EXHIBIT 4.8
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SECURITIES PURCHASE AGREEMENT
BY AND AMONG
AVIALL, INC.
AVIALL SERVICES, INC.
▇. ▇. ▇▇▇▇▇▇▇ MEZZANINE FUND, ▇.▇.
▇▇▇▇▇▇▇ PRIVATE DEBT FUND, ▇.▇.
▇▇▇▇▇▇▇ LIMITED PARTNER HOLDINGS, LLC
BLACKSTONE MEZZANINE PARTNERS ▇.▇.
▇▇▇▇▇▇▇▇▇▇ MEZZANINE HOLDINGS ▇.▇.
▇▇▇▇▇▇▇ HIGH YIELD PARTNERS, L.P.
OAK HILL SECURITIES FUND, L.P.
OAK HILL SECURITIES FUND II, ▇.▇.
▇▇▇▇▇▇ ENTERPRISES, LP
AND
P & PK LIMITED PARTNERSHIP
DATED AS OF DECEMBER 17, 2001
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 DEFINITIONS 2
1.01 DEFINITIONS 2
1.02 ACCOUNTING TERMS: FINANCIAL STATEMENTS 13
1.03 KNOWLEDGE OF THE BORROWER 14
ARTICLE 2 PURCHASE AND SALE OF THE SECURITIES 14
2.01 PURCHASE AND SALE OF THE WMF NOTE 14
2.02 PURCHASE AND SALE OF THE ▇▇▇▇▇▇▇ ▇▇ NOTE 14
2.03 PURCHASE AND SALE OF THE WHITNEY LLC NOTE 14
2.04 PURCHASE AND SALE OF THE BLACKSTONE PARTNERS NOTE 14
2.05 PURCHASE AND SALE OF THE BLACKSTONE HOLDINGS NOTE 14
2.06 PURCHASE AND SALE OF THE CARLYLE NOTE 14
2.07 PURCHASE AND SALE OF THE OAK HILL NOTE 15
2.08 PURCHASE AND SALE OF WMF EQUITY 15
2.09 PURCHASE AND SALE OF ▇▇▇▇▇▇▇ ▇▇ EQUITY 15
2.10 PURCHASE AND SALE OF WHITNEY LLC EQUITY 15
2.11 PURCHASE AND SALE OF BLACKSTONE HOLDINGS EQUITY 15
2.12 PURCHASE AND SALE OF BLACKSTONE PARTNERS EQUITY 15
2.13 PURCHASE AND SALE OF CARLYLE EQUITY 15
2.14 PURCHASE AND SALE OF OAK HILL EQUITY 15
2.15 FEES AT CLOSING 15
2.16 CLOSING 15
2.17 EQUITY CLOSING 16
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ARTICLE 3 CONDITIONS TO THE RESPECTIVE 16
3.01 REPRESENTATIONS AND WARRANTIES 16
3.02 COMPLIANCE WITH THIS AGREEMENT 16
3.03 SECRETARY'S CERTIFICATES FOR BORROWER 16
3.04 SECRETARY'S CERTIFICATES FOR HOLDINGS 17
3.05 DOCUMENTS 17
3.06 PURCHASE OF SECURITIES PERMITTED BY APPLICABLE LAWS 17
3.07 OPINION OF COUNSEL 17
3.08 APPROVAL OF COUNSEL TO THE PURCHASERS 17
3.09 CONSENTS AND APPROVALS 17
3.10 REGISTRATION RIGHTS AGREEMENT 18
3.11 NO JUDGMENT OR ORDER 18
3.12 AS ADJUSTED BALANCE SHEET 18
3.13 GOOD STANDING CERTIFICATES 18
3.14 NO LITIGATION 18
3.15 FEES, ETC. 18
3.16 FINANCINGS, ETC. 18
3.17 GUARANTY. 19
3.18 ADVERSE CHANGE, ETC. 19
3.19 SOLVENCY CERTIFICATE; INSURANCE 19
3.20 CONSENTS PRIOR TO OR CONTEMPORANEOUS WITH THE CLOSING DATE 19
ARTICLE 4 CONDITIONS TO THE OBLIGATIONS 19
4.01 REPRESENTATIONS AND WARRANTIES 20
4.02 COMPLIANCE WITH THIS AGREEMENT 20
4.03 CLOSING OF TRANSACTIONS AND ROLLS ROYCE DISTRIBUTION SERVICES AGREEMENT 20
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4.04 SALE OF NOTES PERMITTED BY APPLICABLE LAWS 20
4.05 NO LITIGATION 20
4.06 NO MATERIAL JUDGMENT OR ORDER 20
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE BORROWER 21
5.01 CORPORATE EXISTENCE AND POWER 21
5.02 CORPORATE AUTHORIZATION; NO CONTRAVENTION 21
5.03 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS 21
5.04 BINDING EFFECT. 22
5.05 NO LEGAL BAR 22
5.06 LITIGATION. 22
5.07 COMPLIANCE WITH LAWS 22
5.08 NO DEFAULT OR BREACH 22
5.09 TITLE TO PROPERTIES 23
5.10 USE OF REAL PROPERTY 23
5.11 TAXES 24
5.12 SEC REPORTS; FINANCIAL CONDITION 25
5.13 [INTENTIONALLY OMITTED] 26
5.14 DISCLOSURE 27
5.15 ABSENCE OF CERTAIN CHANGES OR EVENTS 27
5.16 ENVIRONMENTAL MATTERS 27
5.17 INVESTMENT BORROWER/GOVERNMENT REGULATIONS 28
5.18 SUBSIDIARIES 28
5.19 CAPITALIZATION 29
5.20 PRIVATE OFFERING 30
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5.21 BROKER'S, FINDER'S OR SIMILAR FEES 30
5.22 LABOR RELATIONS 30
5.23 EMPLOYEE BENEFIT PLANS 30
5.24 PATENTS, TRADEMARKS, ETC 32
5.25 POTENTIAL CONFLICTS OF INTEREST 32
5.26 TRADE RELATIONS 33
5.27 FINANCIAL POSITION 33
5.28 MATERIAL CONTRACTS 33
5.29 INSURANCE 34
5.30 PRODUCTS LIABILITY 34
5.31 SOLVENCY 34
5.32 LOCATION OF ASSETS 34
5.33 CHANGE OF CONTROL PAYMENTS 34
5.34 FOREIGN ASSETS CONTROL REGULATIONS, ETC 34
5.35 MARGIN REQUIREMENTS 34
5.36 GOVERNMENT CONTRACTS 35
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 35
6.01 AUTHORIZATION; NO CONTRAVENTION 35
6.02 BINDING EFFECT 35
6.03 NO LEGAL BAR 36
6.04 PURCHASE FOR OWN ACCOUNT 36
6.05 BROKER'S, FINDER'S OR SIMILAR FEES 36
6.06 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT 36
6.07 EXISTENCE AND POWER 36
6.08 LITIGATION 36
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ARTICLE 7 INDEMNIFICATION 37
7.01 INDEMNIFICATION 37
7.02 PROCEDURE; NOTIFICATION 38
7.03 REGISTRATION RIGHTS AGREEMENT 38
ARTICLE 8 AFFIRMATIVE COVENANTS 38
8.01 FINANCIAL STATEMENTS AND OTHER INFORMATION 38
8.02 PRESERVATION OF CORPORATE EXISTENCE 41
8.03 PAYMENT OF OBLIGATIONS 41
8.04 COMPLIANCE WITH LAWS 41
8.05 RESERVATION OF SHARES 41
8.06 INSPECTION 42
8.07 PAYMENT OF NOTES 42
8.08 INSURANCE 42
8.09 BOOKS AND RECORDS 42
8.10 USE OF PROCEEDS 42
8.11 BOARD OBSERVATION RIGHTS 42
ARTICLE 9 MAINTENANCE AND NEGATIVE COVENANTS 43
9.01 MAXIMUM LEVERAGE RATIO 43
9.02 MINIMUM INTEREST COVERAGE RATIO 43
9.03 MINIMUM EBITDA 44
9.04 MAINTENANCE OF TANGIBLE NET WORTH 44
9.05 CAPITAL EXPENDITURES 44
9.06 INDEBTEDNESS 45
9.07 LIMITATION ON LIENS 46
9.08 SALE OF ASSETS 47
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9.09 RESTRICTED PAYMENTS 48
9.10 RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS 48
9.11 MARGIN REGULATIONS 48
9.12 SALE/LEASEBACKS 49
9.13 CHANGE IN NATURE OF BUSINESS 49
9.14 RESTRICTION ON FUNDAMENTAL CHANGES 49
9.15 PERMITTED DISTRIBUTION AGREEMENTS 49
9.16 INVESTMENTS 49
9.17 TRANSACTIONS WITH AFFILIATES 50
9.18 COMPLIANCE WITH ERISA 51
ARTICLE 10 PREPAYMENT 51
10.01 OPTIONAL PREPAYMENT 51
10.02 MANDATORY PREPAYMENT 51
ARTICLE 11 MISCELLANEOUS 51
11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES 51
11.02 TERMINATION 51
11.03 NOTICES 52
11.04 SUCCESSORS AND ASSIGNS 54
11.05 AMENDMENT AND WAIVER 55
11.06 SIGNATURES; COUNTERPARTS 55
11.07 HEADINGS 55
11.08 GOVERNING LAW 56
11.09 DETERMINATIONS, REQUEST OR CONSENTS 56
11.10 JURISDICTION, JURY TRIAL WAIVER, ETC 56
11.11 SEVERABILITY 56
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11.12 RULES OF CONSTRUCTION 57
11.13 ENTIRE AGREEMENT 57
11.14 CERTAIN EXPENSES 57
11.15 PUBLICITY 57
11.16 FURTHER ASSURANCES 57
11.17 OBLIGATIONS OF THE PURCHASERS 57
11.18 NO STRICT CONSTRUCTION 58
11.19 PAYMENT FOR CONSENT 58
11.20 CONFIDENTIALITY 58
11.21 PRIOR NOTIFICATION 59
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SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated as of December 17, 2001, by and among Aviall
Services, Inc. (the "BORROWER"), a Delaware corporation, Aviall, Inc.
("HOLDINGS"), a Delaware corporation, ▇. ▇. ▇▇▇▇▇▇▇ Mezzanine Fund, L.P.
("WMF"), a Delaware limited partnership, Whitney Private Debt Fund, L.P.
("▇▇▇▇▇▇▇ ▇▇"), a Delaware limited partnership, Whitney Limited Partner
Holdings, LLC ("WHITNEY LLC" and together with WMF and ▇▇▇▇▇▇▇ ▇▇, the "▇▇▇▇▇▇▇
FUNDS"), a Delaware limited partnership, Blackstone Mezzanine Partners L.P.
("BLACKSTONE PARTNERS"), a Delaware limited partnership, Blackstone Mezzanine
Holdings L.P. ("BLACKSTONE HOLDINGS" and together with Blackstone Partners,
"BLACKSTONE"), a Delaware limited partnership, Carlyle High Yield Partners,
L.P., a Delaware limited partnership ("CARLYLE") and Oak Hill Securities Fund,
L.P., Oak Hill Securities Fund II, L.P., ▇▇▇▇▇▇ Enterprises, LP and P&PK Limited
Partnership, each a Delaware limited partnership (collectively, "OAK HILL"). The
Whitney Funds, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and Oak Hill are sometimes referred to herein
individually, as a "Purchaser" and collectively, as the "PURCHASERS."
WITNESSETH:
WHEREAS, (i) the Borrower wishes to sell to WMF, and WMF
wishes to purchase from the Borrower a six year senior promissory note (the "WMF
NOTE"), in the principal amount set forth on Schedule 2.15, and (ii) Holdings
wishes to sell to WMF, and WMF wishes to purchase from Holdings the shares of
Common Stock set forth on Schedule 2.15 ("THE WMF EQUITY"), in each case upon
the terms and subject to the conditions hereinafter set forth; and
WHEREAS, (i) the Borrower wishes to sell to ▇▇▇▇▇▇▇ ▇▇ and
▇▇▇▇▇▇▇ ▇▇ wishes to purchase from the Borrower a six year senior promissory
note (the "▇▇▇▇▇▇▇ ▇▇ NOTE"), in the principal amount set forth on Schedule
2.15, and (ii) Holdings wishes to sell to ▇▇▇▇▇▇▇ ▇▇, and ▇▇▇▇▇▇▇ ▇▇ wishes to
purchase from Holdings the shares of Common Stock set forth on Schedule 2.15
(the "▇▇▇▇▇▇▇ ▇▇ EQUITY"), in each case upon the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, (i) the Borrower wishes to sell to Whitney LLC and
Whitney LLC wishes to purchase from the Borrower a six year senior promissory
note (the "WHITNEY LLC NOTE"), in the principal amount set forth on Schedule
2.15, and (ii) Holdings wishes to sell to Whitney LLC, and Whitney LLC wishes to
purchase from Holdings the shares of Common Stock set forth on Schedule 2.15
(the "WHITNEY LLC EQUITY"), in each case upon the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, (i) the Borrower wishes to sell to Blackstone
Partners, and Blackstone Partners wishes to purchase from the Borrower a six
year senior promissory note (the "BLACKSTONE PARTNERS NOTE"), in the principal
amount set forth on Schedule 2.15, and (ii) Holdings wishes to sell to
Blackstone Partners, and Blackstone Partners wishes to purchase from Holdings
the shares of Common Stock set forth on Schedule 2.15 (the "BLACKSTONE PARTNERS
EQUITY"), in each case upon the terms and subject to the conditions hereinafter
set forth; and
WHEREAS, (i) the Borrower wishes to sell to Blackstone
Holdings, and Blackstone Holdings wishes to purchase from the Borrower a six
year senior promissory note (the "BLACKSTONE HOLDINGS NOTE"), in the principal
amount set forth on Schedule 2.15, and (ii) Holdings wishes to sell
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to Blackstone Holdings, and Blackstone Holdings wishes to purchase from Holdings
the shares of Common Stock set forth on Schedule 2.15 (the "BLACKSTONE HOLDINGS
EQUITY"), in each case upon the terms and subject to the conditions hereinafter
set forth; and
WHEREAS, (i) the Borrower wishes to sell to Carlyle, and
Carlyle wishes to purchase from the Borrower a six year senior promissory note
(the "CARLYLE NOTE"), in the principal amount set forth on Schedule 2.15, and
(ii) Holdings wishes to sell to Carlyle, and Carlyle wishes to purchase from
Holdings the shares of Common Stock set forth on Schedule 2.15 (the "CARLYLE
EQUITY"), in each case upon the terms and subject to the conditions hereinafter
set forth; and
WHEREAS, (i) the Borrower wishes to sell to Oak Hill, and Oak
Hill wishes to purchase from the Borrower those six year senior promissory notes
(collectively, the "OAK HILL NOTE"), in the principal amounts set forth on
Schedule 2.15, and (ii) Holdings wishes to sell to Oak Hill, and Oak Hill wishes
to purchase from Holdings the shares of Common Stock set forth on Schedule 2.15
(the "OAK HILL EQUITY"), in each case upon the terms and subject to the
conditions hereinafter set forth; and
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
1.01 DEFINITIONS. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"AFFILIATE" means with respect to any Person, any other Person
(a) directly or indirectly controlling, controlled by, or under common control
with such Person, (b) directly or indirectly owning or holding five percent (5%)
or more of any equity interest in such Person, or (c) five percent (5%) or more
of whose voting stock or other equity interest is directly or indirectly owned
or held by such Person. For purposes of this definition, "control" (including
with correlative meanings, the terms "controlling", "controlled by" and under
"common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"AFFILIATED GROUP" shall have the meaning set forth in Section
1504(a) of the Code.
"AGREEMENT" means this Agreement, including the exhibits and
schedules attached hereto, as the same may be amended, supplemented or modified
in accordance with the terms hereof.
"AS ADJUSTED BALANCE SHEET" means the as adjusted consolidated
balance sheet of Holdings and its Subsidiaries, delivered pursuant to Section
3.12.
"ASSET SALE" has the meaning specified in Section 9.08 hereof.
"AUSTRALIAN FACILITY" means the credit facility to be entered
into between Aviall Australian Pty Ltd and a lender selected by Borrower as
amended, amended and restated, extended,
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supplemented, refinanced or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including, without limitation by increasing the amount of
available borrowings thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement or documents and
whether by the same or any other agent, lender or group of lenders.
"AVAILABILITY AMOUNT" shall have the meaning set forth in
Section 3.16(b) hereof.
"BLACKSTONE" shall have the meaning set forth in the first
clause hereof.
"BLACKSTONE HOLDINGS EQUITY" shall have the meaning set forth
in the fifth Whereas clause hereof.
"BLACKSTONE HOLDINGS NOTE" means the senior promissory note
referred to in the fifth Whereas clause hereof, which note shall be
substantially in the form attached hereto as Exhibit A.
"BLACKSTONE PARTNERS EQUITY" shall have the meaning set forth
in the fourth Whereas clause hereof.
"BLACKSTONE PARTNERS NOTE" means the senior promissory note
referred to in the fourth Whereas clause hereof, which note shall be
substantially in the form attached hereto as Exhibit A.
"BRIDGE PREFERRED STOCK" means the Series B preferred stock of
Holdings having the terms and conditions set forth in the relevant Certificate
of Designation.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of
New York are authorized or
required by law or executive order to close.
"BY-LAWS" means, unless the context in which such term is used
otherwise requires, the By-laws of Holdings or any of its Subsidiaries as in
effect on the Closing Date.
"CANADIAN FACILITY" means the revolving credit facility of
Aviall (Canada) Ltd. as amended, amended and restated, extended, supplemented,
refinanced or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including, without limitation by increasing the amount of available borrowings
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement or documents and whether by the same or any
other agent, lender or group of lenders.
"CAPITAL EXPENDITURES" means, with respect to any Person for
any period, the aggregate of amounts that would be reflected as additions to
property, plant or equipment on a consolidated balance sheet of such Person and
its Subsidiaries prepared in conformity with GAAP, excluding interest
capitalized during construction.
"CAPITAL LEASE" means, with respect to any Person, any lease
(or other arrangement conveying the right to use) of property by such Person as
lessee that would be accounted for as a capital lease on a balance sheet of such
Person prepared in conformity with GAAP.
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"CAPITAL LEASE OBLIGATIONS" means, with respect to any Person,
the capitalized amount of all obligations of such Person or any of its
Subsidiaries under Capital Leases, as determined on a consolidated basis in
conformity with GAAP.
"CARLYLE" shall have the meaning set forth in the first clause
hereof.
"CARLYLE EQUITY" shall have the meaning set forth in the sixth
Whereas clause hereof.
"CARLYLE NOTE" means the senior promissory note referred to in
the sixth Whereas clause hereof, which note shall be substantially in the form
attached hereto as Exhibit A.
"CARLYLE PARTNERS" means Carlyle Partners III, L.P.
"CASH" means the currency of the United States of America.
"CERCLA" has the meaning set forth in the definition of
"Environmental Laws" below.
"CERTIFICATES OF DESIGNATION" means the Certificates of
Designation to the Certificate of Incorporation which set forth the terms,
limitations and relative rights and preferences of the Bridge Preferred Stock,
Mezzanine Preferred Stock, and the Permanent Preferred Stock, substantially in
the forms attached hereto as Exhibit B, C and D.
"CERTIFICATE OF INCORPORATION" means, unless the context in
which it is used shall otherwise require, the Certificate of Incorporation of
Holdings or any of its Subsidiaries as in effect on the Closing Date.
"CLOSING" shall have the meaning assigned to that term in
Section 2.16.
"CLOSING DATE" shall have the meaning assigned to that term in
Section 2.16.
"CODE" means the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.
"COMMISSION" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"COMMON STOCK" means the shares of Common Stock, par value
$.01 per share, of Holdings, or any other capital stock of Holdings into which
such stock is reclassified or reconstituted.
"COMPLIANCE CERTIFICATE" shall have the meaning given in
Section 8.01(c).
"CONDITION OF THE BORROWER" means the assets, business,
properties, prospects, operations or financial condition of Holdings and its
Subsidiaries, taken as a whole.
"CONTRACTUAL OBLIGATIONS" means as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument or
arrangement (whether in writing or otherwise and including, for the avoidance of
doubt, any listing or other agreement with or obligation to, the
New York Stock
Exchange) to which such Person is a party or by which it or any of such Person's
property is bound.
