in the Purchaser Schedule attached hereto, or such other account or
accounts in the United States as you may designate in writing, notwithstanding
any contrary provision herein or in any Note with respect to the place of
payment. You agree that, before disposing of any Note, you will make a notation
thereon (or on a schedule attached thereto) of all principal payments previously
made thereon and of the date to which interest thereon has been paid. The
Company agrees to afford the benefits of this paragraph 12A to any Transferee
which shall have made the same agreement as you have made in this paragraph 12A.
50
12B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save you, any Transferee
and the Collateral Agent harmless against liability for the payment of, all out-
of-pocket expenses arising in connection with such transactions, including (i)
all document production and duplication charges and the fees and expenses of any
special counsel engaged by you, such Transferee and the Collateral Agent in
connection with this Agreement, the transactions contemplated hereby and any
subsequent proposed modification of, or proposed consent under, this Agreement
or the other Subordinated Note Documents, whether or not such proposed
modification shall be effected or proposed consent granted, and (ii) the costs
and expenses, including attorneys' fees, incurred by you, such Transferee and
the Collateral Agent in enforcing (or determining whether or how to enforce) any
rights under this Agreement, the Securities or the other Subordinated Note
Documents or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement, the other
Subordinated Note Documents or the transactions contemplated hereby or thereby,
or by reason of your or such Transferee's having acquired any Note or Warrant,
including without limitation costs and expenses incurred in any bankruptcy case.
The obligations of the Company under this paragraph 12B shall survive the
transfer of any Note or Warrant or portion thereof or interest therein by you or
any Transferee, the payment of any Note or Warrant, the enforcement, amendment
or waiver of any provision of this Agreement or the other Subordinated Note
Documents, and the termination of this Agreement or any of the other
Subordinated Note Documents.
12C. CONSENT TO AMENDMENTS. This Agreement and any of the other
Subordinated Note Documents may be amended, and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, if the Company shall obtain the written consent to such amendment, action or
omission to act, of the Required Holder(s) except that, without the written
consent of the holder or holders of all Notes at the time outstanding, no
amendment to this Agreement shall change the maturity of any Note, or change the
principal of, or the rate or time of payment of interest on any Note, or affect
the time, amount or allocation of any prepayments, or change the proportion of
the principal amount of the Notes required with respect to any consent,
amendment, waiver or declaration. Each holder of any Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this
paragraph 12C, whether or not such Securities shall have been marked to indicate
such consent, but any Securities issued thereafter may bear a notation referring
to any such consent. No course of dealing between the Company and the holder of
any Securities nor any delay in exercising any rights hereunder or under any
Securities shall operate as a waiver of any rights of any holder of such
Securities. As used herein and in the Securities, the term "THIS AGREEMENT" and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
12D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.
The Notes are issuable as registered notes without coupons in denominations of
at least $100,000, except as may be necessary to reflect any principal amount
not evenly divisible by $100,000. The Company shall keep at its principal
office a register in which the Company shall provide for the registration of
Notes and of transfers of Notes. Upon surrender for registration of transfer of
any Note at the principal
51
office of the Company, the Company shall, at its expense, execute and deliver
one or more new Notes of like tenor and of a like aggregate principal amount,
registered in the name of such transferee or transferees. At the option of the
holder of any Note, such Note may be exchanged for other Notes of like tenor and
of any authorized denominations, of a like aggregate principal amount, upon
surrender of the Note to be exchanged at the principal office of the Company.
Whenever any Notes are so surrendered for exchange, the Company shall, at its
expense, execute and deliver the Notes which the holder making the exchange is
entitled to receive. Every Note surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or such holder's attorney
duly authorized in writing. Any Note or Notes issued in exchange for any Note
or upon transfer thereof shall carry the rights to unpaid interest and interest
to accrue which were carried by the Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any such
loss, theft or destruction, upon receipt of such holder's unsecured indemnity
agreement, or in the case of any such mutilation upon surrender and cancellation
of such Note, the Company will make and deliver a new Note, of like tenor, in
lieu of the lost, stolen, destroyed or mutilated Note.
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and interest on such Note and for all other
purposes whatsoever, whether or not such Note shall be overdue, and the Company
shall not be affected by notice to the contrary. Subject to the preceding
sentence, the holder of any Note may from time to time grant participations in
such Note to any Person on such terms and conditions as may be determined by
such holder in its sole and absolute discretion, provided that any such
participation shall be in a principal amount of at least $100,000.