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"CONVERSION DATE" shall have the meaning set forth in the
Notes.
"CUSTOMARY PERMITTED LIENS" means, with respect to any Person,
any of the following Liens:
(a) Liens with respect to the payment of taxes, assessments or
governmental charges in each case that are not yet due or that are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained to the
extent required by GAAP;
(b) Liens of landlords arising by statute and liens of
suppliers, mechanics, carriers, materialmen, warehousemen or workmen and other
liens imposed by law created in the ordinary course of business for amounts not
yet due or that are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves or other appropriate provisions are
being maintained to the extent required by GAAP;
(c) deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance or other types of
social security benefits or to secure the performance of bids, tenders, sales,
contracts (other than for the repayment of borrowed money) and surety, appeal,
customs or performance bonds;
(d) encumbrances arising by reason of zoning restrictions,
easements, licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar encumbrances on the use of real property
not materially detracting from the value of such real property or not materially
interfering with the ordinary conduct of the business conducted and proposed to
be conducted at such real property;
(e) encumbrances arising under leases or subleases of real
property that do not, in the aggregate over all such encumbrances, materially
detract from the value of such real property or interfere with the ordinary
conduct of the business conducted and proposed to be conducted at such real
property; and
(f) financing statements with respect to a lessor's rights in
and to personal property leased to such Person in the ordinary course of such
Person's business.
"DEFAULT" means any event that with the passing of time or the
giving of notice or both, would become an Event of Default.
"DEFINED BENEFIT PLAN" means a defined benefit plan within the
meaning of Section 3(35) of ERISA or Section 414(j) of the Code, whether funded
or unfunded, qualified or non-qualified and whether or not subject to ERISA or
the Code.
"DISQUALIFIED STOCK" means with respect to any Person, any
Stock that, by its terms (or by the terms of any Security into which it is
convertible or for which it is exchangeable) or upon the happening of any event,
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is exchangeable for Indebtedness of such Person or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Notes. Securities issued pursuant to the Equity
Documents (and as in existence on the Closing Date) shall not be deemed
Disqualified Stock.
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"EBITDA" shall have the meaning assigned to such term in the
Senior Credit Agreement as in effect on the Closing Date.
"ENVIRONMENTAL LAWS" means any applicable past, present or
future federal, state, territorial, provincial, regional, foreign or local law,
common law doctrine, rule, order, decree, judgment, injunction, license, permit
or regulation relating to environmental matters, including those pertaining to
land use, air, soil, substrata surface water, groundwater (including the
protection, cleanup, removal, remediation or damage thereof), public or employee
health or safety or any other environmental matter, together with any other laws
(federal, state, territorial, provincial, regional, foreign or local) relating
to emissions, discharges, releases or threatened releases of any pollutant or
contaminant including, without limitation, medical, chemical, biological,
biohazardous, hazardous, toxic or radioactive waste, materials or substances,
into ambient air, land, surface water, groundwater, personal property or
structures, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transportation, or handling of any pollutant
or contaminant, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. 9601 et seq.) ("CERCLA"),
the Hazardous Material Transportation Act (49 U.S.C. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. 6901 et seq.) ("RCRA"), the Federal
Water Pollution Control Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42
U.S.C. 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. 2601 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. 651 et seq.), as such laws
have been, or are, amended, modified or supplemented from time to time and any
analogous future federal, or present or future state or local laws, statutes and
regulations promulgated thereunder.
"EQUITY CLOSING" shall have the meaning set forth in Section
2.17.
"EQUITY CLOSING DATE" shall have the meaning set forth in
Section 2.17.
"EQUITY DOCUMENTS" shall have the meaning set forth in the
Senior Credit Agreement as in existence on the Closing Date.
"EQUITY SALE" means the issuance and sale by Holdings on or
prior to the Closing Date to Carlyle Partners of Bridge Preferred Stock, which
sale shall provide not less than gross proceeds of $45 million to Holdings.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" means a corporation that is or was a member
of a controlled group of corporations with Holdings within the meaning of
Section 4001(a) or (b) of ERISA or Section 414(b) of the Code, a trade or
business (including a sole proprietorship, partnership, trust, estate or
corporation) that is under common control with Holdings within the meaning of
Section 414(c) of the Code, or a trade or business which together with Holdings
is treated as a single employer under Section 414(m) or (o) of the Code.
"EVENT OF DEFAULT" shall have the meaning assigned to such
term in the Notes.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
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"FAIR MARKET VALUE" shall have the meaning assigned thereto in
the Senior Credit Agreement as in effect on the Closing Date.
"FISCAL QUARTER" means each of the three month periods ending
on March 31, June 30, September 30 and December 31.
"FISCAL YEAR" means the twelve month period ending on December
31.
"EXISTING CREDIT AGREEMENT" means that certain Revolving
Credit and Term Loan Agreement, dated December 23, 1999, as amended, between
Holdings and Fleet National Bank, as administrative agent.
"FINANCIAL STATEMENTS" means the Audited Financial Statements
and the Interim Financial Statements.
"GAAP" means generally accepted accounting principles in
effect within the United States, consistently applied.
"GOVERNMENTAL AUTHORITY" means the government of any nation,
state, city, locality or other political subdivision of any thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, regulation or compliance, and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.
"GOVERNMENT CONTRACT" means any bid, quotation, proposal,
contract, agreement, work authorization, lease, commitment or sale or purchase
order of Holdings or any of its Subsidiaries with the United States Government,
or any state, local or foreign government.
"GUARANTOR" means each of Holdings and each Subsidiary
Guarantor.
"GUARANTY" means the Guaranty of each of Holdings and each
Subsidiary Guarantor substantially in the form attached hereto as Exhibit E-1
and E-2, respectfully.
"HAZARDOUS MATERIALS" means any chemical, pollutant,
contaminant, pesticide, petroleum or petroleum product or byproduct, radioactive
substance, solid waste (hazardous or extremely hazardous), special, dangerous or
toxic waste, hazardous or toxic substance, chemical or material regulated,
listed, referred to, limited or prohibited under any Environmental Law,
including without limitation: (i) friable or damaged asbestos,
asbestos-containing material, polychlorinated biphenyls (PCBs), solvents and
waste oil; (ii) any "hazardous substance" as defined under CERCLA or any
Environmental Law; (iii) any hazardous waste defined under RCRA or any
Environmental Law; and (iv) even if not prohibited, listed, limited or regulated
by an Environmental Law, all pollutants, contaminants or hazardous, dangerous or
toxic chemicals, materials, wastes, substances, including without limitation,
any industrial process or pollution control waste (whether or not hazardous
within the meaning of RCRA), which could pose a hazard to the environment, or
the health or safety of any person or impair the use or value of any portion of
the Property of the Borrower.
"INDEBTEDNESS" of any Person means without duplication (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person evidenced by notes, bonds, debentures or similar instruments or that bear
interest, (c) all reimbursement and all obligations with respect to
7
letters of credit, bankers' acceptances, surety bonds and performance bonds,
whether or not matured, (d) all indebtedness for the deferred purchase price of
property or services, other than trade payables incurred in the ordinary course
of business that are not evidenced by a note or similar instrument and are not
more than 90 days overdue, (e) all indebtedness of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (f) all Capital Lease Obligations of
such Person and the present value of future rental payments under all synthetic
leases, (g) all Guaranty Obligations of such Person, (h) (I) all obligations of
such Person to purchase, redeem, retire, defease or otherwise acquire for value,
prior to the date which is 6 months after the final maturity date of the Notes,
any Stock or Stock Equivalents of such Person, valued, in the case of redeemable
preferred stock, at the greater of its voluntary liquidation preference and its
involuntary liquidation preference plus accrued and unpaid dividends, and (II)
all Stock and Stock Equivalents of such Person if at such time it is Cash Pay
Stock, valued in the case of such preferred Stock or Stock Equivalent, at the
greater of its voluntary liquidation preference and its involuntary liquidation
preference plus, accrued and unpaid dividends (i) all payments that such Person
would have to make in the event of any early termination on the date
Indebtedness of such Person is being determined in respect of Hedging Contracts
of such Person, and (j) all Indebtedness of the type referred to above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including Accounts and general intangibles) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness. All capitalized terms used in this definition but not defined in
this Agreement shall have the meaning assigned to them in the Senior Credit
Agreement in effect as of the Closing Date. The determination of the amount of
the Indebtedness at the relevant time of determination with respect to Holdings
and its Subsidiaries shall be made on a consolidated basis in accordance with
GAAP consistently applied.
"INTEREST COVERAGE RATIO" means, with respect to any Person
for any period, the ratio of EBITDA of such Person for such period to Interest
Expense of such Person for such period.
"INTEREST EXPENSE" shall have the meaning set forth in the
Senior Credit Agreement as in existence on the Closing Date.
"INTERIM FINANCIAL STATEMENTS" shall have the meaning assigned
to that term in Section 5.12(b).
"LEVERAGE RATIO" means, with respect to any Person for any
period, the ratio of (a) Financial Covenant Debt (as defined in the Senior
Credit Agreement as in effect on the Closing Date hereof) of such Person and its
Subsidiaries determined on a consolidated basis in accordance with GAAP as of
the last day of such period to (b) EBITDA for such Person for such period.
"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment, charge, deposit arrangement, encumbrance, lien
(statutory or other), security interest or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
intended to assure payment of any Indebtedness or the performance of any other
obligation, including any conditional sale or other title retention agreement,
the interest of a lessor under a Capital Lease and any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the UCC or comparable law of any jurisdiction
naming the owner of the asset to which such Lien relates as debtor.
8
"MARGIN STOCK" shall have the meaning provided in Regulation
U.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(x) the financial condition, business operations or prospects of Holdings and
its Subsidiaries taken as a whole, (y) the ability of Holdings and its
Subsidiaries to pay their obligations or perform their respective agreements
under the Note Transaction Documents or (z) the validity or enforceability of
this Agreement or any of the other Note Transaction Documents or any of the
material rights or remedies of any Purchaser hereunder or under any Note
Transaction Document.
"MATERIAL CONTRACTS" means the contracts and arrangements
required to be set forth on Schedule 5.28.
"MATERIAL SUBSIDIARY" means, with respect to any Person, at
the date of determination, any Subsidiary of such Person that, together with its
Subsidiaries, (i) for the most recent fiscal year, accounted for more than 10%
of the consolidated revenues of such Person or (ii) as of the end of the most
recent fiscal quarter, was the owner of more than 10% of the consolidated assets
of such Person.
"MEZZANINE EQUITY" means the WMF Equity, ▇▇▇▇▇▇▇ ▇▇ Equity,
Whitney LLC Equity, Blackstone Holdings Equity, Blackstone Partners Equity,
Carlyle Equity and Oak Hill Equity.
"MEZZANINE PREFERRED STOCK" means the Series C preferred stock
of Holdings having the terms and conditions set forth in the relevant
Certificate of Designation.
"MULTIEMPLOYER PLAN" means a multiemployer plan within the
meaning of Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code.
"NOTE TRANSACTION" means the transactions contemplated by this
Agreement.
"NOTES" means collectively, the WMF Note, the ▇▇▇▇▇▇▇ ▇▇ Note,
the Whitney LLC Note, the Blackstone Partners Note, the Blackstone Holdings
Note, the Carlyle Note and the Oak Hill Note and any portions thereof assigned
or transferred.
"NOTE TRANSACTION DOCUMENTS" means, collectively, this
Agreement, the Notes, the Registration Rights Agreement, the Guarantys, the
Certificate of Incorporation and the By-laws.
"OAK HILL" shall have the meaning set forth in the first
clause hereof.
"OAK HILL EQUITY" shall have the meaning set forth in the
seventh Whereas clause hereof.
"OAK HILL NOTE" means those senior promissory notes referred
to in the seventh Whereas clause hereof, which notes shall be substantially in
the form attached hereto as Exhibit A.
"PERMANENT PREFERRED STOCK" means the Series D preferred stock
of Holdings having substantially the terms and conditions set forth in the
Certificate of Designation relating thereto.
9
"PERMITS" means all licenses, permits, orders, consents,
approvals, registrations, authorizations, qualifications and filings required by
any federal, state, local or foreign laws or governmental or regulatory bodies
and all industry or other non-governmental self-regulatory organizations,
including, without limitation, the United States Federal Aviation Authority, or
any analogous foreign governmental agency.
"PERMITTED ACQUISITION" means the acquisition by Holdings or
any of its Subsidiaries of all or substantially all of the assets or Stock of
any Person or of any operating division thereof (the "TARGET"), or the merger of
the Target with or into Holdings or any Subsidiary of Holdings (with Holdings,
in the case of a merger with Holdings, being the surviving corporation) subject
to the satisfaction of each of the following conditions:
(a) the Purchasers shall receive at least 10 days' prior
written notice of such acquisition, which notice shall include, without
limitation, a reasonably detailed description of such acquisition;
(b) such acquisition shall only involve assets substantially
located in the United States and comprising a business, or those assets of a
business of the type engaged in by the Borrower and its Subsidiaries or
permitted pursuant to Section 9.13 hereof;
(c) such acquisition shall be consensual and shall have been
approved by the Target's board of directors;
(d) no additional Indebtedness or other liabilities shall be
incurred, assumed or otherwise be reflected on a consolidated balance sheet of
Holdings and Target after giving effect to such acquisition, except (i) loans
made under the Senior Credit Agreement, (ii) ordinary course trade payables,
accrued expenses and (iii) Indebtedness permitted under Section 9.06 hereof;
(e) the sum of all amounts payable in connection with such
acquisition and all other Permitted Acquisitions (including all transaction
costs and all Indebtedness, liabilities and Guaranty Obligations incurred or
assumed in connection therewith or otherwise reflected in a consolidated balance
sheet of Holdings and Target) shall not exceed $100,000,000;
(f) concurrently with delivery of the notice referred to in
(a) above, the Borrower shall have delivered to the Purchasers such other
financial information, financial analysis, documentation or other information
relating to such acquisition as the Purchasers shall reasonably request; and
(g) at the time of such acquisition and after giving effect
thereto, no Default or Event of Default shall have occurred and be continuing.
"PERSON" means any individual, firm, corporation, limited
liability company, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, Governmental Authority or other
entity of any kind, and shall include any successor (by merger or otherwise) of
such entity.
"PLANS" shall have the meaning assigned to that term in
Section 5.23 of this Agreement.
"PREFERRED STOCK" means the shares of preferred stock, par
value $.01 per share, of Holdings.
10
"PURCHASERS" shall have the meaning set forth in the first
paragraph of this Agreement.
"RCRA" has the meaning set forth in the definition of
"Environmental Laws."
"RR AGREEMENT" means the Distribution Services Agreement
between Rolls-Royce Corporation and the Borrower appointing Borrower the
exclusive worldwide distributor of all parts related to the Rolls Royce T56
engine substantially in the form attached hereto as Exhibit G.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement substantially in the form attached hereto as Exhibit H.
"REQUIREMENTS OF LAW" means as to Holdings, Borrower and their
Subsidiaries, any law (including Environmental Laws), rule, regulation, decree,
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable or binding upon Holdings, Borrower and their Subsidiaries,
or any of their property or assets or to which they or any of their property or
assets is subject or pertaining to any or all of the Transaction.
"RESTRICTED PAYMENT" shall have the meaning assigned thereto
in the Senior Credit Agreement as in effect on the Closing Date.
"SEC REPORTS" with respect to any Person means all forms,
reports, statements and other documents (including exhibits, annexes,
supplements and amendments to such documents) required to be filed by it, or
sent or made available by it to its security holders, under the Exchange Act,
the Securities Act, any national securities exchange or quotation system or
comparable Governmental Authority since the date of such Person's initial public
offering subsequent to January 1, 1999.
"SECURITIES" means, collectively, the Notes and the Mezzanine
Equity.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations thereunder as the
same shall be in effect at the time.
"SENIOR CREDIT AGREEMENT" means the Credit Agreement dated as
of the date hereof among the Borrower, Holdings, the lenders and issuers party
thereto from time to time, and Citicorp USA, Inc., as amended, amended and
restated, extended, supplemented, refinanced or otherwise modified from time to
time, including any agreement extending the maturity of, refinancing, replacing
or otherwise restructuring (including, without limitation, by increasing the
amount of available borrowings thereunder or adding any Subsidiaries of Holdings
as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or documents or any successor or replacement
agreement or documents and whether by the same or any other agent, lender or
group of lenders.
"SENIOR CREDIT AGREEMENT DOCUMENTS" means the Senior Credit
Agreement and, after the execution and delivery thereof pursuant to the terms of
the Senior Credit Agreement, each note, each security document and guarantee
and, after the execution and delivery thereof, each additional note, guaranty or
security document executed pursuant to the Senior Credit Agreement.
"SHARES" shall have the meaning assigned to that term in
Section 8.05 hereof.
11
"SOLVENT" means, with respect to any Person, that the value of
the assets of such Person (both at fair value and present fair saleable value)
is, on the date of determination, greater than the total amount of liabilities
(including contingent and unliquidated liabilities) of such Person as of such
date and that, as of such date, such Person is able to pay all liabilities of
such Person as such liabilities mature and does not have unreasonably small
capital. In computing the amount of contingent or unliquidated liabilities at
any time, such liabilities shall be computed at the amount that, in light of all
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
"STOCKHOLDER APPROVAL" means the affirmative approval of the
stockholders of Holdings, in accordance with the rules of the
New York Stock
Exchange, Inc., to the issuance of the Mezzanine Equity and the Permanent
Preferred Stock, all as contemplated pursuant to the Transaction.
"SUBSIDIARY" means, with respect to any Person, a corporation
or other entity of which more than 50% of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
Holdings.
"SUBSIDIARY GUARANTOR" means each domestic Subsidiary of the
Borrower which executes a Guaranty concurrently herewith or which executes a
Subsidiary Guaranty after the Closing Date.
"T56 FINANCIAL INFORMATION" means the historical financial
information provided to Purchasers by Holdings and Borrower set forth as
Schedule 5.12(b) hereto relating to the Rolls-Royce T56 and 501D parts, modules,
and all related technical publications and all 501K parts that are common with
501D or T56 engines.
"TANGIBLE NET WORTH" shall have the meaning assigned thereto
in the Senior Credit Agreement as in effect on the Closing Date.
"TAX" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on-minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"TOTAL ASSETS" of any Person means, at any date, the total
assets of such Person and its Subsidiaries at such date determined on a
consolidated basis in conformity with GAAP minus (a) any minority interest in
non-wholly-owned Subsidiaries that would be reflected on a consolidated balance
sheet of such person and its Subsidiaries at such date prepared in conformity
with GAAP and (b) any Securities (as defined in the Senior Credit Agreement as
of the Closing Date) issued by such Person held as treasury securities.
12
"TOTAL LIABILITIES" of any Person means, at any date, all
obligations that, in conformity with GAAP, would be included in determining
total liabilities as shown on the liabilities side of a consolidated balance
sheet of such Person and its Subsidiaries at such date; provided, however, that,
regardless of whether the same would be so shown, "Total Liabilities" of any
Person shall include all Indebtedness of such Person or any of its Subsidiaries
at such date (other than intercompany Indebtedness) and shall include the
greater of the liquidation preference and the redemption price of any
outstanding Disqualified Stock of such Person at such date.
"TRANSACTION" means, collectively, (i) the incurrence of
Indebtedness hereunder on the Closing Date and the sale and issuance of the
Mezzanine Equity by Holdings on the Equity Closing Date, (ii) the consummation
of the transactions contemplated by the Senior Credit Agreement providing for a
facility of $200.0 million, of which not less than the Availability Amount will
be available for borrowing thereunder at the Closing Date, (iii) the Equity
Sale, (iv) the repayment of all amounts outstanding under the Existing Credit
Agreement, (v) the payment of no less than $70 million for the purchase of
inventory pursuant to and in accordance with the RR Agreement and no more than
$20 million for a licensing fee in connection therewith, and (vi) the payment of
fees and expenses owing in connection with the foregoing in an amount not
materially exceeding the amount set forth on the As Adjusted Balance Sheet.
"WMF EQUITY" shall have the meaning set forth in the first
Whereas clause hereof.
"WMF NOTE" means the senior promissory note referred to in the
first Whereas clause hereof, which note shall be substantially in the form
attached hereto as Exhibit A.
"▇▇▇▇▇▇▇ ▇▇ EQUITY" shall have the meaning set forth in the
second Whereas clause hereof.
"▇▇▇▇▇▇▇ ▇▇ NOTE" means the senior promissory note referred to
in the second Whereas clause hereof, which note is substantially in the form
attached hereto as Exhibit A.
"WHITNEY LLC EQUITY" shall have the meaning set forth in the
third Whereas clause hereof.
"WHITNEY LLC NOTE" means the senior promissory note referred
to in the third Whereas clause hereof, which note is substantially in the form
attached hereto as Exhibit A.
1.02 ACCOUNTING TERMS: FINANCIAL STATEMENTS. All accounting terms used
herein and not expressly defined in this Agreement shall have the respective
meanings given to them in conformance with GAAP. Financial statements and other
information furnished after the date hereof pursuant to the Agreement or the
other Note Transaction Documents shall be prepared in accordance with GAAP as in
effect at the time of such preparation, provided, however, that no "Accounting
Changes" (as defined below) shall be taken into account in determining
compliance with the financial covenants, standards or terms in this Agreement.
Holdings and the Borrower shall prepare footnotes to each Compliance Certificate
and the financial statements required to be delivered hereunder that show the
differences between the basis for calculating financial covenant compliance (the
calculation of financial covenant compliance shall not be based upon nor reflect
such Accounting Changes) and the financial statements delivered (which shall
reflect such Accounting Changes). "ACCOUNTING CHANGES" means: (a) changes in
accounting principles required by GAAP and implemented by Holdings and its
Subsidiaries; (b) changes in accounting principles
13
recommended by Holdings' certified public accountants and implemented by
Holdings; and (c) changes resulting from (i) the application of purchase
accounting principles (A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109) to the
purchase and sale of the Securities or the other transactions described in the
Note Transaction Documents, or (ii) any other adjustments that, in each case,
were applicable to, but not included in, the As Adjusted Balance Sheet. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including, but not limited to, capitalization of costs and expenses or payment
of pre-Closing Date liabilities) shall be treated as expenses in the period the
expenditures are made.
1.03 KNOWLEDGE OF THE BORROWER. All references to the knowledge of the
Borrower or Holdings or to facts known by the Borrower or Holdings shall mean
actual knowledge or notice of the Persons named on Exhibit F hereto.
ARTICLE 2
PURCHASE AND SALE OF THE SECURITIES
2.01 PURCHASE AND SALE OF THE WMF NOTE. Subject to the terms and
conditions herein set forth, the Borrower agrees that it will issue and sell to
WMF, and WMF agrees that it will acquire from the Borrower on the Closing Date,
the WMF Note substantially in the form attached hereto as Exhibit A,
appropriately completed in conformity herewith.
2.02 PURCHASE AND SALE OF THE ▇▇▇▇▇▇▇ ▇▇ NOTE. Subject to the terms and
conditions herein set forth, the Borrower agrees that it will issue and sell to
▇▇▇▇▇▇▇ ▇▇, and ▇▇▇▇▇▇▇ ▇▇ agrees that it will acquire from the Borrower on the
Closing Date, the ▇▇▇▇▇▇▇ ▇▇ Note substantially in the form attached hereto as
Exhibit A, appropriately completed in conformity herewith.
2.03 PURCHASE AND SALE OF THE WHITNEY LLC NOTE. Subject to the terms
and conditions herein set forth, the Borrower agrees that it will issue and sell
to Whitney LLC, and Whitney LLC agrees that it will acquire from the Borrower on
the Closing Date, the Whitney LLC Note substantially in the form attached hereto
as Exhibit A, appropriately completed in conformity herewith.
2.04 PURCHASE AND SALE OF THE BLACKSTONE PARTNERS NOTE. Subject to the
terms and conditions herein set forth, the Borrower agrees that it will issue
and sell to Blackstone Partners, and Blackstone Partners agrees that it will
acquire from the Borrower on the Closing Date, the Blackstone Partners Note
substantially in the form attached hereto as Exhibit A, appropriately completed
in conformity herewith.
2.05 PURCHASE AND SALE OF THE BLACKSTONE HOLDINGS NOTE. Subject to the
terms and conditions herein set forth, the Borrower agrees that it will issue
and sell to Blackstone Holdings, and Blackstone Holdings agrees that it will
acquire from the Borrower on the Closing Date, the Blackstone Holdings Note
substantially in the form attached hereto as Exhibit A, appropriately completed
in conformity herewith.
2.06 PURCHASE AND SALE OF THE CARLYLE NOTE. Subject to the terms and
conditions herein set forth, the Borrower agrees that it will issue and sell to
Carlyle, and Carlyle agrees that it will acquire
14
from the Borrower on the Closing Date, the Carlyle Note substantially in the
form attached hereto as Exhibit A, appropriately completed in conformity
herewith.
2.07 PURCHASE AND SALE OF THE OAK HILL NOTE. Subject to the terms and
conditions herein set forth, the Borrower agrees that it will issue and sell to
Oak Hill, and Oak Hill agrees that it will acquire from the Borrower on the
Closing Date, the Oak Hill Note substantially in the form attached hereto as
Exhibit A, appropriately completed in conformity herewith.
2.08 PURCHASE AND SALE OF WMF EQUITY. Subject to the terms and
conditions herein set forth, Holdings agrees that it will issue and sell to WMF,
and WMF agrees that it will acquire from Holdings on the Equity Closing Date,
the WMF Equity.
2.09 PURCHASE AND SALE OF ▇▇▇▇▇▇▇ ▇▇ EQUITY. Subject to the terms and
conditions herein set forth, Holdings agrees that it will issue and sell to
▇▇▇▇▇▇▇ ▇▇, and ▇▇▇▇▇▇▇ ▇▇ agrees that it will acquire from Holdings on the
Equity Closing Date, the ▇▇▇▇▇▇▇ ▇▇ Equity.
2.10 PURCHASE AND SALE OF WHITNEY LLC EQUITY. Subject to the terms and
conditions herein set forth, Holdings agrees that it will issue and sell to
Whitney LLC, and Whitney LLC agrees that it will acquire from Holdings on the
Equity Closing Date, the Whitney LLC Equity.
2.11 PURCHASE AND SALE OF BLACKSTONE HOLDINGS EQUITY. Subject to the
terms and conditions herein set forth, Holdings agrees that it will issue and
sell to Blackstone Holdings, and Blackstone Holdings agrees that it will acquire
from Holdings on the Equity Closing Date, the Blackstone Holdings Equity.
2.12 PURCHASE AND SALE OF BLACKSTONE PARTNERS EQUITY. Subject to the
terms and conditions herein set forth, Holdings agrees that it will issue and
sell to Blackstone Partners, and Blackstone Partners agrees that it will acquire
from Holdings on the Equity Closing Date, the Blackstone Partners Equity.
2.13 PURCHASE AND SALE OF CARLYLE EQUITY. Subject to the terms and
conditions herein set forth, Holdings agrees that it will issue and sell to
Carlyle, and Carlyle agrees that it will acquire from Holdings on the Equity
Closing Date, the Carlyle Equity.
2.14 PURCHASE AND SALE OF OAK HILL EQUITY. Subject to the terms and
conditions herein set forth, Holdings agrees that it will issue and sell to Oak
Hill, and Oak Hill agrees that it will acquire from Holdings on the Equity
Closing Date, the Oak Hill Equity.
2.15 FEES AT CLOSING. Concurrently with the execution hereof, the
Borrower shall (a) pay to each Purchaser the placement fee set forth on Schedule
2.15 and (b) reimburse all of the Purchasers' reasonable out-of-pocket expenses
(including, without limitation, fees, charges and disbursements of counsel and
consultants) incurred in connection with (i) the negotiation and execution and
delivery of this Agreement and the Note Transaction Documents and the
Purchasers' due diligence investigation and (ii) the transactions contemplated
by this Agreement and the Note Transaction Documents, which payments shall be
made by wire transfer of immediately available funds to an account or accounts
designated by the Purchasers.
2.16 CLOSING. The purchase and issuance of the Notes shall take place
at the closing (the "CLOSING") to be held at the offices of Weil, Gotshal &
▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, on the 21st of December, 2001 (the "CLOSING DATE"). At the
Closing, the Borrower shall deliver the Notes to the Purchasers against delivery
by the Purchasers to the Borrower of the purchase prices therefor and for the
Mezzanine Equity.
2.17 EQUITY CLOSING. The purchase and sale of the Mezzanine Equity
shall take place at a closing (the "EQUITY CLOSING") to be held on the
Conversion Date at such place and time as agreed between the parties hereto (the
"EQUITY CLOSING DATE"). The Equity Closing with respect to the issuance of the
Mezzanine Equity to any Purchaser will not occur unless and until the occurrence
of the Conversion Date with respect to the Note issued to such Purchaser. At the
Equity Closing with respect to any Purchaser, Holdings shall deliver stock
certificates representing the Mezzanine Equity to such Purchaser in the amount
as set forth on Schedule 2.15 with respect to such Purchaser (with appropriate
legends thereon).
ARTICLE 3
CONDITIONS TO THE RESPECTIVE
OBLIGATIONS OF THE PURCHASERS
TO PURCHASE THE SECURITIES
The obligation of each Purchaser to purchase its respective
Notes and Mezzanine Equity and to pay the purchase prices therefor at the
Closing and to perform any obligations hereunder shall be subject to the
satisfaction as determined by, or waived by, such Purchaser of the following
conditions on or before the Closing Date; provided, however, that any waiver of
a condition shall not be deemed a waiver of any breach of any representation,
warranty, agreement, term or covenant or of any misrepresentation by the
Borrower or Holdings. None of the Purchasers shall be obligated to purchase any
Note unless the purchase and sale of all the Notes occurs simultaneously.
3.01 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Borrower and Holdings contained in Article 5 hereof shall be true and
correct at and as of the date hereof and the Closing Date as if made at and as
of such date, and the Purchasers shall have received at the Closing a
certificate to the foregoing effect, dated the Closing Date, and executed by the
Chief Executive Officer, President or a Vice President of the Borrower.
3.02 COMPLIANCE WITH THIS AGREEMENT. The Borrower and Holdings shall
have performed and complied in all material respects with all of their
agreements and conditions set forth or contemplated herein that are required to
be performed or complied with by them on or before the Closing Date, and the
Purchasers shall have received at the Closing a certificate to the foregoing
effect, dated the Closing Date, and executed by the Chief Executive Officer,
President or a Vice President of the Borrower.
3.03 SECRETARY'S CERTIFICATES FOR BORROWER. The Purchasers shall have
received certificates from the Borrower, dated the Closing Date and signed by
the Secretary or an Assistant Secretary of the Borrower, certifying (x) that the
attached copies of the Certificate of Incorporation and By-laws of the Borrower,
and resolutions of the Board of Directors of the Borrower approving the Note
Transaction Documents to which it is a party and the Note Transaction are all
true, complete and correct and remain unamended and in full force and effect,
and (y) the incumbency and specimen signature of each officer of the Borrower
executing any Note Transaction Document to which it is a
16
party or any other document delivered in connection herewith and therewith on
behalf of the Borrower.
3.04 SECRETARY'S CERTIFICATES FOR HOLDINGS. The Purchasers shall have
received certificates from Holdings, dated the Closing Date and signed by the
Secretary or an Assistant Secretary of Holdings, certifying (x) that the
attached copies of the Certificate of Incorporation and By-laws of Holdings, and
resolutions of the Board of Directors of Holdings approving the Note Transaction
Documents to which it is a party and the transactions contemplated hereby and
thereby are all true, complete and correct and remain unamended and in full
force and effect, and (y) the incumbency and specimen signature of each officer
of Holdings executing any Note Transaction Document to which it is a party or
any other document delivered in connection herewith and therewith on behalf of
Holdings.
3.05 DOCUMENTS. The Purchasers shall have received true, complete and
correct copies of such agreements, schedules, exhibits, certificates, documents,
financial information and filings as they may reasonably request in connection
with or relating to the Note Transaction, all in form and substance reasonably
satisfactory to the Purchasers.
3.06 PURCHASE OF SECURITIES PERMITTED BY APPLICABLE LAWS. Except as set
forth on Schedule 3.06, the acquisition of and payment for the Securities to be
acquired by the Purchasers hereunder and the consummation of the Note
Transaction (a) shall not be prohibited by any Requirement of Law, (b) shall not
subject the Purchasers to any onerous condition under or pursuant to any
Requirement of Law, and (c) shall be permitted by all Requirements of Law to
which any Purchaser or the Note Transaction or the Note Transaction Documents
are subject; and the Purchasers shall have received such certificates or other
evidence as they may reasonably request to establish compliance with this
condition.
3.07 OPINION OF COUNSEL. The Purchasers shall have received an opinion
of ▇▇▇▇▇▇ and ▇▇▇▇▇ LLP, outside counsel to Holdings and its Subsidiaries, dated
as of the Closing Date, relating to the Note Transaction and such other matters,
in form and substance reasonably acceptable to the Purchasers.
3.08 APPROVAL OF COUNSEL TO THE PURCHASERS. All actions and proceedings
hereunder and all agreements, schedules, exhibits, certificates, financial
information, filings and other documents required to be delivered by Holdings
and each of its Subsidiaries hereunder or in connection with the consummation of
the Note Transaction shall be in form and substance reasonably acceptable to
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to the Purchasers, in its reasonable judgment
(including, without limitation, the opinion of counsel referred to in Section
3.07 hereof).
3.09 CONSENTS AND APPROVALS. Except as set forth on Schedule 3.09, all
consents, exemptions, authorizations, or other actions by, or notices to, or
filings with, Governmental Authorities and other Persons in respect of all
Requirements of Law and with respect to those Contractual Obligations of
Holdings and each of its Subsidiaries necessary or required in connection with
the execution, delivery or performance (including, without limitation, the
payment of interest on the Notes and the issuance of the Mezzanine Equity), by
Holdings and each of its Subsidiaries, or enforcement against Holdings and each
of its Subsidiaries, of the Note Transaction Documents to which it is a party
shall have been obtained and be in full force and effect, and the Purchasers
shall have been furnished with appropriate evidence thereof, and all waiting
periods shall have lapsed without extension or the imposition of any conditions
or restrictions.
17
3.10 REGISTRATION RIGHTS AGREEMENT. Holdings shall have duly executed
and delivered to the Purchaser the Registration Rights Agreement.
3.11 NO JUDGMENT OR ORDER. There shall not be on the Closing Date any
judgment or order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirement of Law
which, in the judgment of the Purchasers, would prohibit the purchase of the
Securities hereunder or subject the Purchasers to any onerous condition under or
pursuant to any Requirement of Law if the Securities were to be purchased
hereunder.
3.12 AS ADJUSTED BALANCE SHEET. The Purchasers shall have received an
As Adjusted consolidated balance sheet of Holdings and its Subsidiaries, which
shall be certified by the principal accounting officer and principal finance
officer of Holdings, to the effect that it fairly presents the consolidated
preliminary balance sheet of Holdings and its Subsidiaries as of November 30,
2001 and as adjusted to reflect the consummation of the Transaction, including
all material fees and expenses in connection therewith.
3.13 GOOD STANDING CERTIFICATES. The Purchasers shall have received as
of the Closing Date, good standing certificates for Holdings and each of its
domestic Subsidiaries for each of their respective jurisdictions of
incorporation and all other jurisdictions where they do business.
3.14 NO LITIGATION. No action, suit or proceeding before any court or
any Governmental Authority shall have been commenced or threatened, no
investigation by any Governmental Authority shall have been commenced or
threatened and no action, suit or proceeding by any Governmental Authority shall
have been commenced or threatened against any Purchaser, Holdings or any
Subsidiary of Holdings (i) seeking to restrain, prevent or change the
Transaction or questioning the validity or legality of any of part of the
Transaction, or (ii) which would, if resolved adversely to such Purchaser,
Holdings or Subsidiary, have, individually or in the aggregate, a Material
Adverse Effect.
3.15 FEES, ETC. On the Closing Date, the Borrower shall have paid to
the Purchasers all costs, fees and expenses (including, without limitation,
reasonable legal fees and expenses) payable to the Purchasers to the extent then
due and invoiced.
3.16 FINANCINGS, ETC. (a) On or prior to the Closing Date, (x) Holdings
shall have received gross cash proceeds of at least $45,000,000 in consideration
for the issuance of Bridge Preferred Stock having an aggregate liquidation
preference equal to such gross proceeds and (y) Holdings shall have utilized the
full amount of such cash contribution to make payments owing in connection with
the Transaction.
(b) On or prior to the Closing Date, (i) the Borrower shall
have consummated the transactions contemplated by the Senior Credit Agreement
providing for a revolving credit facility of $200 million, and there shall be
not less than $32 million of: (x) undrawn availability under the BorrOwing Base
defined in the Senior Credit Agreement plus (y) available cash (the
"AVAILABILITY AMOUNT") and (ii) the Borrower shall have utilized an amount not
in excess of $17 million of net cash proceeds from borrowings under the Senior
Credit Agreement to pay fees and expenses owing in connection with the
Transaction.
(c) The Equity Sale and the issuance of Indebtedness under the
Senior Credit Agreement shall have been consummated, in each case in all
material respects in accordance with the
18
terms and conditions of the applicable documentation therefor substantially in
the form provided to Purchaser as of the date hereof and all Requirements of
Law.
3.17 GUARANTY. Holdings and each Subsidiary Guarantor existing on the
Closing Date shall have guaranteed the obligations of Holdings and its
Subsidiaries under the Note Transaction Documents and duly authorized, executed
and delivered a Guaranty.
3.18 ADVERSE CHANGE, ETC.
(a) On the Closing Date and except as set forth on Schedule
5.15 hereof, there shall not have occurred or been threatened since September
30, 2001 any change (or a series of changes) that the Purchasers shall
determine, has resulted, or could reasonably be expected to result, in a
Material Adverse Effect.
(b) On or prior to the Closing Date, all necessary material
governmental (domestic and foreign) and material third party approvals and/or
consents in connection with the Transaction shall have been obtained and remain
in effect, and all applicable waiting periods shall have expired without any
action being taken by any competent authority which would cause a Material
Adverse Effect.
3.19 SOLVENCY CERTIFICATE; INSURANCE. On or before the Closing Date,
the Borrower shall cause to be delivered to the Purchasers (i) a solvency
certificate from the principal accounting officer and principal finance officer
of Holdings, which shall be addressed to the Purchasers and dated the Closing
Date, setting forth the conclusion that, on a going concern basis and after
giving effect to the Transaction and the incurrence of all the financings
contemplated thereby, and the Equity Sale and the right of contribution under
the Subsidiary Guarantees, Borrower and its Subsidiaries taken as a whole are
not insolvent and will not be rendered insolvent by the indebtedness incurred in
connection therewith, and will not be left with unreasonably small capital with
which to engage in its business and will not have incurred debts beyond its
ability to pay such debts as they mature, and (ii) copies of certificates of
insurance complying with the requirements of Section 8.08 for the business and
properties of Holdings and its Subsidiaries, in scope, form and substance
reasonably satisfactory to the Purchasers, and stating that such insurance shall
not be cancelled or revised without 30 days prior written notice by the insurer
to the Purchasers.
3.20 CONSENTS PRIOR TO OR CONTEMPORANEOUS WITH THE CLOSING DATE.
Holdings shall have amended or obtained the respective consents or waivers under
the various agreements and plans to the extent specified on Schedule 5.02
hereof.
ARTICLE 4
CONDITIONS TO THE OBLIGATIONS
OF HOLDINGS AND THE BORROWER TO ISSUE AND SELL THE SECURITIES
(A) The obligations of Borrower to issue and sell the Notes
and to perform its other obligations hereunder relating thereto shall be subject
to the satisfaction as determined by, or waived by, the Borrower of the
following conditions on or before the Closing Date:
19
4.01 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchasers contained in Article 6 hereof shall be true and correct at and
as of the date hereof and the Closing Date as if made at and as of such date.
4.02 COMPLIANCE WITH THIS AGREEMENT. The Purchasers shall have
performed and complied in all material respects with all of their respective
agreements and conditions set forth or contemplated herein that are required to
be performed or complied with by the Purchasers on or before the Closing Date.
4.03 CLOSING OF TRANSACTIONS AND ROLLS ROYCE DISTRIBUTION SERVICES
AGREEMENT. At the Closing, Holdings, Borrower and Subsidiaries, as applicable,
will (i) enter (or have entered) into the RR Agreement; (ii) consummate the
transactions contemplated by the Senior Credit Agreement; and (iii) consummate
the Equity Sale. Prior to Closing, Holdings and Borrower hereby covenant and
agree to use their commercially reasonable best efforts to consummate the
foregoing.