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representa tions and warranties contained herein or in the other Subordinated
Note Documents or otherwise made in writing by or on behalf of the Company and
its Subsidiaries in connection herewith and therewith shall survive the
execution and delivery of this Agreement, the Notes, the Warrants and the other
Subordinated Note Documents, the transfer by you of any Note or Warrant or
portion thereof or interest therein and the payment of any Note, and may be
relied upon by any Transferee, regardless of any investigation made at any time
by or on behalf of you or any Transferee. Subject to the preceding sentence,
this Agreement, the Notes, the Warrants and the other Subordinated Note
Documents embody the entire agreement and understanding between you and the
Company and supersede all prior agreements and understandings relating to the
subject matter hereof.
12G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of either of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee) whether so
expressed or not.
52
12H. DISCLOSURE TO OTHER PERSONS. Except as provided in the second
sentence of this paragraph 12H, each holder and each Person that purchases a
participation in a Note or any part thereof agrees that it will hold in
confidence, in accordance with such procedures as such holder or Person applies
generally to information of this kind, any Confidential Information provided by
the Company or any Subsidiary; provided that such holder or Person will be free,
after notice to the Company, to correct any false or misleading information
which may become public concerning the relationship of such holder or Person to
the Company. The Company acknowledges that the holder of any Note or Warrant
may deliver copies of any financial statements and other documents or materials
delivered to such holder, and disclose any other information disclosed to such
holder, and disclose any other information disclosed to such holder, by or on
behalf of the Company or any Subsidiary in connection with or pursuant to this
Agreement or the other Subordinated Note Documents to (i) such holder's
directors, officers, employees, agents and professional consultants, (ii) any
other holder of any Note or Warrant, (iii) any Person to which such holder
offers to sell such Note or Warrant or any part thereof, (iv) any Person to
which such holder sells or offers to sell a participation in all or any part of
such Note or Warrant, (v) any Person from which such holder offers to purchase
any security of the Company, (vi) any federal or state regulatory authority
having jurisdiction over such holder, (vii) the National Association of
Insurance Commissioners or any similar organization or (viii) any other Person
to which such delivery or disclosure may be necessary or appropriate (a) in
compliance with any law, rule, regulation or order applicable to such holder,
(b) in response to any subpoena or other legal process or informal investigative
demand or (c) in connection with any litigation to which such holder is a party.
Each holder agrees to use Confidential Information for internal purposes only.
12I. NOTICES. All notices or other communications provided for
hereunder (except for the telephonic notice required by paragraph 4B) shall be
in writing and sent by first class mail or nationwide overnight delivery service
(with charges prepaid) and (i) if to you, addressed to you at the address
specified for such communications in the Purchaser Schedule attached hereto, or
at such other address as you shall have specified to the Company in writing,
(ii) if to any other holder of any Note or Warrant, addressed to such other
holder at such address as such other holder shall have specified to the Company
in writing or, if any such other holder shall not have so specified an address
to the Company, then addressed to such other holder in care of the last holder
of such Note or Warrant which shall have so specified an address to the Company,
and (iii) if to the Company, addressed to it at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer, or at such other
address as the Company shall have specified to the holder of each Note or
Warrant in writing.
12J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day. If the date for any payment is
extended to the next succeeding Business Day by reason of the preceding
sentence, the period of such extension shall not be included in the computation
of the interest payable on such Business Day.
53
12K. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to you or to the Required Holder(s), the
determination of such satisfaction shall be made by you or the Required
Holder(s), as the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.
12L. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK. This Agreement may not be changed orally, but (subject
to the provisions of paragraph 12C) only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.
12M. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION.
(I) THE COMPANY AND EACH HOLDER OF SECURITIES HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY
JURY IN ANY LITIGATION OF ANY CLAIM WHICH IS BASED HEREON, OR ARISES OUT
OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES, THE WARRANTS OR
THE OTHER SUBORDINATED NOTE DOCUMENTS, OR ANY TRANSACTIONS RELATING HERETO
OR THERETO, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE COMPANY, THE HOLDERS OF THE
SECURITIES OR THE COLLATERAL AGENT. THE COMPANY ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR YOU TO ENTER INTO THIS AGREEMENT.