4.04 SALE OF NOTES PERMITTED BY APPLICABLE LAWS. The acquisition of and
payment for the Notes to be acquired by each Purchaser hereunder and the
consummation of the transactions contemplated hereby and by the Note Transaction
Documents (a) shall not be prohibited by any Requirement of Law, (b) shall not
subject Holdings or Borrower to any onerous condition under or pursuant to any
Requirement of Law, and (c) shall be permitted by all Requirements of Law to
which Holdings, Borrower or the transactions contemplated by or referred to
herein or in the Note Transaction Documents are subject.
4.05 NO LITIGATION. No action, suit or proceeding before any court or
any Governmental Authority shall have been commenced or threatened, no
investigation by any Governmental Authority shall have been commenced and no
action, suit or proceeding by any Government Authority shall have been
threatened against the Purchasers, Holdings, the Borrower, or any Subsidiary (i)
seeking to restrain, prevent or change the Note Transaction or questioning the
validity or legality of any of such Note Transaction, or (ii) which would, if
resolved adversely to the Purchasers, Holdings, the Borrower or any Subsidiary,
severally or in the aggregate, have individually or in the aggregate a Material
Adverse Effect.
4.06 NO MATERIAL JUDGMENT OR ORDER. There shall not be on the Closing
Date any judgment or order of a court of competent jurisdiction or any ruling of
any Governmental Authority or any condition imposed under any Requirement of Law
which, in the judgment of the Borrower, would prohibit the sale of the
Securities hereunder or subject Holdings, the Borrower or any Subsidiary to any
penalty or other onerous condition under or pursuant to any Requirement of Law
if the Securities were to be sold hereunder.
(B) The obligations of Holdings to issue and sell the
Mezzanine Equity shall be subject to the receipt of the Stockholder Approval and
verification that Purchasers' representations set forth in Section 6.04 hereof
are true and correct on the Closing Date as they relate to the sale of the
Mezzanine Equity.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE BORROWER
Holdings and the Borrower, jointly and severally, hereby
represent and warrant to the Purchasers as follows:
5.01 CORPORATE EXISTENCE AND POWER. Each of Holdings, the Borrower and
their respective Subsidiaries: (a) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; (b) has all requisite corporate power and authority to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently engaged; (c) is, duly qualified as a
foreign entity, licensed and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification, except to the extent that the
failure to so qualify would not have a Material Adverse Effect on the Condition
of the Borrower; and (d) has the corporate power and authority to execute,
deliver and perform its obligations under each Note Transaction Document to
which it is or will be a party and, with respect to Borrower, to borrow
hereunder. Schedule 5.01 contains a true, complete and correct list of Holdings
and each of its Subsidiaries, their respective jurisdictions of incorporation or
organization. Holdings and each of its Subsidiaries are qualified to do business
in each jurisdiction where its ownership, lease or operation of property or the
conduct of its business would require it to be qualified to do business as a
foreign entity, except when the failure to be so qualified would not have,
individually or in the aggregate, a Material Adverse Effect.
5.02 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution, delivery
and performance by each of Holdings, the Borrower and their respective
Subsidiaries of the Transaction Documents to which it is or will be a party and
the consummation of the Note Transaction including, without limitation, the
issuance of the Securities: (a) has been duly authorized by all necessary
corporate, and if required, stockholder action; (b) do not and will not
contravene the terms of the Certificate of Incorporation or By-Laws of Holdings
or any Subsidiary of Holdings, or any amendment thereof or any Requirement of
Law applicable to such Person or such Person's assets, business or properties
which would, with respect to any such Requirement of Law, have, individually or
in the aggregate, a Material Adverse Effect; (c) except as set forth on Schedule
5.02, do not and will not (i) conflict with, contravene, result in any violation
or breach of or default under (with or without the giving of notice or the lapse
of time or both), (ii) create in any other Person a right or claim of
termination or amendment, or (iii) require modification, acceleration or
cancellation of any Contractual Obligation of Holdings or any of its
Subsidiaries, the existence of which in the case of (i), (ii) or (iii) would
have, individually or in the aggregate, a Material Adverse Effect; and (d)
except as set forth in Schedule 5.02, do not and will not result in the creation
of any Lien (or obligation to create a Lien) against any property, asset or
business of Holdings or any of its Subsidiaries, which would result in,
individually or in the aggregate, a Material Adverse Effect.
5.03 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. Except as set
forth in Schedule 5.03, no approval, consent, compliance, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person (including the
New York Stock
Exchange or the stockholders of Holdings) in respect of any Requirement of Law
or Contractual Obligation, and no lapse of a waiting period under a Requirement
of Law or Contractual Obligation, is necessary or required in connection with
the execution, delivery or performance by Holdings or any of its Subsidiaries of
the Note Transaction Documents to which they are a party
21
(including, without limitation, the payment of interest on the Notes and the
issuance of the Mezzanine Equity) or for the consummation by Holdings or its
Subsidiaries of the Note Transaction.
5.04 BINDING EFFECT. This Agreement has been, and each of the Note
Transaction Documents to which Holdings or its Subsidiaries will be a party to
will be, duly executed and delivered by such Person, and this Agreement
constitutes, and such Note Transaction Documents will constitute, the legal,
valid and binding obligation of each such Person enforceable against it in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
relating to enforceability.
5.05 NO LEGAL BAR. Neither the execution, delivery and performance of
the Note Transaction Documents to which they are a party nor the issuance of or
performance of the terms of the Securities will violate in any Requirement of
Law, except where such violation would not have, individually or in the
aggregate, a Material Adverse Effect. Neither Holdings nor any of its
Subsidiaries has previously entered into any agreement which is currently in
effect or to which Holdings or any of its Subsidiaries is currently bound,
granting any rights to any Person which are inconsistent with the rights to be
granted by Holdings and its Subsidiaries in the Note Transaction Documents.
5.06 LITIGATION. Except as set forth on Schedule 5.06 or in the SEC
Filings, there are no legal actions, suits, proceedings, claims or disputes
pending or, to the knowledge of Holdings or the Borrower, threatened, at law, in
equity, in arbitration or before any Governmental Authority against or affecting
Holdings or any of its Subsidiaries except for such actions, suits, proceedings,
claims or disputes as would not, individually or in the aggregate, have a
Material Adverse Effect. No injunction, writ, temporary restraining order,
decree or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the execution, delivery
or performance of the Note Transaction Documents.
5.07 COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.07, (i)
Holdings and its Subsidiaries are, and at all times since January 1, 2000 have
been, in material compliance with all Requirements of Law except where,
individually or in the aggregate, non-compliance would not result in a Material
Adverse Effect; (ii) each of Holdings and its Subsidiaries has obtained and
holds all material Permits necessary for the lawful conduct of its businesses or
the lawful ownership, use and operation of its assets; (iii) neither Holdings
nor any of its Subsidiaries has received any written notice of any material
violation of any Requirements of Law which has not been dismissed or otherwise
disposed of, or that Holdings or any Subsidiary has not so complied with; (iv)
neither Holdings nor any of its Subsidiaries is charged or, to the knowledge of
Holdings or Borrower threatened with, or, to the knowledge of Holdings or
Borrower, under investigation with respect to, any material violation of any
Requirements of Law relating to any aspect of the business of Holdings or and
Subsidiary; and (v) neither Holdings nor any of its Subsidiaries has, since
January 1, 2000, conducted any material internal investigation concerning any
actual or alleged material violation of any Requirement of Law on the part of
Holdings, any of its Subsidiaries or any of their respective officers or
directors.
5.08 NO DEFAULT OR BREACH. No event has occurred and is continuing or
would result from the incurring of obligations by Holdings and its Subsidiaries
under the Note Transaction Documents which constitutes or, with the giving of
notice or lapse of time or both, would constitute an Event of Default. Neither
Holdings nor any of its Subsidiaries is in default under or with respect to any
22
Contractual Obligation which default, individually or in the aggregate, would
result in a Material Adverse Effect.
5.09 TITLE TO PROPERTIES.
(a) Neither Holdings nor any of its Subsidiaries owns any real
property. Holdings and its Subsidiaries have good title to all material assets
reflected on the As Adjusted Balance Sheet or used in connection with their
respective businesses, in each case, free and clear of all Liens, except
Customary Permitted Liens and for those Liens that would not have, individually
or in the aggregate, a Material Adverse Effect.
(b) Schedule 5.09 contains a list of all material real
property leases reflected on the As Adjusted Balance Sheet or used in connection
with the respective businesses of Holdings and each of its Subsidiaries.
Holdings and/or its Subsidiaries hold all of the right, title and interest of
the tenant under the leases reflected on the As Adjusted Balance Sheet or used
in connection with their respective businesses free and clear of all Liens,
except as provided on Schedule 5.09(b) and except where the failure to hold all
right title and interest of the tenant under the lease would not have
individually or in the aggregate Material Adverse Effect.
5.10 USE OF REAL PROPERTY. Except as set forth on Schedule 5.10, the
owned and leased real properties reflected on the As Adjusted Balance Sheet or
used in connection with the respective businesses of Holdings and its
Subsidiaries, are used and operated in compliance and conformity with all
Contractual Obligations and Requirements of Law, except to the extent that the
failure so to comply would not, individually or in the aggregate, have a
Material Adverse Effect; neither Holdings nor any of its Subsidiaries has
received notice of violation of any applicable zoning or building regulation,
ordinance or other law, order, regulation or other Requirements of Law relating
to the operations of either Holdings or any of its Subsidiaries which would
have, individually or in the aggregate, a Material Adverse Effect; and there is
no such violation that would have a Material Adverse Effect. Except as set forth
on Schedule 5.10, all structures, improvements and other buildings that are
owned or covered by leases reflected on the As Adjusted Balance Sheet or used in
connection with the business of Holdings and its Subsidiaries, comply in all
respects with all applicable Requirements of Law or Permits and have a valid and
subsisting certificate of occupancy for their present use, except to the extent
the failure to so comply or have such certificate of occupancy would not have,
individually or in the aggregate, a Material Adverse Effect. Neither Holdings
nor any Subsidiary thereof has received any written notice from any Governmental
Authority which is still outstanding of any failure to obtain any material
Permit, with respect to such real property, or any intended revocation,
modification or cancellation of same, and no Requirements of Law presently in
effect or condition precludes or restricts continuation of the present use of
such properties, except as would not have, individually or in the aggregate, a
Material Adverse Effect. Each lease relating to leased real property reflected
on the As Adjusted Balance Sheet or used in connection with the business of
Holdings or any of its Subsidiaries is in full force and effect and each such
Person enjoys peaceful and undisturbed possession thereunder, except as would
not have, individually or in the aggregate, a Material Adverse Effect. There is
no material default on the part of Holdings or any of its Subsidiaries or event
or condition which (with notice or lapse of time, or both) would constitute a
material default on the part of Holdings or any of its Subsidiaries under any
such lease. There are no material service contracts, maintenance contracts,
union contracts, concession agreements, licenses, agency agreements or any other
material Contractual Obligations affecting the real property or the leased
property reflected on the As Adjusted Balance Sheet or used in connection with
the business of Holdings and its Subsidiaries, or the operation thereof, other
than
23
those listed on Schedule 5.10. There are no pending or, to the knowledge of
Holdings or Borrower, threatened condemnation or eminent domain proceedings that
would affect any part of the real property or the leased property reflected on
the As Adjusted Balance Sheet or used in connection with the business of
Holdings and its Subsidiaries, except as would not have, individually or in the
aggregate, a Material Adverse Effect. There are no actions, suits or proceedings
pending or, to the knowledge of Holdings or Borrowers, threatened against the
real property or the leased property on the As Adjusted Balance Sheet or used in
connection with the business of Holdings and its Subsidiaries, at law or in
equity, before any federal, state, municipal or governmental department,
commission, board, bureau, agency or instrumentality which would in any way
affect title to such real property or the leased property, except as would not
have, individually or in the aggregate, a Material Adverse Effect.
5.11 TAXES.
(a) All federal, state, local and foreign Tax Returns required
to be filed by or on behalf of Holdings and its Subsidiaries (or, to the
knowledge of Holdings and Borrower, any predecessor corporation of any of them),
or any consolidated, combined, affiliated entity or group of which Holdings or
any Subsidiary is (or, to the knowledge of Holdings and Borrower, has ever been)
a member have been timely filed with the appropriate tax authorities. All such
Tax Returns were correct and complete in all material respects. Except as set
forth in Section 5.11(g), all Taxes owed by Holdings and any of its Subsidiaries
(whether or not shown on any Tax Return) have been paid. No written claim has
ever been made by a Governmental Authority in a jurisdiction where Holdings or
any of its Subsidiaries does not file Tax Returns that Holdings or any of its
Subsidiaries is or may be subject to taxation by that jurisdiction, which claim
remains unresolved. There are no Liens on any of the assets of Holdings or any
of its Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) Each of Holdings and its Subsidiaries has withheld all
material Taxes required to have been withheld in connection with amounts paid or
owing to any employee, independent contractors, customer, creditor, stockholder,
or other third party and has timely paid all such withheld amounts to the
appropriate taxing authorities.
(c) None of Holdings or any of its Subsidiaries expects any
Governmental Authority to assess any additional material Taxes for any period
for which Tax Returns have been filed. Except as set forth in Section 5.11(g),
all Taxes due with respect to any completed and settled audit, examination or
deficiency action with any taxing authorities for which Holdings or any of its
Subsidiaries is or might otherwise be liable have been paid in full. There is no
dispute or claim concerning any Tax liability of Holdings or any of its
Subsidiaries either (i) claimed or raised by any Governmental Authority in
writing or (ii) as to which Holdings or the Borrower has knowledge based upon
personal contact with any agent of such authority. To the knowledge of Holdings
and Borrower, no issue has arisen in any examination of Holdings or any of its
Subsidiaries by any taxing authority that if raised with respect to the same or
substantially similar facts in any other tax period not so examined would result
in a material deficiency for such other period, if upheld. Schedule 5.11(c)
lists all federal, state, local, and foreign income Tax Returns filed with
respect to any of Holdings and its Subsidiaries for taxable periods ended on or
after January 1, 1997, that have been audited, and indicates those Tax Returns
that currently are the subject of an audit. Holdings has made available to the
Purchasers correct and complete copies of all federal income Tax Returns,
examination reports and statements of deficiencies assessed against or agreed to
by any of the Borrower and its Subsidiaries for all taxable period beginning on
or after January 1, 1998.
24
(d) Neither Holdings nor any of its Subsidiaries is currently
subject to any waiver of any statute of limitations in respect of Taxes or
agreement to any extension of time with respect to a Tax assessment or
deficiency.
(e) Neither Holdings nor any of its Subsidiaries has filed a
consent under Code Section 341(f) concerning collapsible corporations. Neither
the Borrower nor any of its Subsidiaries has made any payments, or to their
respective knowledge, is obligated to make any payments that will not be
deductible under Code Section 280G or Section 162(m). Neither Holdings nor any
of its Subsidiaries has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). Each of Holdings and its
Subsidiaries has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6621 where such understatement would
result in a Material Adverse Effect. Except as disclosed in Schedule 5.11(e),
neither Holdings nor any of its Subsidiaries is a party to any Tax allocation or
sharing agreement.
(f) Schedule 5.11(f) sets forth the following information with
respect to each of Holdings and its Subsidiaries (or, in the case of clause (ii)
below, with respect to each of the Subsidiaries) as reported for federal income
tax purposes as of December 31, 2000: (i) the amount of any net operating loss,
net capital loss, unused investment or other credit, unused foreign tax credit,
or excess charitable contribution allocable to Holdings or Subsidiary; and (ii)
the amount of any deferred gain or loss allocable to Holdings or any Subsidiary
arising out of any deferred intercompany transaction.
(g) The unpaid Taxes of Holdings and its Subsidiaries (i) did
not, as of the month ended September 2001, exceed the reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the balance
sheet for such month end (rather than in any notes thereto) and (ii) did not
exceed that reserve as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of Holdings and its Subsidiaries
in filing their Tax Returns.
(h) Except as disclosed in Schedule 5.11(h), neither Holdings
nor any of its Subsidiaries has any liability for the Taxes of any person or
entity other than Holdings and its Subsidiaries (i) under Reg. Section 1.1502-6
(or any similar provision of state, local or foreign law), (ii) as a transferee
or successor, (iii) by contract, or (iv) otherwise.
(i) To the knowledge of Holdings and Borrower, for purposes of
Code Section 382, immediately prior to the Closing Date the cumulative owner
shifts involving 5-percent shareholders and equity structure shifts with respect
to Holdings that would be taken into account in measuring whether an ownership
change has occurred as of the Closing Date is not greater than 10%.
5.12 SEC REPORTS; FINANCIAL CONDITION.
(a) Holdings has filed all SEC Reports and has made available
to the Purchasers each SEC Report. The SEC Reports of Holdings, including,
without limitation, any financial statements or schedules included or
incorporated therein by reference, (i) comply in all material respects with the
requirements of the Exchange Act or the Securities Act or both, as the case may
be, applicable to those SEC Reports and (ii) did not at the time they were filed
in the case of Exchange Act filings, or became effective in the case of
Securities Act filings, contain any untrue statement of a material fact or omit
to state a material fact required to be stated or necessary in order to make the
25
statements made in those SEC Reports, in light of the circumstances under which
they were made, and at the time they were made, not misleading. No Subsidiary of
Holdings is subject to the periodic reporting requirements of the Exchange Act
or is otherwise required to file any documents with the Commission or any
national securities exchange or quotation service or comparable Governmental
Authority.
(b) Holdings has furnished the Purchasers with true and
complete copies of (i) the audited consolidated balance sheets of Holdings and
its Subsidiaries as of December 31, 2000 and December 31, 1999, and the related
consolidated statements of income, stockholders' equity and cash flows, together
with the notes thereto, of Holdings and its Subsidiaries for each of the three
years ended December 31, 2000, together with the report of Pricewaterhouse
Coopers LLP thereon (the "AUDITED FINANCIAL STATEMENTS"), and (ii) the unaudited
consolidated balance sheet and the preliminary consolidating balance sheet of
Holdings and its Subsidiaries, each as of September 30, 2001, and the related
unaudited consolidated and preliminary consolidating statements of income,
together with the notes thereto, of Holdings and its Subsidiaries for the nine
months ended September 30, 2001 (the "INTERIM FINANCIAL STATEMENTS"). The
Audited Financial Statements and the Interim Financial Statements, which were
provided to the Purchasers, fairly present, in all material respects, the
financial position of Holdings and each of its Subsidiaries as of the respective
dates thereof, and the results of operations and cash flows of Holdings and each
of its Subsidiaries as of the respective dates or for the respective periods set
forth therein, all in conformity with GAAP, consistently applied during the
periods involved, except as otherwise set forth in the notes thereto and
subject, in the case of the Interim Financial Statements, to normal year-end and
quarterly audit and reserve adjustments, as the case may be. As of the dates of
the Financial Statements, neither Holdings nor its Subsidiaries had any
obligation, indebtedness or liability (whether accrued, absolute, contingent or
otherwise, known or unknown, and whether due or to become due), which was not
reflected or reserved against in the balance sheets or the notes thereto which
are part of the Audited Financial Statements, to the extent required to be
reflected or reserved against in accordance with GAAP. To the knowledge of
Borrower and Holdings, the T56 Financial Information is true, complete and
correct in all material respects.
(c) The As Adjusted Balance Sheet delivered to the Purchasers
fairly presents in all material respects the assets and liabilities of Holdings
and its Subsidiaries taken as a whole on a consolidated basis as of November 30,
2001, and on an as adjusted basis after taking into account the consummation of
the Transaction based on the assumptions set forth therein. The historical
information included in the As Adjusted Balance Sheet has been prepared in
accordance with GAAP, consistently applied subject to normal year end and
quarterly reserve and audit adjustments.
(d) The financial projections of Holdings and its Subsidiaries
set forth on Schedule 5.12(d) heretofore delivered to the Purchasers (i) are the
most current financial projections prepared by Holdings relating to the periods
covered thereby, and (ii) are based on assumptions which each Borrower and
Holdings believed to be reasonable when made and such assumptions and
projections are believed by each of Borrower and Holdings to be reasonable on
the date hereof, in light of current conditions and current facts known by them.
Neither Holdings nor any of its Subsidiaries has delivered to any Person any
similar later dated projections.
5.13 [Intentionally Omitted]
26
5.14 DISCLOSURE.
(a) Agreement and Other Documents. This Agreement, together
with all exhibits and schedules hereto, and the agreements, certificates and
other documents furnished to the Purchasers by Holdings and its Subsidiaries at
the Closing, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained herein
or therein, in the light of the circumstances under which they were made, not
misleading.
(b) Material Adverse Effects. There is no fact known to the
Borrower or Holdings, which has or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
5.15 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since September 30, 2001, except as (a) set forth on
Schedule 5.15, (b) may result in connection with the consummation of the
Transaction, (c) as disclosed in the SEC Filings, or (d) occurring in the
ordinary course of business, neither Holdings nor any of its Subsidiaries has
(i) issued any stock, bonds or other corporate securities, (ii) borrowed any
amount or incurred any liabilities (absolute or contingent), in excess of
$100,000, (iii) discharged or satisfied any Lien (other than Customary Permitted
Liens) or incurred or paid any obligation or liability (absolute or contingent),
in excess of $100,000, (iv) declared or made any payment or distribution to
stockholders or purchased or redeemed any shares of its capital stock or other
securities, (v) mortgaged, pledged or subjected to Lien (other than Customary
Permitted Liens) any of its material assets, tangible or intangible, (vi) sold,
assigned or transferred any of its material tangible assets, or canceled any
debts or claims, (vii) sold, assigned or transferred any material patents,
trademarks, trade names, copyrights, trade secrets or other intangible assets,
(viii) suffered any material losses of property, or waived any material rights
of substantial value, (ix) expended any material amount, granted any bonuses or
extraordinary salary increases, (x) entered into any transaction involving
consideration in excess of $150,000 or (xi) entered into any agreement or
transaction, or amended or terminated any agreement, with an Affiliate.
(b) To the knowledge of the Borrower and Holdings and except
as set forth on Schedule 5.15, no material adverse change in the Condition of
the Borrower is threatened or reasonably expected to occur. Since September 30,
2001, except as set forth on Schedule 5.15 and except as disclosed in the SEC
Filings, there has been no Material Adverse Effect.
5.16 ENVIRONMENTAL MATTERS. Except as described on Schedule 5.16:
(a) The assets and operations of Holdings and its Subsidiaries
are and have been in material compliance with all applicable Environmental Laws;
there are no Hazardous Materials stored or otherwise located in, on or under any
of the property or assets of Holdings or its Subsidiaries, including, without
limitation, the soil, substrata, and groundwater, except in material compliance
with applicable Environmental Laws; and there have been no releases or
threatened releases of Hazardous Materials in, on, under or adjacent to any of
the property or assets currently leased by Holdings or its Subsidiaries which
have not been remediated to the satisfaction of the appropriate Governmental
Authorities.
(b) None of the property, assets or operations of Holdings or
its Subsidiaries is the subject of any investigation by a Governmental Authority
evaluating whether (i) any remedial action
27
is needed to respond to a release or threatened release of any Hazardous
Materials into the environment or (ii) any release or threatened release of any
Hazardous Materials into the environment is in contravention of any
Environmental Law.
(c) Neither Holdings nor any of its Subsidiaries has received
any notice, claim or demand letter, nor are there pending, threatened or
reasonably anticipated, lawsuits, actions or proceedings against any of them,
with respect to violations of an Environmental Law or in connection with the
presence of or exposure to any Hazardous Materials in the environment or any
release or threatened release of any Hazardous Materials into the environment,
and neither the Borrower nor its Subsidiaries is or was the owner or operator of
any property which (i) pursuant to any Environmental Law has been placed on any
list of Hazardous Materials disposal sites, including, without limitation, the
"National Priorities List" or "CERCLIS List" or equivalent state list, (ii) has,
or had, any underground storage tanks located thereon for which Holdings or its
Subsidiaries is an owner or operator, or (iii) has ever been used as or for a
waste disposal facility, a mine, a gasoline service station or, other than for
petroleum chemical substances stored in the ordinary course of business, a
petroleum chemical products storage facility.
(d) Neither Holdings nor any of its Subsidiaries has any
present or contingent liability in connection with the presence either in, on,
under, adjacent to, or off the property currently or previously leased at any
time after January 1, 1994, or assets currently or previously owned by Holdings
or its Subsidiaries of any Hazardous Materials in the environment resulting from
the operations of Holdings and its Subsidiaries or for which either Holdings or
its Subsidiaries are contractually or legally responsible or any release or
threatened release by Holdings or its Subsidiaries of any Hazardous Materials
into the environment at any location.
(e) The summaries of environmental matters disclosed on
Schedule 5.16 are true and correct as of the Closing Date and include all known
material environmental liabilities associated with (i) Holdings, and its
Subsidiaries, current or formerly leased properties and (ii) all third party
sites where Holdings and its Subsidiaries have been identified as potentially
responsible parties under CERCLA or similar state statutes.
5.17 INVESTMENT BORROWER/GOVERNMENT REGULATIONS. None of Holdings or
its Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. None of Holdings or its Subsidiaries is subject
to regulation under the Public Utility Holding Borrower Act of 1935, as amended,
the Federal Power Act, or the Interstate Commerce Act.
5.18 SUBSIDIARIES.
(a) All of the outstanding shares of capital stock of, or
other equity interests in, the Subsidiaries are validly issued, fully paid and
nonassessable. Except as set forth on Schedule 5.18, as of the Closing Date, all
of the outstanding shares of capital stock of, or other ownership interests in,
each of the Subsidiaries are owned by Holdings or by a wholly owned Subsidiary
free and clear of any Liens (other than Customary Permitted Liens). No
Subsidiary has outstanding options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments obligating the
Subsidiary to issue, transfer or sell any securities of the Subsidiary.
(b) Except for the Subsidiaries of Holdings set forth on
Schedule 5.18, Holdings does not own of record or beneficially, directly or
indirectly, (i) any shares of outstanding capital
28
stock or securities convertible into capital stock of any other corporation, and
(ii) except as set forth in Schedule 5.18(b), any equity, voting or
participating interest in any limited liability company, partnership, joint
venture or other non-corporate business enterprises.
5.19 CAPITALIZATION.
(a) The authorized capital stock of Holdings as of the date
hereof, consists solely of 80,000,000 shares of Common Stock and 10,000,000
shares of preferred stock, of which 800,000 shares of preferred stock have been
designated Series A Junior Participating Preferred Stock. As of December 10,
2001, 18,495,990 shares of Common Stock are issued and outstanding, along with
2,912,434 options to purchase shares of Common Stock (whether vested or unvested
as of the date hereof). Schedule 5.19 contains the aggregate number of all
outstanding options to purchase shares of Common Stock, the weighted average
exercise price with respect to such options and the plan or other arrangements
pursuant to which such options were issued. Except as set forth in the preceding
sentences, as contemplated pursuant to the Transaction, or as set forth on
Schedule 5.19, there are no other shares of capital stock or other equity
securities of Holdings issued and outstanding or reserved for issuance. The
Mezzanine Equity shall, upon issuance as contemplated hereby, be validly issued,
fully paid and nonassessable and shall be free of any preemptive or similar
rights. The issuance of the foregoing securities was not done in violation of
any preemptive rights in favor of any Person and did not trigger any
anti-dilution rights contained in any options, warrants, debentures or other
securities or agreements. The issuance of the securities contemplated by the
Transaction (including common stock issuable upon conversion of preferred stock
pursuant to the Certificates of Designation) will not be subject to preemptive
rights in favor of any Person or trigger any anti-dilution rights contained in
any options, warrants, debentures or other securities or agreements in effect on
the date hereof. To the Knowledge of Holdings or Borrower, all outstanding
shares of capital stock have been issued in compliance with the Securities Act
and all applicable state securities laws, and no shares of capital stock of
Holdings are subject to, nor have any been issued in violation of, any
preemptive or similar rights.
(b) Except as set forth above in paragraph (a) of this Section
5.19, as contemplated by this Agreement or as set forth on Schedule 5.19, there
are outstanding (i) no shares of capital stock or other voting securities of
Holdings; (ii) no securities of Holdings convertible into or exchangeable or
exercisable for shares of capital stock or other voting securities of Holdings;
(iii) no subscriptions, options, warrants, calls, commitments, preemptive rights
or other rights of any kind to acquire from Holdings, and no obligation of
Holdings to issue or sell, any shares of capital stock or other voting
securities of Holdings or any securities of Holdings convertible into or
exchangeable for such capital stock or voting securities, except as may arise
pursuant to the securities to be issued pursuant to the Transaction, and (iv) no
equity equivalents, interests in the ownership or earnings or other similar
rights of or with respect to Holdings. Except as may arise pursuant to the terms
of the securities to be issued pursuant to the Transaction, there are no
outstanding contractual obligations of Holdings to repurchase, redeem or
otherwise acquire any shares of Common Stock or any other securities of the type
described in clauses (i)-(iv) of the preceding sentence. Except as may arise
pursuant to the securities to be issued pursuant to the Transaction or
applicable securities laws, there are no restrictions upon the voting or
transfer of any share of the capital stock or other voting securities of
Holdings pursuant to the Certificate of Incorporation, the Bylaws or other
governing documents or any agreement or other instrument to which Holdings is
party or by which Holdings is bound other than restricted stock held by certain
employees.
29
5.20 PRIVATE OFFERING. No form of general solicitation or general
advertising was used by Holdings or any of its Subsidiaries, or their respective
representatives in connection with the offer or sale of the Securities. Provided
that the Purchasers representations and warranties herein are true, no
registration of the Securities pursuant to the provisions of the Securities Act
or the state securities or "blue sky" laws will be required for the offer, sale
or issuance of the Securities pursuant to this Agreement. Borrower and Holdings
each agree that neither it, nor anyone acting on its behalf, will offer or sell
the Securities or any other security so as to require the registration of the
Securities pursuant to the provisions of the Securities Act or any state
securities or "blue sky" laws.
5.21 BROKER'S, FINDER'S OR SIMILAR FEES. Except as set forth on
Schedule 5.21, there are no brokerage commissions, finder's fees or similar fees
or commissions payable in connection with the Note Transactions.
5.22 LABOR RELATIONS. Neither Holdings nor any of its Subsidiaries has
committed or has engaged during the last six (6) months in any material unfair
labor practice within the meaning of the National Labor Relations Act. Except as
set forth in Schedule 5.22, there is (a) no unfair labor practice complaint
pending or to the knowledge of Holdings or any of its Subsidiaries threatened
against Holdings or any of its Subsidiaries before the National Labor Relations
Board and no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is so pending or, to the knowledge of Holdings
or any of its Subsidiaries, threatened, (b) no strike, labor dispute, slowdown
or stoppage pending or to the knowledge of Holdings or any of its Subsidiaries
threatened against Holdings or any of its Subsidiaries, (c) no union
representation question existing with respect to the employees of Holdings or
any of its Subsidiaries, and to the knowledge of Holdings no union organizing
activities are taking place, and (d) no employment contract with any employee or
contract with any individual providing services as an independent contractor of
Holdings or any Subsidiary. Holdings and each Subsidiary is in compliance in all
material respects with all federal, state or other applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours. Except as set forth in Schedule 5.22, neither Holdings, nor any
of its Subsidiaries, is a party to any collective bargaining agreement.
5.23 EMPLOYEE BENEFIT PLANS.
(a) Employee Benefit Plans and Liabilities. Neither Holdings
nor its Subsidiaries currently sponsors, contributes to, participates in,
administers, or has any actual or contingent, direct or indirect, liability in
respect of any employee benefit plan (as defined in Section 3(3) of ERISA)
("ERISA BENEFIT PLAN") or other employee benefit arrangement, payment,
understanding, agreement, policy or program of any kind whatsoever not subject
to ERISA ("NON-ERISA BENEFIT PLAN"), and neither Holdings or its Subsidiaries
nor any ERISA Affiliate sponsored, has contributed to, administered,
participated in or has incurred any actual or contingent, direct or indirect,
liability in respect of any ERISA Benefit Plan that is covered by Title IV of
ERISA within the five-consecutive-year period immediately preceding the first
day of the year in which the Closing Date occurs, other than those specifically
described on Schedule 5.23(a) (collectively, the "PLANS"). Schedule 5.23(a) sets
forth all Plans. At no time during such five year period has Holdings or its
Subsidiaries or any ERISA Affiliate participated in, contributed to or incurred
any liability under a Multiemployer Plan, nor during such period has Holdings or
its Subsidiaries or any ERISA Affiliate had an obligation to participate in or
contribute to any such Multiemployer Plan. Neither Holdings or its Subsidiaries
participated in, contributed or has incurred any liability under a Voluntary
Employee Beneficiary Association. No agreement subject to Section 4204 of ERISA
has been entered into in connection with the transactions contemplated in this
Agreement. There are no outstanding liabilities of
30
Holdings or its Subsidiaries or any ERISA Affiliate to any ERISA Benefit Plan or
Non-ERISA Benefit Plan previously maintained by Holdings or its Subsidiaries or
any ERISA Affiliate, and Holdings and its Subsidiaries are not aware of any
liabilities in connection therewith. There are no actions, suits or claims,
other than for benefits in the ordinary course, pending or, to the knowledge of
Holdings or its Subsidiaries, threatened against Holdings or its Subsidiaries,
an ERISA Affiliate or the Plans which might subject Holdings or its Subsidiaries
or any ERISA Affiliate to any material liability. Holdings and its Subsidiaries
have delivered or made available to the Purchasers accurate and complete copies
of all of the Plans or descriptions of the Plans.
(b) Plan Compliance. Except as otherwise set forth in Schedule
5.23(b), Holdings and each of its Subsidiaries is in compliance in all material
respects with all reporting, disclosure and registration requirements applicable
to it under the Code, ERISA and all federal and state securities laws, and
Department of Labor, Internal Revenue Service and Commission rules and
regulations promulgated thereunder, with respect to all of the Plans, and is not
subject to any material liability, whether asserted or not, for any penalties to
any Governmental Authority for late filing of any return, report or other
governmental filing. No civil or criminal action brought pursuant to the
provisions of Title I, Subtitle B, Part 5 of ERISA or any other federal or state
law is pending or, to the knowledge of Holdings or its Subsidiaries or any ERISA
Affiliate, threatened against any fiduciary of the Plans. No Plan, or any
fiduciary thereof, is currently the direct subject of an audit, investigation or
examination by any Governmental Authority. All of the Plans comply currently,
and have complied at all times, both as to form and operation, in all material
respects, with their terms and with all Requirements of Law. Each of the Plans
maintained by Holdings or any Subsidiary that is an "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA) and is intended to be a
tax-qualified plan has obtained a favorable determination (covering all changes
or amendments applicable under Requirements of Law) from the Internal Revenue
Service as to its qualification under Sections 401(a) and 501(a) of the Code or
is within the remedial amendment period (as provided in Section 401(b) of the
Code) for making any required changes or amendments, and nothing has occurred
before or after the date of each such determination letter as would adversely
affect such qualification in any manner that would result in a Material Adverse
Effect (Business point to be raised). All amounts that are currently owing to
Plan participants (including, without imitation, former Plan participants), or
contributions required to be made to the Plans have been timely paid or
contributed with respect to all periods prior to the Closing Date or provided
for by adequate reserves on the As Adjusted Balance Sheet.
(c) Prohibited Transactions. Except as set forth on Schedule
5.23(d), neither Holdings, nor any Subsidiary thereof, has engaged in or
knowingly permitted to occur and to Holdings and its Subsidiaries' knowledge, no
other party has engaged in or permitted to occur any transaction prohibited by
Section 406 of ERISA or "prohibited transaction" under Section 4975(c) of the
Code with respect to any Plan, except for any transactions which are exempt
under Section 408 of ERISA or Section 4975 of the Code, which could subject any
of the Plans or related trusts or Holdings or any Subsidiary thereof to the
penalties or excise tax imposed on prohibited transactions by Section 502 of
ERISA or Section 4975 of the Code which could have a material adverse effect on
the Condition of the Borrower.
(d) Miscellaneous. Except as disclosed in Schedule 5.23(d),
neither the Borrower, its Subsidiaries, nor any Plan provides for or promises
retiree medical, disability or life insurance benefits to any current or former
employee, officer or director of Holdings or any of its Subsidiaries, other than
continuation coverage required by section 4980B of the Code.
31
5.24 PATENTS, TRADEMARKS, ETC. Holdings and its Subsidiaries own or are
licensed or otherwise have the right to use all patents, trademarks, service
marks, trade names, copyrights, licenses, franchises and other rights,
including, without limitation, rights with respect to all software
(collectively, the "RIGHTS") developed, owned or licensed by Holdings or its
Subsidiaries, being used to conduct their businesses as now operated, except for
any such right which the failure to own or possess would not result in,
individually or in the aggregate, a Material Adverse Effect. Schedule 5.24 sets
forth a complete list of material licenses and other material Contractual
Obligations relating to Holdings' and its Subsidiaries' Rights and, to the
extent owned by Holdings and its Subsidiaries of registrations of patents,
trademarks, service marks and copyrights including any applications therefor in
any country constituting such Rights. To the knowledge of Holdings and the
Borrower, no Right or product, process, method, substance or other material
presently made, imported, sold by or employed by Holdings or any of its
Subsidiaries, or which Holdings or any of its Subsidiaries contemplates making,
importing, selling or employing, infringes upon the Rights that are owned by
others. No litigation is pending and no claim has been made against Holdings or
any of its Subsidiaries or, to the knowledge of Holdings, is threatened; (i)
contesting the right of Holdings or any of its Subsidiaries to make, import,
sell or use any Right or product, process, method, substance or other material
presently or currently contemplated to be made, imported, sold by or employed by
Holdings or any of its Subsidiaries; (ii) challenging the ownership,
inventorship, validity or enforceability of any of the Rights owned or licensed
by Holdings or any of its Subsidiaries; (iii) seeking to terminate or otherwise
hold Holdings or any Subsidiary in default of any licenses with respect to any
of the Rights. Neither Holdings nor any of its Subsidiaries has asserted any
claim of infringement, misappropriation or misuse by any Person of any Rights
owned by Holdings or any of its Subsidiaries or to which any of them have
exclusive use. Except as set forth on Schedule 5.24, to the knowledge of
Holdings or the Borrower, no employee or officer and no consultant of Holdings
or any of its Subsidiaries has any material proprietary, financial or other
interest in any Rights owned or used by Holdings or its Subsidiaries in their
businesses. Except as set forth on Schedule 5.24, neither Holdings nor any of
its Subsidiaries has any obligation to compensate any Person for the use of any
Rights except as may be implied by the sale of goods and neither Holdings nor
any of its Subsidiaries has granted any license or other right to use any of the
Rights of Holdings or it Subsidiaries, whether requiring the payment of
royalties or not. Holdings and its Subsidiaries have taken all reasonable
measures to protect and preserve the security, confidentiality and value of
their Rights, including trade secrets and other confidential information,
including, without limitation, all algorithms, methods, technology or know-how
incorporated or embedded in, or underlying, software licensed by Holdings and
its Subsidiaries to third parties. All trade secrets and other confidential
information of Holdings and its Subsidiaries are not part of the public domain
or knowledge, nor to the knowledge of Holdings have they been used, divulged or
appropriated for the benefit of any Person other than the Borrower or its
Subsidiaries or otherwise to the detriment of Holdings or its Subsidiaries
except as pursuant to agreements or obligations protecting their
confidentiality. Except as set forth on Schedule 5.24, to the knowledge of
Holdings or the Borrower, no employee or consultant of Holdings or its
Subsidiaries has used any trade secrets or other confidential information of any
other Person in the course of his work for Holdings or its Subsidiaries. To the
knowledge of Holdings or the Borrower, no patent, invention, device, principle
or any statute, law, rule, regulation, standard or code is pending or proposed
which would restrict Holdings or any Subsidiary's ability to use any of the
Rights that it owns or licenses.