(II) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT,
THE NOTES, THE WARRANTS, THE OTHER SUBORDINATED NOTE DOCUMENTS OR ANY
TRANSACTIONS RELATING HERETO OR THERETO, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE
COMPANY, THE HOLDERS OF SECURITIES OR THE COLLATERAL AGENT MAY BE BROUGHT
IN THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND THE COMPANY HEREBY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AND EACH
HOLDER OF SECURITIES HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
54
THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
12N. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12O. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
12P. MAXIMUM INTEREST PAYABLE. The Company, you and all other holders
of the Notes specifically intend and agree to limit contractually the amount of
interest payable under this Agreement, the Notes and all other instruments and
agreements related hereto and thereto to the maximum amount of interest lawfully
permitted to be charged under applicable law. Therefore, none of the terms of
this Agreement, the Notes or any instrument pertaining to or relating to this
Agreement or the Notes shall ever be construed to create a contract to pay
interest at a rate in excess of the maximum rate permitted to be charged under
applicable law, and neither the Company, any guarantor nor any other party
liable or to become liable hereunder, under the Notes, any guaranty or under any
other instruments and agreements related hereto and thereto shall ever be liable
for interest in excess of the amount determined at such maximum rate, and the
provisions of this paragraph 12P shall control over all other provisions of this
Agreement, any Notes, any guaranty or any other instrument pertaining to or
relating to the transactions herein contemplated. If any amount of interest
taken or received by you or any holder of a Note shall be in excess of said
maximum amount of interest which, under applicable law, could lawfully have been
collected by you or such holder incident to such transactions, then such excess
shall be deemed to have been the result of a mathematical error by all parties
hereto and shall be refunded promptly by the Person receiving such amount to the
party paying such amount, or, at the option of the recipient, credited ratably
against the unpaid principal amount of the Note or Notes held by you or such
holder, respectively. All amounts paid or agreed to be paid in connection with
such transactions which would under applicable law be deemed "interest" shall,
to the extent permitted by such applicable law, be amortized, prorated,
allocated and spread throughout the stated term of this Agreement and the Notes.
"APPLICABLE LAW" as used in this paragraph means that law in effect from time to
time which permits the charging and collection of the highest permissible
lawful, nonusurious rate of interest on the transactions herein contemplated
including laws of the State of New York and of the United States of America, and
"MAXIMUM RATE" as used in this paragraph means, with respect to each of the
Notes, the maximum lawful, nonusurious rates of interest (if any) which under
applicable law may be charged to the Company from time to time with respect to
such Notes.
12Q. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
55
If you are in agreement with the foregoing, please sign the form of acceptance
on the enclosed counterpart of this letter and return the same to the Company,
whereupon this letter shall become a binding agreement between the Company and
you.
Very truly yours,
BOOTS & ▇▇▇▇▇ INTERNATIONAL WELL CONTROL, INC.
By:______________________________________
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:____________________________________
Vice President
PURCHASER SCHEDULE
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Aggregate Principal
Amount of Notes to
be Purchased Note Denomination(s)
---------------------- --------------------
$30,000,000 $30,000,000
(No. R-1)
Aggregate Number
of Shares of
Common Stock for
which Warrant is
Initially Exercisable Warrant Number
--------------------- --------------
3,165,396 WA-1
(1) All payments on account of Notes held by such
purchaser shall be made by wire transfer of
immediately available funds for credit to:
Account No. ▇▇▇-▇▇▇▇-▇▇▇
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
(ABA No.: 021-000-018)
Each such wire transfer shall set forth the name of the Company, a
reference to "11.28% Senior Secured Subordinated Notes due July 23,
2006, Security No. 099469 A * 9 !INV6115!", and the due date and
application (as among principal, interest and Yield Maintenance
Amount) of the payment being made.
(2)Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Investment Operations Group
(Attention: Manager)
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Managing Director
(4) Recipient of telephonic prepayment notices:
Manager, Investment Operations Group
(▇▇▇) ▇▇▇-▇▇▇▇
(5) Tax Identification No.: ▇▇-▇▇▇▇▇▇▇
SCHEDULE 9A
LIST OF SUBSIDIARIES
SCHEDULE 9D
EXISTING DEBT AND LIENS
SCHEDULE 9H
LIST OF AGREEMENTS RESTRICTING DEBT
SCHEDULE 9I
LIST OF WARRANTS, OPTIONS AND CONVERTIBLE SECURITIES
SCHEDULE 9K
USE OF PROCEEDS
EXHIBIT A
[FORM OF NOTE]
BOOTS & ▇▇▇▇▇ INTERNATIONAL WELL CONTROL, INC.