5.25 POTENTIAL CONFLICTS OF INTEREST. Except as set forth on Schedule
5.25 and except as disclosed in the SEC Filings, no officer or director of
Holdings, the Borrower or any Material Subsidiary (other than any director
affiliated with any purchaser under the Equity Documents): (a) owns, directly or
indirectly, any interest in (excepting less than 5% stock holdings for
investment
32
purposes in securities of publicly held and traded companies), or is an officer,
director, employee or consultant of, any Person that is, or is engaged in
business as, a competitor, lessor, lessee, supplier, or distributor to Holdings
or any of its Subsidiaries; (b) owns, directly or indirectly, in whole or in
part, any tangible or intangible property that Holdings or any of its
Subsidiaries uses in the conduct of business; or (c) has any cause of action or
other claim whatsoever against, or owes or has advanced any amount to, Holdings
or any of its Subsidiaries, except for claims in the ordinary course of business
such as for accrued vacation pay, accrued benefits under employee benefit plans,
and similar matters and agreements existing on the date hereof and except for
such causes of action or claims as would not have, individually or in the
aggregate, a Material Adverse Effect.
5.26 TRADE RELATIONS. Set forth on Schedule 5.26 is a true and correct
list of the twenty largest customers of Holdings and its Subsidiaries taken as a
whole in terms of aggregate sales during the nine-month period ended September
30, 2001 and year ended December 31, 2000 and any other customers who accounted
for more than 3% of such sales, and a list of the suppliers that sold goods,
merchandise or services in excess of $5 million to Holdings and its Subsidiaries
during the nine-month period ended September 30, 2001 and year ended December
31, 2000. Except as set for on Schedule 5.26, there exists no actual or, to the
knowledge of Borrower or Holdings, any threatened termination, cancellation or
limitation of, or any adverse modification or change in, the business
relationship of Holdings, its Subsidiaries or their business with any customer
or any group of customers of Holdings or any such Subsidiary, or with any
supplier except to the extent any of the foregoing would not have, individually
or in the aggregate, a Material Adverse Effect, and to the knowledge of Borrower
and Holdings there exists no present condition or state of facts or
circumstances that would have a Material Adversely Effect or prevent Holdings or
its Subsidiaries from conducting their business after the consummation of the
Transaction, in substantially the same manner in which such business has
heretofore been conducted.
5.27 FINANCIAL POSITION. No Material Adverse Effect has occurred in the
financial position of Holdings and its Subsidiaries, taken as a whole, on a
consolidated basis (including without limitation outstanding Indebtedness) from
the consolidated financial position of Holdings and its Subsidiaries set forth
on the As Adjusted Balance Sheet.
5.28 MATERIAL CONTRACTS. Schedule 5.28 lists all Contractual
Obligations of Holdings and its Subsidiaries as of the Closing Date, whether
written or oral, other than (a) the Transaction Documents, and (b) any
Contractual Obligations of Holdings or any Subsidiary that do not extend beyond
one year and involve the receipt or payment of not more than $5 million per year
(collectively, "Material Contracts"). Each of the Material Contracts required to
be set forth on Schedule 5.28 is in full force and effect and is the legal,
valid, binding and enforceable agreement of Holdings and such Subsidiary party
thereto subject to applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditor's rights generally, and general
equitable principles. Neither Holdings nor its Subsidiaries is in default under
any Material Contract, nor to the knowledge of the Borrower or Holdings, does
any condition exist that with notice or lapse of time or both under any Material
Contract would constitute such a default except for such defaults and conditions
as would not have, individually or in the aggregate, a Material Adverse Effect.
Except as set forth on Schedule 5.28, no approval or consent of any Person is
needed for all of the material contracts to continue to be in full force and
effect. Except as set forth on Schedule 5.28 or applicable Requirements of Law,
there are no Contractual Obligations that limit or restrict the ability of any
Subsidiary Guarantor of Borrower to make dividends, distributions or other
payments, directly or indirectly to the Borrower or any other Subsidiary
Guarantor of the Borrower.
33
5.29 INSURANCE. Schedule 5.29 accurately summarizes all of the material
domestic insurance policies or programs of Holdings and each Subsidiary in
effect as of the date hereof, and indicates the insurer's name, policy number,
expiration date, amount of coverage (except for insurance programs which benefit
the employees of Holdings and each Subsidiary), type of coverage, annual
premiums, exclusions and deductibles (except for insurance programs which
benefit the employees of Holdings and each Subsidiary), and also indicates any
self-insurance program that is in effect. All such policies are in full force
and effect, are underwritten by financially sound and reputable insurers, are
sufficient for all applicable material Requirements of Law and otherwise are in
compliance with the criteria set forth in Section 8.08 hereof. All such policies
will remain in full force and effect and will not terminate or lapse by reason
of any part of the Transaction. Borrower and Holdings do not currently expect
any future increase in insurance premiums for the year ended December 31, 2002,
to have, individually or in the aggregate, a Material Adverse Effect.
5.30 PRODUCTS LIABILITY. Except as set forth on Schedule 5.30, there is
no action, suit, proceeding, inquiry, or investigation that would have,
individually or in the aggregate, a Material Adverse Effect and there is no
action, suit, proceeding, inquiry or investigation pending, or, to the knowledge
of the Borrower or Holdings, threatened, by or before any Governmental Authority
against Holdings or any of its Subsidiaries relating to any product alleged to
have been sold by Holdings or any of its Subsidiaries and alleged to have been
defective, or improperly designed or manufactured that would have, individually
or in the aggregate, a Material Adverse Effect.
5.31 SOLVENCY. Both before and after giving effect to the Transaction,
each of the Borrower and Holdings and each Subsidiary Guarantor, is and will be
Solvent.
5.32 LOCATION OF ASSETS. The chief executive offices of each of
Holdings and its Subsidiaries and the books and records of Holdings and its
Subsidiaries concerning their accounts (as such term is defined in the Uniform
Commercial Code) are located only at the addresses set forth on Schedule 5.32
identified as such, and the only other places of business and locations of
assets of Holdings and its Subsidiaries that are not in transit in the ordinary
course of business, if any, are the addresses set forth on Schedule 5.32.
5.33 CHANGE OF CONTROL PAYMENTS. Except as set forth on Schedule 5.33,
neither the execution, delivery and performance by the Borrower, Holdings or any
of their Subsidiaries of the Note Transaction Documents to which they are a
party, nor the consummation of the Transaction (i) shall require any payment by
Holdings or any of its Subsidiaries or Affiliates, in cash or kind, under any
other agreement, plan, policy, commitment or other arrangement or (ii) cause an
"OWNERSHIP CHANGE" under Section 382 of the Code. Except as set forth on
Schedule 5.33, there are no agreements, plans, policies, commitments or other
arrangements with respect to any compensation, benefits or consideration that
will be materially increased, or the vesting of benefits or options to purchase
Common Stock which will be accelerated, or severance rights that would be
triggered, as a result of the Transaction.
5.34 FOREIGN ASSETS CONTROL REGULATIONS, ETC. The use of the net
proceeds from the sale of the Securities will not violate the Trading with the
Enemy Act, as amended, or any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or
any enabling legislation or executive order relating thereto.
5.35 MARGIN REQUIREMENTS. No part of the proceeds from the sale of the
Securities hereunder will be used to purchase or carry any Margin Stock or to
extend credit for the purpose of
34
purchasing or carrying any Margin Stock. Neither the sale of the Securities nor
the use of the proceeds thereof will violate or be inconsistent with the
provisions of Regulation T, U, or X of the Board of Governors of the Federal
Reserve System.
5.36 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.36, (a)
none of Holdings or any of its Subsidiaries is party to any Contractual
Obligation or subject to any Requirement of Law as a result of any conflict of
interest by, between or among Holdings, the Borrower, such Subsidiaries or
otherwise that would result in the termination of any material Government
Contract or that would impose any material limitation on Holdings or such
Subsidiary's ability to perform such contract or to continue its business as
presently conducted, (b) no payment has been made by Holdings or any of its
Subsidiaries, or by any Person authorized to act on their behalf, to any Person
in connection with any material Government Contract of Holdings or any such
Subsidiary, in violation of applicable United States or foreign procurement laws
or regulations, United States criminal or civil laws relating to bribes or
gratuities, or in violation of the Foreign Corrupt Practices Act or other
Requirements of Law, which violations, individually or in the aggregate, would
have a Material Adverse Effect, (c) with respect to each material Government
Contract, no termination for convenience or termination for default has occurred
within the last five years and no cure notice or show cause notice is currently
in effect pertaining to such material Government Contract, (d) none of Holdings
or any of its Subsidiaries or any of their respective directors or officers is
(or during the last five years has been) under administrative, civil or criminal
indictment by any Governmental Authority, with respect to any alleged
irregularity, misstatement or omission arising under or relating to any material
Government Contract, (e) there exist (A) no outstanding claims against Holdings
or any of its Subsidiaries, either by the United States Government or by any
prime contractor, subcontractor, vendor or other third party, arising under or
relating to any material Government Contract; and (B) no material disputes
between Holdings or any of its Subsidiaries and the United States Government
under the Contract Disputes Act or any other Federal statute or between Holdings
or any of its Subsidiaries and any prime contractor, subcontractor or vendor
arising under or relating to any such Government Contract, (f) none of Holdings
or any of its Subsidiaries is (or during the last five years has been) suspended
or debarred from doing business with the United States Government or is (or
during such period was) the subject of a finding of non-responsibility or
ineligibility for United States Government contracting.
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS
Each Purchaser, severally but not jointly, hereby represents
and warrants as to itself as follows:
6.01 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and
performance by it of this Agreement: (a) is within its power and authority and
has been duly authorized by all necessary action; (b) does not contravene the
terms of its organizational documents or any amendment thereof; and (c) will not
violate, conflict with or result in any breach or contravention of any of its
Contractual Obligations, or any order or decree directly relating to it.
6.02 BINDING EFFECT. This Agreement has been duly executed and
delivered by it and this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance
35
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
6.03 NO LEGAL BAR. The execution, delivery and performance of this
Agreement by it will not violate any Requirement of Law applicable to it.
6.04 PURCHASE FOR OWN ACCOUNT. The Securities to be acquired by it
pursuant to this Agreement are being or will be acquired for its own account and
with no intention of distributing or reselling such securities or any part
thereof in any transaction that would be in violation of the securities laws of
the United States of America, or any state, without prejudice, however, to its
right at all times to sell or otherwise dispose of all or any part of the
Securities, under an effective registration statement under the Securities Act,
or under an exemption from such registration available under the Securities Act,
and subject, nevertheless, to the disposition of its property being at all times
within its control. If the Purchaser should in the future decide to dispose of
any of the Securities, the Purchaser understands and agrees that it may do so
only in compliance with the Securities Act and applicable state securities laws,
as then in effect. It agrees to the imprinting of a legend on certificates
representing all of the Securities to the following effect: "THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."
6.05 BROKER'S, FINDER'S OR SIMILAR FEES. Except in connection with the
Transaction, there are no brokerage commissions, finder's fees or similar fees
or commissions payable in connection with the Note Transaction based on any
agreement, arrangement or understanding with it or any action taken by it.
6.06 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT. No approval,
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is necessary or required in connection with the execution, delivery or
performance by it or enforcement against it of the Note Transaction.
6.07 EXISTENCE AND POWER. Each of Purchasers: (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization; and (b) has the power and authority to execute, deliver and
perform its obligations under each Note Transaction Document to which it is or
will be a party.
6.08 LITIGATION. No injunction, writ, temporary restraining order,
decree or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the execution, delivery
or performance of the Note Transaction Documents.
36
ARTICLE 7
INDEMNIFICATION
7.01 INDEMNIFICATION. In addition to all other sums due hereunder or
provided for in this Agreement, each of Holdings and the Borrower agrees to
indemnify and hold harmless the Purchasers and their respective Affiliates and
each of their respective officers, directors, agents, employees, Subsidiaries,
partners, members, attorneys, accountants and controlling persons (each, an
"INDEMNIFIED PARTY") to the fullest extent permitted by law from and against any
and all liabilities, losses, claims, damages, expenses (including, without
limitation, reasonable fees, disbursements and other charges of counsel and
reasonable costs of investigation incurred by an Indemnified Party in any action
or proceeding between Holdings (or any of its Subsidiaries) and such Indemnified
Party (or Indemnified Parties) or between an Indemnified Party (or Indemnified
Parties) and any third party or otherwise) (collectively, "LIABILITIES")
resulting from or arising out of any breach of any representation or warranty,
covenant or agreement of Holdings, Borrower or any of their Subsidiaries in the
Note Transaction Documents, including without limitation, the failure to make
payment when due of amounts owing pursuant to the Note Transaction Documents, on
the due date thereof (whether at the scheduled maturity, by acceleration or
otherwise) or any legal, administrative or other actions (including, without
limitation, actions brought by any of the Purchasers, Holdings, any of its
Subsidiaries or any holders of equity or indebtedness of Holdings or any of its
Subsidiaries or derivative actions brought by any Person claiming through or in
Holdings or any Subsidiary's name), proceedings or investigations (whether
formal or informal), or written threats thereof, based upon, relating to or
arising out of the Note Transaction Documents, or any Indemnified Party's role
in the Transaction; provided, however, that the Borrower or Holdings shall not
be liable under this Section 7.01 to an Indemnified Party: (a) for any amount
paid by the Indemnified Party in settlement of claims by the Indemnified Party
without the Borrower's consent (which consent shall not be unreasonably
withheld), (b) to the extent that it is finally judicially determined that such
Liabilities resulted primarily from the willful misconduct or gross negligence
of such Indemnified Party or (c) to the extent that it is finally judicially
determined that such Liabilities resulted primarily from the breach by such
Indemnified Party of any representation, warranty, covenant or other agreement
of such Indemnified Party contained in this Agreement; provided, further, that
if and to the extent that such indemnification is unenforceable for any reason,
Borrower and Holdings shall make the maximum contribution to the payment and
satisfaction of such Liabilities which shall be permissible under applicable
laws. In connection with the obligation of the Borrower or Holdings to indemnify
for expenses as set forth above, the Borrower and Holdings further agree,
jointly and severally, upon presentation of appropriate invoices containing
reasonable detail, to reimburse each Indemnified Party for all such expenses
(including, without limitation, fees, disbursements and other charges of counsel
and reasonable costs of investigation incurred by an Indemnified Party in any
action or proceeding between Holdings (or any of its Subsidiaries) and such
Indemnified Party (or Indemnified Parties) or between an Indemnified Party (or
Indemnified Parties) and any third party or otherwise) as they are incurred by
such Indemnified Party; provided, however, that if an Indemnified Party is
reimbursed hereunder for any expenses, such reimbursement of expenses shall be
refunded to the extent it is finally judicially determined that the Liabilities
in question resulted primarily from (i) the willful misconduct or gross
negligence of such Indemnified Party or (ii) the breach by such Indemnified
Party of any representation, warranty, covenant or other agreement of such
Indemnified Party contained in the Note Transaction Documents.
37
7.02 PROCEDURE; NOTIFICATION. Each Indemnified Party under this Article
7 will, promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the Borrower or Holdings under
this Article 7, notify the Borrower and Holdings in writing of the commencement
thereof. The omission of any Indemnified Party so to notify the Borrower and
Holdings of any such action shall not relieve the Borrower or Holdings from any
liability which it may have to such Indemnified Party unless, and only to the
extent that, such omission results in the Borrower's or Holdings' forfeiture of
substantive rights or defenses. In case any such action, claim or other
proceeding shall be brought against any Indemnified Party and it shall notify
the Borrower and Holdings of the commencement thereof, the Borrower and/or
Holdings shall be entitled to assume the defense thereof at its own expense,
with counsel satisfactory to such Indemnified Party in its reasonable judgment;
provided, however, that any Indemnified Party may, at its own expense, retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
in any action, claim or proceeding in which the Borrower or Holdings, on the one
hand, and an Indemnified Party, on the other hand, is, or is reasonably likely
to become, a party, such Indemnified Party shall have the right to employ
separate counsel at the Borrower's and Holdings' expense and to control its own
defense of such action, claim or proceeding if, in the reasonable opinion of
counsel to such Indemnified Party, a conflict or potential conflict exists
between the Borrower or Holdings, on the one hand, and such Indemnified Party,
on the other hand, that would make such separate representation advisable;
provided, however, that in no event shall the Borrower or Holdings be required
to pay fees and expenses under this Article 7 for more than one firm of
attorneys in any jurisdiction in any one legal action or group of related legal
actions. The Borrower and Holdings agree that it will not, without the prior
written consent of the respective Purchaser, which consent shall not be
unreasonably withheld, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated hereby (if any Indemnified Party is a party thereto or
has been actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of the respective
Purchaser and each other Indemnified Party from all liability arising or that
may arise out of such claim, action or proceeding. The Borrower and Holdings
shall not be liable for any settlement of any claim, action or proceeding
effected against an Indemnified Party without its written consent, which consent
shall not be unreasonably withheld. The rights accorded to Indemnified Parties
hereunder shall be in addition to any rights that any Indemnified Party may have
at common law, by separate agreement or otherwise.
7.03 REGISTRATION RIGHTS AGREEMENT. Notwithstanding anything to the
contrary in this Article 7, the indemnification and contribution provisions of
the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or any sales made thereunder.
ARTICLE 8
AFFIRMATIVE COVENANTS
Until the payment by the Borrower of all principal of and
interest on the Notes, each of the Borrower and Holdings hereby covenants and
agrees with each of the Purchasers as follows:
8.01 FINANCIAL STATEMENTS AND OTHER INFORMATION. Holdings shall
maintain, and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in
38
accordance with sound business practices to permit preparation of financial
statements in conformity with GAAP (it being understood that monthly financial
statements are not required to have footnote disclosures). The Borrower shall
deliver or cause to be delivered to the Purchasers each of the financial
statements and other reports described below:
(a) Management Reports. As soon as available and in any event
within thirty (30) days after the end of each month, the Borrower will deliver
or cause to be delivered a management report, in the form submitted
contemporaneously herewith to Purchasers, which shall include all earnings
packages, preliminary consolidated and consolidating balance sheets and income
statements of Holdings and its Subsidiaries consistent with such form.
(b) Financial Information. As soon as available and in any
event within forty-five (45) days after the end of each quarter, the Borrower
shall deliver or cause to be delivered the consolidated and consolidating
balance sheets of Holdings and its Subsidiaries, as at the end of such quarter
and the related consolidated and consolidating statements of income, and
consolidated cash flows for such month and for the period from the beginning of
the then current fiscal year of Holdings to the end of such quarter setting
forth in each case in comparative form the figures for the previous year and for
the most recent budget provided by Holdings and Borrower certified by the
principal accounting officer or principal financial officer (or their Chief
Financial Officer, to the extent there is one) of Borrower and Holdings as being
fairly stated in all material respects (subject to normal year-end audit
adjustments) all in the form submitted contemporaneously herewith to Purchasers.
(c) Year-End Financial Information. As soon as available and
in any event within ninety (90) days after the end of the fiscal year of
Holdings, the Borrower shall deliver or cause to be delivered (i) the
consolidated and consolidating balance sheets of Holdings and its Subsidiaries
as at the end of such year and the related consolidated and consolidating
statements of income and consolidated cash flows for such fiscal year and (ii) a
report with respect to the financial statements from PricewaterhouseCoopers LLP
or another "Big Five" firm of certified public accountants selected by Holdings
and reasonably acceptable to the Purchasers, which report shall be issued
pursuant to an audit conducted by such firm of certified public accountants in
accordance with GAAP. Such report shall contain an "Unqualified" opinion (as
such term is defined in AU Section 508. of the American Institute of Certified
Public Accountants Professional Standards).
(d) Borrower's Compliance Certificate. Together with each
delivery of financial statements of Holdings and its Subsidiaries pursuant to
Sections 8.01(a) and 8.01(b) above, the Borrower shall deliver or cause to be
delivered a fully and properly completed compliance certificate in substantially
the form provided contemporaneously herewith to Borrower (or in such other form
or substance as shall be reasonably satisfactory to the Purchasers) and referred
to as a "COMPLIANCE CERTIFICATE") signed by the principal financial or principal
accounting officer of Holdings and the Borrower (or Chief Financial Officer, to
the extent there is one). Holdings, the Borrower and the Purchasers acknowledge
and agree that calculations of covenant compliance, with respect to the
financial covenants contained in Article 9 hereof and contained in any such
compliance certificate delivered for a month that is not the last month of a
fiscal quarter, will be for informational purposes only and shall not measure
compliance (or lack of compliance) with such financial covenants.
(e) Accountants' Reports. Promptly upon receipt thereof,
Holdings shall deliver copies of the reports submitted by Holdings' firm of
certified public accountants in connection with any review of the internal
control systems of Holdings and its Subsidiaries made by such
39
accountants, including any comment letter submitted by such accountants to
management in connection with their services.
(f) Projections. No later than thirty (30) days after the end
of each fiscal year beginning with the current fiscal year, the Borrower shall
prepare and deliver or cause to be prepared and delivered to Purchasers
projections of Holdings and its Subsidiaries for the next succeeding fiscal
year, on a month to month basis and for the following four (4) fiscal years on a
yearly basis, including a consolidated and consolidating balance sheet as at the
end of each relevant period, consolidated and consolidating income statements
and consolidated statements of cash flows for each relevant period and for the
period commencing at the beginning of the fiscal year and ending on the last day
of such relevant period.
(g) SEC Filings and Press Releases. Promptly upon their
becoming available, Holdings shall deliver copies of (i) all Forms 10-K, 10-Q
and amendments thereto filed by Holdings, (ii) all regular and periodic reports
and all registration statements and prospectuses, if any, filed by Holdings or
any of its Subsidiaries with any securities exchange or with the Commission and
(iii) all press releases and other statements made available by Holdings or any
of its Subsidiaries to the public concerning material developments in the
business of Holdings or any of its Subsidiaries.
(h) Events of Default, Etc. As soon as practicable, and in any
event within five Business Days after any senior executive officer of the
Borrower or Holdings has actual knowledge of the existence of any Default, Event
of Default or other event having had a Material Adverse Effect or having any
reasonable likelihood of causing or resulting in a Material Adverse Effect
(which shall be deemed to include any Default or Event of Default as such terms
are defined in the Senior Credit Agreement) the Borrower or Holdings shall give
the Purchasers notice specifying the nature of such Default or Event of Default
or other event, including the anticipated effect thereof, which notice, if given
by telephone, shall be promptly confirmed in writing on the next Business Day.
(i) Litigation. Promptly after the commencement thereof,
Borrower or Holdings shall give the Purchasers written notice of the
commencement of all actions, suits and proceedings before any domestic or
foreign Governmental Authority or arbitrator affecting Holdings or any of its
Subsidiaries that (i) seeks injunctive or similar relief or (ii) in the
reasonable judgment of Holdings exposes Holdings or such Subsidiary to liability
in an amount aggregating $1,000,000 or more or that, if adversely determined,
would have a Material Adverse Effect.
(j) Subsidiaries. Not less than fifteen (15) days prior to
creating a Subsidiary or acquiring the stock of, or other equity interests in, a
Person, such that such Person will become a Subsidiary, Holdings shall notify
the Purchasers of Holdings or any of its Subsidiary's intention to create such
Subsidiary or acquire such stock or equity interests, and following such notice
such Subsidiary will not be created or acquired until Holdings has caused each
such Subsidiary which is organized under any state of the United States of
America to execute a Guaranty in the form of Exhibit C-2.
(k) No Defaults. The Borrower shall deliver or cause to be
delivered to the Purchasers concurrently with the delivery of the financial
statements referred to in Section 8.01(b), a certificate of the principal
accounting officer or principal financial officer of Holdings and the Borrower
stating that to his or her knowledge no Default or Event of Default shall have
occurred during the period covered thereby, except as specified in such
certificate.
40
(l) Other Copies. Copies of all material notices, reports,
certificates (including, in any event, borrowing base and compliance
certificates) and other information, and any borrowing base reports or other
reports as to collateral eligibility or borrowing availability furnished to the
Administrative Agent under the Senior Credit Agreement promptly after the same
are so furnished.
(m) Other Information. With reasonable promptness, the
Borrower and Holdings shall deliver such other information and data with respect
to Holdings or any of its Subsidiaries as from time to time may be reasonably
required by the Purchasers.
8.02 PRESERVATION OF CORPORATE EXISTENCE. Holdings shall, and shall
cause each of its Subsidiaries to:
(a) preserve and maintain its corporate (or, as applicable,
limited liability partnership or other entity) existence;
(b) conduct its business consistent with past business
practices (except as permitted pursuant to Section 9.13), keep its properties in
good working order and condition (normal wear and tear excepted) consistent with
past business practices, and from time to time make all needed repairs to,
renewals of or replacements of its properties (except to the extent that any of
such properties are not material or are not obsolete or are being replaced) so
that its business operations shall be preserved in all material respects; and
(c) file or cause to be filed in a timely manner all material
reports, applications, estimates and licenses that shall be required by each
Governmental Authority.
8.03 PAYMENT OF OBLIGATIONS. Holdings shall, and shall cause each of
its Subsidiaries to, pay and discharge as the same shall become due and payable,
all their respective obligations and liabilities, including without limitation:
(a) all Tax liabilities, assessments and governmental charges
or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate applicable
reserves in accordance with GAAP have been established on the books of Holdings
or such Subsidiary; and
(b) all lawful claims which Holdings and each of its
Subsidiaries is obligated to pay, which are due and which, if unpaid, might by
law become a Lien upon its property, unless the same are being contested in good
faith by appropriate proceedings and adequate reserves in accordance with GAAP
have been established on the books of Holdings or such Subsidiary as applicable.
8.04 COMPLIANCE WITH LAWS. Holdings shall comply, and shall cause each
of its Subsidiaries to comply, in all material respects, with all Requirements
of Law, Contractual Obligations and Permits except where failure to so comply
would not, individually or in the aggregate over all such failures, have a
Material Adverse Effect.
8.05 RESERVATION OF SHARES. Holdings shall prior to the Equity Closing
Date reserve and keep available out of its authorized capital stock (solely for
the purpose of issuance and delivery upon the Equity Closing Date in connection
with the issuance of the Mezzanine Equity) the number of shares of Common Stock
required to be issued and delivered by Holdings at the Equity Closing Date (the
"SHARES"). The Shares shall, when issued or delivered on the Equity Closing, be
duly and
41
validly issued and fully paid and non-assessable and not subject to any
preemptive or other similar rights.
8.06 INSPECTION. Until such time as the Notes have been paid in full,
within two Business Days notice after written notification of same, Holdings
will permit, and will cause each of its Subsidiaries to permit, representatives
of the Purchasers to visit and inspect any of their properties, to examine their
books of account and records and make copies and extracts therefrom at their
expense, and to discuss their affairs, finances and accounts with and to be
advised as to the same by their officers and independent public accountants
(provided that Holdings or Borrower shall have the right to participate in any
discussions with Holdings' or Borrower's public accountants) all at such
reasonable times during normal business hours and as often as may be reasonably
requested (except that during the continuance of a Default of Event of Default
no such notification shall be required); provided, however, that no such
inspection, examination or inquiry, the failure to conduct same, nor any
knowledge of any Purchaser, including, without limitation, any knowledge
obtained by such Purchaser in connection with any such inspection, investigation
or inquiry, shall constitute a waiver of any rights such Purchaser may have
under any representation, warranty, covenant, term or agreement under any of the
Note Transaction Documents.
8.07 PAYMENT OF NOTES. The Borrower shall pay the principal of,
interest on and other amounts due in respect of, the Notes on the dates and in
the manner provided in the Notes.
8.08 INSURANCE. Holdings and its Subsidiaries will maintain or cause to
be maintained with financially sound and reputable insurers that have a rating
of "A-" or better as established by Best's Rating Guide (or an equivalent rating
with such other publication of a similar nature as shall be in current use),
public liability and property damage insurance with respect to their respective
businesses and properties against loss or damage of the kinds customarily
carried or maintained by companies of established reputation engaged in similar
businesses and in amounts acceptable to Purchasers and will deliver evidence
thereof to Purchasers. Without limiting the foregoing, Holdings and its
Subsidiaries shall establish no later than two (2) months after the Closing Date
and maintain at all times thereafter business interruption insurance in an
amount satisfactory to the Purchasers; provided, however, that Holdings shall
not be obligated to purchase such insurance in the event that reasonable terms
and pricing are not commercially available.
8.09 BOOKS AND RECORDS. Holdings shall, and shall cause each of its
Subsidiaries to, keep proper books of record and account, in which full and
materially correct entries shall be made in accordance with GAAP of all
financial transactions and the assets and business of Holdings and each of its
Subsidiaries.
8.10 USE OF PROCEEDS. The Borrower shall use the gross proceeds from
the Equity Sale, the sale of the Securities and the initial borrowings under the
Senior Credit Agreement, only as follows: (i) for the payment of fees and
expenses incurred in connection with the Transaction, (ii) to repay in full all
amounts outstanding under the Existing Credit Agreement, and (iii) to purchase
inventory in an amount not less than $70 million from, and make a licensing
payment to, Rolls Royce Corporation in an amount not more than $20 million in
accordance with the RR Agreement.
8.11 BOARD OBSERVATION RIGHTS. Holdings shall give each of the Whitney
Funds and Blackstone notice of (in each of the same manner as notice is given to
directors), and permit one Person designated by each of the Whitney Funds and
Blackstone to attend as observer, all meetings of Holdings' Board of Directors
and all executive and other committee meetings of the Board of
42
Directors of Holdings and shall provide to each of the Whitney Funds and
Blackstone the same information concerning Holdings and its Subsidiaries, and
access thereto, provided to members of Holdings' Board of Directors and such
committees. The reasonable travel expenses incurred by any such designee of each
of the Whitney Funds and Blackstone and in attending any board or committee
meetings shall be reimbursed by Holdings.
ARTICLE 9
MAINTENANCE AND NEGATIVE COVENANTS
Until the payment in full by Holdings of all principal and
interest on the Notes, each of Holdings and the Borrower hereby covenants and
agrees with the Purchasers as follows. To the extent capitalized terms used in
this Article 9 are not specifically defined herein, such terms shall have the
meanings assigned to them in the Senior Credit Agreement in effect on the
Closing Date.
9.01 MAXIMUM LEVERAGE RATIO.
Holdings shall maintain a Leverage Ratio, as determined as of
the last day of each Fiscal Quarter set forth below, for the four Fiscal
Quarters ending on such day, of not more than the maximum ratio set forth below
opposite such Fiscal Quarter:
FISCAL QUARTER ENDING MAXIMUM LEVERAGE RATIO
--------------------- ----------------------
December 31, 2002 4.75 to 1
March 31, 2003 4.50 to 1
June 30, 2003 4.00 to 1
September 30, 2003 3.75 to 1
December 31, 2003 3.50 to 1
March 31, 2004 3.50 to 1
June 30, 2004 3.50 to 1
September 30, 2004 3.25 to 1
December 31, 2004 and thereafter 3.00 to 1
9.02 MINIMUM INTEREST COVERAGE RATIO.
Holdings shall maintain an Interest Coverage Ratio, as
determined as of the last day of each Fiscal Quarter set forth below, for the
four Fiscal Quarters ending on such day, of at least the minimum ratio set forth
below opposite such Fiscal Quarter:
MINIMUM INTEREST
FISCAL QUARTER ENDING COVERAGE RATIO
--------------------- ----------------
December 31, 2002 2.00 to 1
March 31, 2003 2.00 to 1
June 30, 2003 2.00 to 1
September 30, 2003 2.25 to 1
December 31, 2003 2.40 to 1
March 31, 2004 2.50 to 1
June 30, 2004 2.50 to 1
September 30, 2004 2.75 to 1
December 31, 2004 and thereafter 3.00 to 1
43
9.03 MINIMUM EBITDA.
Holdings shall have, as of the last day of each Fiscal Quarter
set forth below, EBITDA for the fiscal periods indicated below ending on such
day of not less than the following:
MINIMUM EBITDA
--------------
Fiscal Quarter Ending March 31, 2002 10,800,000
2 Fiscal Quarters Ending June 30, 2002 22,500,000
3 Fiscal Quarters Ending September 30, 2002 36,000,000
9.04 MAINTENANCE OF TANGIBLE NET WORTH.
Holdings shall maintain as of the last day of each Fiscal
Quarter set forth below a Tangible Net Worth of not less than the minimum amount
set forth below opposite such Fiscal Quarter:
MINIMUM TANGIBLE NET
FISCAL QUARTER ENDING WORTH
--------------------- --------------------
March 31, 2002 140,000,000
June 30, 2002 146,000,000
September 30, 2002 153,000,000
December 31, 2002 155,000,000
March 31, 2003 162,500,000
June 30, 2003 170,000,000
September 30, 2003 177,500,000
December 31, 2003 185,000,000
March 31, 2004 191,000,000
June 30, 2004 197,000,000
September 30, 2004 203,000,000
December 31, 2004 210,000,000
March 31, 2005 217,500,000
June 30, 2005 225,000,000
September 30, 2005 235,000,000
December 31, 2005 245,000,000
March 31, 2006 255,000,000
June 30, 2006 265,000,000
September 30, 2006 275,000,000
December 31, 2006 285,000,000
9.05 CAPITAL EXPENDITURES.
Holdings shall not permit Capital Expenditures to be made or
incurred during each of the Fiscal Years set forth below to be, in the
aggregate, in excess of the maximum amount set forth below for such Fiscal Year:
44
MAXIMUM CAPITAL
FISCAL YEAR EXPENDITURES
----------- ---------------
2002 7,260,000
2003 12,400,000
2004 12,100,000
2005 12,100,000
2006 12,100,000
provided, however, that to the extent that actual Capital
Expenditures for any such Fiscal Year shall be less than the maximum amount set
forth above for such Fiscal Year (without giving effect to the carryover
permitted by this provision), the difference shall, in addition, be available
for Capital Expenditures in the next succeeding Fiscal Year. Capital
Expenditures funded by Reinvestment of Deferred Amounts (as such term is defined
in the Senior Credit Agreement as in effect on the Closing Date) and to the
extent classified as a Capital Expenditure, amounts paid in a Permitted
Acquisition shall be excluded from the calculation of Capital Expenditures for
purposes of this Section 9.05.
9.06 INDEBTEDNESS. Neither Holdings nor the Borrower shall, and neither
shall permit any of its Subsidiaries to, directly or indirectly, create, incur,
assume or otherwise become or remain directly or indirectly liable with respect
to any Indebtedness except for the following:
(a) Indebtedness of Holdings, the Borrower and any Subsidiary
Guarantor under the Senior Credit Agreement in an aggregate amount not to exceed
the greater of (i) $200 million or (ii) 100% of the Borrowing Base as is then in
effect under the Senior Credit Agreement or would be in effect as of such date
under the Senior Credit Agreement as in effect on the Closing Date; provided,
however, that prior to the first anniversary of the Closing Date, the foregoing
shall be limited to $200 million under the Senior Credit Agreement minus any
permanent prepayments or reductions of commitments thereunder; and provided,
further, that any Indebtedness incurred pursuant to this clause (a) after the
first anniversary date of the Closing Date (x) shall be incurred only pursuant
to a revolving credit facility or a term loan (which shall be limited to a de
minimus amortization of amounts owed in the case of a term loan) and (y) if in
an amount described in the foregoing clause (ii) shall not contain covenants
less favorable to Holdings, the Borrower or any Subsidiary Guarantor than those
contained in this Article 9 unless Holdings and its Subsidiaries offer to amend
this Agreement to provide substantially similar covenant protection;
(b) Indebtedness (x) under the Canadian Facility not to exceed
6,000,000 Canadian dollars, (y) under the Notes and (z) outstanding on the date
of this Agreement (other than under the Senior Credit Agreement and Canadian
Facility) and disclosed as existing Indebtedness on Schedule 8.1 to the Senior
Credit Agreement as in effect on the Closing Date;
(c) Indebtedness under the Australian Facility not to exceed
10,000,000 Australian dollars;
(d) provided no Default or Event of Default is then continuing
or would result after giving effect thereto, secured Indebtedness in an
aggregate outstanding principal amount not exceeding at any time $25,000,000;
provided, however, that the proceeds of such Indebtedness shall be used to
finance the purchase of rights and inventory under new distribution agreements
and Permitted Acquisitions entered into by Borrower or any Subsidiary and (x)
such Indebtedness has de minimus amortization payments due prior to the date
that is six months after the final maturity date of the Notes, (y) such
Indebtedness contains covenants that are no more onerous to Holdings and its
45
Subsidiaries than those contained herein and (z) such Indebtedness has an
overall cost no more onerous than the Note Transaction to Holdings and its
Subsidiaries;
(e) [Intentionally omitted];
(f) Renewals, extensions, refinancings and refundings of
Indebtedness permitted under clauses (b)(y) and (b)(z) and this clause (f);
provided, however, that any such renewal, extension, refinancing or refunding is
in an aggregate principal amount not greater than the principal amount of, and
is on terms not materially less favorable to Holdings or such Subsidiary,
including as to weighted average maturity, than the Indebtedness being renewed,
extended, refinanced or refunded;
(g) Indebtedness arising from intercompany loans (i) from the
Borrower to any Subsidiary Guarantor, (ii) from any Subsidiary Guarantor to the
Borrower or any other Subsidiary Guarantor or (iii) from the Borrower or any
Subsidiary Guarantor to any Subsidiary of the Borrower that is not a Subsidiary
Guarantor; provided, however, that the investment in the intercompany loan to
such Subsidiary is permitted under Section 9.16;
(h) Indebtedness arising under any performance or surety bond
entered into in the ordinary course of business, in an aggregate amount not to
exceed $1,000,000;
(i) Capital Lease Obligations and purchase money Indebtedness
incurred by Holdings or any of its Subsidiaries to finance the acquisition of
fixed assets; provided, however, that the Capital Expenditure related thereto is
otherwise permitted by Section 9.05 and that the aggregate outstanding principal
of all such Capital Lease Obligations and purchase money Indebtedness shall not
exceed $5,000,000 at any time;
(j) unsecured Indebtedness not otherwise permitted under this
Section 9.06; provided, however, that the aggregate outstanding principal amount
of all such unsecured Indebtedness shall not exceed $5,000,000 at any time;
(k) any Guaranty Obligation incurred by Holdings or any of its
Subsidiaries in respect of Indebtedness that is permitted by this Section 9.06;
and
(l) to the extent constituting Indebtedness, the Securities
issued under the Equity Documents as in existence on the Closing Date.
9.07 LIMITATION ON LIENS. Holdings will not, and will not cause or
permit any of its Subsidiaries to, directly or indirectly, create or suffer to
exist any Lien of any kind (other than Customary Permitted Liens) against or
upon any of their respective properties or assets, whether owned on the date
hereof or acquired after the date hereof, or any proceeds therefrom, unless
contemporaneously therewith effective provision is made to secure the Notes
equally and ratably with a Lien equal to (or prior to) such Indebtedness.
Notwithstanding the foregoing, this Section 9.07 shall not restrict the
following Liens:
(a) Liens created pursuant to the Senior Credit Agreement or
pursuant to Indebtedness permitted by Section 9.06(d) hereof;
(b) Liens existing on the date of this Agreement and set forth
on Schedule 8.2 of the Senior Credit Agreement as in effect on the Closing Date;
46
(c) Liens on assets of Aviall Australia Pty Ltd securing
obligations under the Australian Facility;
(d) Customary Permitted Liens of Holdings and its
Subsidiaries;
(e) purchase money Liens granted by Holdings or any Subsidiary
of Holdings (including the interest of a lessor under a Capital Lease and Liens
to which any property is subject at the time, on or after the date hereof, of
Holdings' or such Subsidiary's acquisition thereof) securing Indebtedness
permitted under Section 9.06(i) and limited in each case to the property
purchased with the proceeds of such purchase money Indebtedness or subject to
such Capital Lease;
(f) any Lien securing the renewal, extension, refinancing or
refunding of any Indebtedness secured by any Lien permitted under Section
9.07(a), (b) or (e) or this clause (f) above, without any change in the assets
subject to such Lien;
(g) Liens in favor of lessors securing operating leases
permitted hereunder; and
(h) Liens not otherwise permitted by the foregoing clauses of
this Section 9.07 securing obligations or other liabilities (other than
Indebtedness of the Borrower) Holdings or any Subsidiary Guarantor; provided,
however, that the aggregate outstanding amount of all such obligations and
liabilities secured by such Liens shall not exceed $2,000,000 at any time.