11.28% SENIOR SUBORDINATED NOTE DUE JULY 23, 2006
No.______________ [Date]
$________________ PPN 099469 A * 9
FOR VALUE RECEIVED, the undersigned, BOOTS & ▇▇▇▇▇ INTERNATIONAL WELL
CONTROL, INC. (the "COMPANY"), a corporation organized and existing under the
laws of the State of Delaware, hereby promises to pay to _____________________
___________________________, or registered assigns, the principal sum of
_____________ ______________ DOLLARS ($______________) on July 23, 2006, with
interest (computed on the basis of a 360-day year -- 30-day month) (a) on the
unpaid balance thereof at the rate of 11.28% per annum from the date hereof,
payable quarterly on the 23rd day of October, January, April and July in each
year, commencing with the October 23, January 23, April 23 or July 23 next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) so long as an Event of Default (as defined in the Note
Agreement referred to below) is continuing, on the unpaid balance thereof, any
overdue payment of interest and any overdue payment of any Yield Maintenance
Amount (as defined in the Note Agreement referred to below), payable quarterly
as aforesaid (or, at the option of the registered holder hereof, on demand), at
a rate per annum from time to time equal to the lesser of (a) the maximum rate
permitted by applicable law or (b) the greater of (i) 2.0% over the rate of
interest then in effect with respect to this Note or (ii) 2.0% over the rate of
interest publicly announced by The Bank of New York from time to time in New
York City as its Prime Rate.
Payments of principal of, interest on and any Yield Maintenance Amount
payable with respect to this Note are to be made at the main office of The Bank
of New York in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of a series of 11.28% Senior Subordinated Notes (the
"NOTES") issued pursuant to a Subordinated Note and Warrant Purchase Agreement,
dated as of July 23, 1998 (the "AGREEMENT"), between the Company and The
Prudential Insurance Company of America, is entitled to the benefits thereof and
is guaranteed by each of the Guaranty Agreements (as defined in the Agreement)
and secured by each of the Security Documents (as defined in the Agreement) in
favor of the Collateral Agent (as defined in the Agreement) for the benefit of
the holders of the Notes. Capitalized terms used and not otherwise defined
herein have the meanings assigned to them in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
of like tenor for a like principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
This Note is entitled to the benefits of the Security Documents and the
Guaranty Agreements. This Note is subject to required and optional prepayment,
in whole or from time to time in part, on the terms specified in the Note
Agreement.
If an Event of Default, as defined in the Agreement, shall occur and be
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner and with the effect provided in the Agreement.
The Company, and the purchaser and the registered holder of this Note
specifically intend and agree to limit contractually the amount of interest
payable under this Note to the maximum amount of interest lawfully permitted to
be charged under applicable law. Therefore, none of the terms of this Note
shall ever be construed to create a contract to pay interest at a rate in excess
of the maximum rate permitted to be charged under applicable law, and neither
the Company nor any other party liable or to become liable hereunder shall ever
be liable for interest in excess of the amount determined at such maximum rate,
and the provisions of paragraph 12P of the Agreement shall control over any
contrary provision of this Note.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.
BOOTS & ▇▇▇▇▇ INTERNATIONAL WELL CONTROL, INC.
By:___________________________________
[Vice] President
A-2
EXHIBIT B
[FORM OF WARRANT]
B-1
EXHIBIT C
[FORM OF OPINION OF COMPANY'S COUNSEL]
C-1
EXHIBIT D
[FORM OF COMPLIANCE CERTIFICATE]
D-1
EXHIBIT E
[FORM OF GUARANTY AGREEMENT]
E-1
EXHIBIT F
[FORM OF MORTGAGE]
F-1
EXHIBIT G
[FORM OF PARTICIPATION RIGHTS AGREEMENT]
G-1
EXHIBIT H
[FORM OF PLEDGE AGREEMENT]
H-1
EXHIBIT I
[FORM OF REGISTRATION RIGHTS AGREEMENT]
I-1
EXHIBIT J
[FORM OF SECURITY AGREEMENT]
J-1