9.08 SALE OF ASSETS. Neither Holdings nor the Borrower shall, and
neither shall permit any of its Subsidiaries to, sell, convey, transfer, lease
or otherwise dispose of, any of their respective assets or any interest therein
(including the sale or factoring at maturity or collection of any accounts) to
any Person, or permit or suffer any other Person to acquire any interest in any
of their respective assets or, in the case of any Subsidiary, issue or sell any
shares of such Subsidiary's stock or stock equivalent (any such disposition
being an "ASSET SALE"), except for the following:
(a) the sale or disposition of Inventory in the ordinary
course of business;
(b) the sale or disposition of equipment that has become
obsolete or is replaced in the ordinary course of business; provided, however,
that the aggregate Fair Market Value of all such equipment disposed of in any
fiscal year shall not exceed $1,000,000;
(c) the lease or sublease of real property not constituting a
sale and leaseback, to the extent not otherwise prohibited by this Agreement;
(d) assignments and licenses of intellectual property of the
Borrower and its Subsidiaries in the ordinary course of business;
(e) any Asset Sale to the Borrower or any Subsidiary
Guarantor; and
(f) as long as no Default or Event of Default is continuing or
would result therefrom, any other Asset Sale for Fair Market Value, payable in
cash upon such sale; provided, however, that with respect to any such sale
pursuant to this Section 9.08(f), the aggregate consideration received for the
sale of all assets sold during any Fiscal Year shall not exceed $20,000,000 and
the net cash proceeds from such Asset Sale are applied, within 365 days of such
Asset Sale, to permanently prepay Indebtedness or reinvest in the business of
Holdings and its Subsidiaries.
47
9.09 RESTRICTED PAYMENTS. Neither Holdings nor the Borrower shall, and
neither shall permit any of its Subsidiaries to, directly or indirectly,
declare, order, pay, make or set apart any sum for any Restricted Payment except
for the following:
(a) Restricted Payments by any Subsidiary of the Borrower to
the Borrower or any Subsidiary Guarantor;
(b) cash dividends on the Stock of the Borrower to Holdings
paid and declared in any Fiscal Year for solely the purpose of funding the
following:
(i) ordinary operating expenses and scheduled debt
service of Holdings; and
(ii) payments by Holdings in respect of foreign,
federal, state or local taxes owing by Holdings in respect of Holdings
and its Subsidiaries, but not greater than the amount that would be
payable by the Borrower, on a consolidated basis, if the Borrower were
the taxpayer;
(iii) payments by Holdings of the rollover fees due
pursuant to the Equity Sale and the Notes;
(iv) payment by Holdings of dividends in respect of
the Permanent Preferred Stock issued pursuant to the Equity Sale made
during the Fiscal Years ending December 31, 2006 and December 31, 2007,
that do not exceed in aggregate amount for each such Fiscal Year
$6,000,000 and $7,000,000, respectively; provided, that after giving
effect to each such payment the Leverage Ratio of Holdings is not more
than 2.00 to 1; and
(v) payment by Holdings of dividends in respect of
its outstanding Mezzanine Preferred Stock issued upon conversion of the
Bridge Preferred Stock made during the Fiscal Years ending December 31,
2005, 2006 and 2007, that do not exceed in aggregate amount $10,000,000
for each such Fiscal Years; provided, that after giving effect to each
such payment the Leverage Ratio of Holdings is not more than 2.0 to 1;
and
(c) payments by Holdings for the purposes of funding the
payments described in clauses (b) (iii), (iv) and (v).
provided, however, that the Restricted Payments described in Sections 9.09(b)
and (c) shall not be permitted if an Event of Default or Default shall have
occurred and be continuing at the date of declaration or payment thereof or
would result therefrom.
9.10 RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS. Other than pursuant to
any agreements governing any Indebtedness or Capital Lease Obligations permitted
by Section 9.06(a), (b), (d) or (i) neither Holdings nor the Borrower shall, and
shall not permit any of their respective Subsidiaries to, agree to enter into or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of such Subsidiary to pay dividends or make any other
distribution or transfer of funds or assets or make loans or advances to or
other Investments in, or pay any Indebtedness owed to, the Borrower or any other
Subsidiary of the Borrower.
9.11 MARGIN REGULATIONS. Neither Holdings nor the Borrower shall, and
neither shall permit any of its Subsidiaries to, use all or any portion of the
proceeds of any credit extended
48
hereunder to purchase or carry margin stock (within the meaning of Regulation U
of the Federal Reserve Board) in contravention of Regulation U of the Federal
Reserve Board.
9.12 SALE/LEASEBACKS. Neither Holdings nor the Borrower shall, and
neither shall permit any of its Subsidiaries to, enter into any sale and
leaseback transaction if, after giving effect to such sale and leaseback
transaction, the aggregate fair market value of all properties covered by sale
and leaseback transactions would exceed $2,000,000.
9.13 CHANGE IN NATURE OF BUSINESS. (a) Neither Holdings nor the
Borrower shall, and neither shall permit any of its Subsidiaries to, make any
material change in the nature or conduct of its business as carried on at the
date hereof except for substantially similar or related extensions of its
business occurring in the ordinary course.
(b) Holdings shall not engage in any business or activity
other than (i) holding shares in the capital stock of the Borrower and other
Subsidiaries, (ii) paying taxes, (iii) preparing reports to Governmental
Authorities and to its stockholders, (iv) holding directors and stockholders
meetings, preparing corporate records and other corporate activities required to
maintain its separate corporate structure and (v) similar activities undertaken
in the normal course of business by a holding company.
9.14 RESTRICTION ON FUNDAMENTAL CHANGES. Except in connection with a
Permitted Acquisition, neither Holdings nor the Borrower shall permit any of its
Subsidiaries to (a) merge or consolidate with any Person (other than mergers or
consolidations of any Loan Party into any other Loan Party (with Borrower being
the surviving corporation, if a merger involving Borrower), any Foreign
Subsidiary into any other Foreign Subsidiary or any Foreign Subsidiary into any
Loan Party (but not any Loan Party into any Foreign Subsidiary), (b) consolidate
with any Person, (c) acquire all or substantially all of the Stock or Stock
Equivalents of any Person, (d) acquire all or substantially all of the assets of
any Person or all or substantially all of the assets constituting the business
of a division or branch or other unit of operation of any Person, (e) enter into
any joint venture or partnership with any Person or (f) acquire or create any
Subsidiary unless, after giving effect thereto, such Subsidiary is a
Wholly-Owned Subsidiary, the Borrower is in compliance with Section 8.01(j) and
the Investment in such Subsidiary is permitted under Section 9.17 hereof.
9.15 PERMITTED DISTRIBUTION AGREEMENTS.
Holdings and Borrower will not, and will not cause or permit
any of their respective Subsidiaries to, enter into any distribution or similar
agreement with any Person (or any Affiliate of such Person) that provides for
the right to distribute new aviation parts manufactured by such Person or
Affiliate with a purchase price or commitment to purchase initial inventory and
related license fees that would exceed $75,000,000. Nothing contained herein
shall be deemed to restrict the purchase of inventory in accordance with or
pursuant to any Contractual Obligation in existence as of the date hereof or
contemplated pursuant to the Transaction.
9.16 INVESTMENTS.
Neither Holdings nor the Borrower shall, and neither shall
permit any of its Subsidiaries to, directly or indirectly make or maintain any
Investment except for the following:
49
(a) Investments existing on the date of this Agreement and
disclosed on Schedule 8.3 of the Senior Credit Agreement in effect on the
Closing Date;
(b) Investments in cash and Cash Equivalents held in a Cash
Collateral Account or a Control Account in accordance with the Senior Credit
Agreement as in effect on the Closing Date;
(c) Investments in accounts, contract rights and chattel paper
(each as defined in the UCC), notes receivable and similar items arising or
acquired from the sale of Inventory in the ordinary course of business
consistent with the past practice of Holdings or the applicable Subsidiary;
(d) Investments received in settlement of amount due to
Holdings or any of its Subsidiaries effected in the ordinary course of business;
(e) Investments (i) by Holdings in the Borrower, the Borrower
in any Subsidiary Guarantor or by any Subsidiary Guarantor in the Borrower,
Holdings or any other Subsidiary Guarantor, (ii) by Holdings, the Borrower, or
any Subsidiary Guarantor in connection with a Permitted Acquisition, (iii) by a
Subsidiary of the Borrower that is not a Subsidiary Guarantor in the Borrower or
any other Subsidiary of the Borrower; (iv) by Holdings, the Borrower or any
Subsidiary Guarantor in a Subsidiary that is not a Subsidiary Guarantor;
provided, however, that the aggregate outstanding amount of all such Investments
pursuant to this clause (iv) shall not exceed $15,000,000 at any time;
(f) loans or advances to employees of Holdings or any of its
Subsidiaries in the ordinary course of business; provided, however, that the
aggregate principal amount of all such loans and advances shall not exceed
$1,000,000 at any time;
(g) Investments constituting Guaranty Obligations permitted by
Section 9.06;
(h) Investments not otherwise permitted hereby; provided,
however, that the aggregate outstanding amount of all such Investments shall not
exceed $5,000,000 at any time; and
(i) Investments constituting payments relating to distribution
or similar agreements to the extent permitted by Section 9.15.
9.17 TRANSACTIONS WITH AFFILIATES. Neither Holdings nor the Borrower
shall, and neither shall permit any of its Subsidiaries to, except as otherwise
expressly permitted herein, do any of the following: (a) make any Investment in
an Affiliate of the Borrower that is not a Subsidiary of the Borrower, (b)
transfer, sell, lease, assign or otherwise dispose of any asset to any Affiliate
of the Borrower that is not a Subsidiary of the Borrower, (c) merge into or
consolidate with or purchase or acquire assets from any Affiliate of the
Borrower that is not a Subsidiary of the Borrower, (d) repay any Indebtedness to
any Affiliate of the Borrower that is not a Subsidiary of the Borrower or (e)
enter into any other transaction directly or indirectly with or for the benefit
of any Affiliate of the Borrower that is not a Guarantor (including guaranties
and assumptions of obligations of any such Affiliate), except for, in each case,
(i) transactions in the ordinary course of business on a basis no less favorable
to the Borrower or such Guarantor as would be obtained in a comparable arm's
length transaction with a Person not an Affiliate, (ii) salaries and other
director and employee compensation to officers or directors of the Borrower or
any of its Subsidiaries commensurate with current compensation levels as
reasonably adjusted from time to time and (iii) dividends and fees permitted
50
by the terms hereof and the transactions contemplated by this Agreement, the
Senior Credit Agreement and the Equity Documents.
9.18 COMPLIANCE WITH ERISA. Neither Holdings nor the Borrower shall
cause or permit to occur, and neither shall permit any of its Subsidiaries or
ERISA Affiliates to cause or permit to occur, (a) an event that could result in
the imposition of a Lien under Section 412 of the Code or Section 302 or 4068 of
ERISA or (b) ERISA Events that would have a Material Adverse Effect in the
aggregate over all such ERISA Events.
ARTICLE 10
PREPAYMENT
10.01 OPTIONAL PREPAYMENT. The Borrower may prepay outstanding
principal (together with accrued interest) on the Notes in accordance with the
"Optional Prepayment" provisions set forth in the Notes.
10.02 MANDATORY PREPAYMENT. The Borrower shall prepay outstanding
principal (together with accrued interest) on the Notes in accordance with the
"MANDATORY PREPAYMENT" provisions set forth in the Notes.
ARTICLE 11
MISCELLANEOUS
11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Purchasers,
acceptance of the Securities and payment therefor, or termination of this
Agreement.
11.02 TERMINATION. Prior to Closing, this Agreement may be terminated:
(a) by mutual written consent of all parties hereto;
(b) by either Purchasers or Holdings if the Closing shall not
have occurred on or prior to December 31, 2001, provided that the terminating
party is not in breach hereof.
In the event of termination of this Agreement prior to Closing
for any reason, Purchasers shall be promptly reimbursed by wire transfer of
immediately available funds to an account designated by Purchasers for the
reasonable out-of-pocket fees and expenses incurred by Purchasers in connection
with the Note Transaction, including, but not limited to, fees and expenses of
legal counsel, accounting and consulting fees and disbursements and travel and
other expenses reasonably incurred in connection with the preparation of this
Agreement and the other out-of-pocket expenses incurred by the Purchasers in
connection with the Note Transaction. In addition, Whitney Funds shall be
entitled to their transaction fee owing pursuant to that certain letter of
intent between Holdings and Whitney & Co. dated December 2, 2001.
51
11.03 NOTICES. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier (with
receipt confirmed), courier service or personal delivery:
(a) if to WMF, ▇▇▇▇▇▇▇ ▇▇ or ▇▇▇▇▇▇▇ LLC:
c/o Whitney & Co.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
with a copy to:
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
(b) if to Blackstone Partners:
The Blackstone Mezzanine Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to Blackstone Holdings:
The Blackstone Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
52
(d) if to Carlyle:
The Carlyle Group
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
(e) if to Oak Hill:
Oak Hill Securities Fund, L.P.
Park Avenue Tower
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
(f) if to ▇▇▇▇▇▇ Enterprises:
Oak Hill Asset Management, Inc.
Park Avenue Tower
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
And to:
▇▇▇▇▇▇ Enterprises
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(g) if to P & PK Limited Partnership:
Oak Hill Asset Management Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
32nd Floor
New York,
New York 10022
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
53
(h) if to the Borrower:
Aviall Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(i) if to Holdings:
Aviall, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight courier service; if mailed,
five Business Days after being deposited in the mail, postage prepaid; or if
telecopied, when receipt is acknowledged.
11.04 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of the parties
hereto. Subject to applicable securities laws, the Purchasers may assign any of
their respective rights under any of the Note Transaction Documents to any
Person and any holder of the Notes or the Mezzanine Equity may assign, in whole
or in part, the Notes or Mezzanine Equity to any Person. Neither the Borrower
nor Holdings may assign any of its rights, or delegate any of its obligations,
under this Agreement without the prior written consent of the Purchasers, and
any such purported assignment by Holdings without the written consent of the
Purchasers shall be void and of no effect. Except as provided in Article 7, no
Person other than the parties hereto and their successors and permitted assigns
is intended to be a beneficiary of any of the Note Transaction Documents.
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11.05 AMENDMENT AND WAIVER.
(a) No failure or delay on the part of any of the parties
hereto in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
parties hereto at law, in equity or otherwise.
(b) No amendment, supplement or modification of or to any
provision in this Agreement or any of the Notes, or any waiver of any such
provision or consent to any departure by any party from the terms of any such
provision may be made orally.
(c) Any (i) amendment, supplement or modification hereto or to
any of the Notes, (ii) consent hereunder or under any of the Notes or (iii)
waiver of any provision (collectively, "MODIFICATION") of this Agreement or of
any of the Notes shall be effective as to all holders of the Notes if given
pursuant to a written agreement signed by the Borrower, Holdings and the holders
of at least a majority of the principal amount of the Notes then outstanding
(the "REQUISITE NOTEHOLDERS"); provided, however, that no Modification with
respect to this Agreement or any of the Notes shall (1) decrease or forgive the
principal of such Note, (2) extend the originally scheduled time of payment of
the principal of such Note or the time of payment of interest on such Note, (3)
reduce, directly or indirectly, the rate of interest or amount of premium
payable on such Note, (4) permit any subordination of the principal or interest
of such Note, (5) release any Guarantor from any of its obligations under any of
the Guarantees or (6) amend, modify, or alter the provisions of Section 2(f) of
the Notes in a manner materially adverse to a holder of Notes, without the prior
written consent of the holder of each Note affected thereby.
(d) Any amendment, supplement or modification of or to any
provision of this Agreement or any Note, any waiver of any provision of this
Agreement or any Note, and any consent to any departure by any party from the
terms of any provision of this Agreement or any Note made or given in conformity
herewith, shall (i) apply to all of the parties hereto and their successors and
assigns and (ii) be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement, no notice to or demand on the Borrower or Holdings in any case
shall entitle the Borrower or Holdings to any other or further notice or demand
in similar or other circumstances.
11.06 SIGNATURES; COUNTERPARTS. Telefacsimile transmissions of any
executed original document and/or retransmission of any executed telefacsimile
transmission shall be deemed to be the same as the delivery of an executed
original. At the request of any party hereto, the other parties hereto shall
confirm telefacsimile transmissions by executing duplicate original documents
and delivering the same to the requesting party or parties. This Agreement may
be executed in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
11.07 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
55
11.08 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED IN
ACCORDANCE WITH, AND ENFORCED UNDER, THE LAW OF THE STATE OF
NEW YORK APPLICABLE
TO AGREEMENTS OR INSTRUMENTS ENTERED INTO AND PERFORMED ENTIRELY WITHIN SUCH
STATE.
11.09 DETERMINATIONS, REQUEST OR CONSENTS. Subject to the provisions of
Section 11.04, all determinations, requests, consents, waivers or amendments to
be made by the Purchasers in their respective opinions or judgments or with
their approval or otherwise pursuant to the Note Transaction Documents shall be
made with respect to the Notes, by the holder of such Note and (ii) with respect
to the Mezzanine Equity by the holder of such Mezzanine Equity.
11.10 JURISDICTION, JURY TRIAL WAIVER, ETC.
(a) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AGREES
THAT THE ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTES, THE MEZZANINE EQUITY OR ANY AGREEMENTS OR TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY MAY BE BROUGHT IN THE COURTS OF THE STATE OF
NEW
YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
NEW YORK
AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH
COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE
AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN
SECTION 11.02, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.
(b) EACH OF HOLDINGS AND ITS SUBSIDIARIES HEREBY WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES, THE MEZZANINE EQUITY OR
ANY OF THE OTHER NOTE TRANSACTION DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER
OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EACH OF
HOLDINGS AND ITS SUBSIDIARIES (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ▇▇▇▇▇▇▇ ▇▇, WMF, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ OR OAK HILL HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT ▇▇▇▇▇▇▇ ▇▇, WMF, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ OR OAK HILL
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(II) ACKNOWLEDGES THAT ▇▇▇▇▇▇▇ ▇▇, WMF, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ AND OAK HILL HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT, AND THE OTHER NOTE TRANSACTION
DOCUMENTS TO WHICH THEY ARE PARTY BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS CONTAINED HEREIN.
11.11 SEVERABILITY. If any one or more of the provisions contained in
this Agreement, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions of this Agreement. The parties hereto
further agree to replace such invalid, illegal or unenforceable
56
provision of this Agreement with a valid, legal and enforceable provision that
will achieve, to the extent possible, the economic, business and other purposes
of such invalid, illegal or unenforceable provision.
11.12 RULES OF CONSTRUCTION. Unless the context otherwise requires,
"or" is not exclusive, and references to sections or subsections refer to
sections or subsections of this Agreement.
11.13 ENTIRE AGREEMENT. This Agreement, together with the exhibits and
schedules hereto, the other Note Transaction Documents, and the letter agreement
dated as of December 21, 2001 from Holdings to the Purchasers and the
Confidentiality Agreements referred to in Section 11.20 hereof are intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement, together with
the exhibits and schedules hereto, and the other Note Transaction Documents and
the letter agreement dated as of December 21, 2001 from Holdings to the
Purchasers supersede all prior agreements and understandings between the parties
with respect to such subject matter, except the Confidentiality Agreements set
forth in Section 11.20 hereof.
11.14 CERTAIN EXPENSES. Holdings and the Borrower, jointly and
severally, agree to pay the expenses of the Purchasers for all fees, costs and
expenses, including, without limitation, the reasonable fees, costs and expenses
of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, incurred in connection with any amendment,
supplement, modification or waiver of or to any provision of this Agreement or
any other Note Transaction Document or documents relating to the Note
Transaction (including, without limitation, a response to a request by Holdings
or the Borrower for the Purchasers' consent to any action otherwise prohibited
hereunder or thereunder), or consent to any departure from, the terms of any
provision of this Agreement or such other documents.
11.15 PUBLICITY. Except as may be required by applicable law, none of
the parties hereto shall issue a publicity release or announcement or otherwise
make any public disclosure concerning this Agreement or the transactions
contemplated hereby, without prior approval by the other party hereto. If any
announcement is required by law to be made by any party hereto, prior to making
such announcement such party will deliver a draft of such announcement to the
other parties and shall give the other parties an opportunity to comment
thereon. Notwithstanding the foregoing, the Purchasers and their Affiliates may
list the name and logo of Holdings and the Borrower, and describe their business
in their marketing materials and may post such information on their website.
11.16 FURTHER ASSURANCES. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement, including without limitation, any
post-closing assignment(s) by the Purchasers of a portion of the Securities to a
Person not currently a party hereto.
11.17 OBLIGATIONS OF THE PURCHASERS. Each Purchaser's obligations and
the obligations of Holdings and the Borrower hereunder are subject to the
execution and delivery of this Agreement by the other Purchasers. The
obligations of each Purchaser shall be several and not joint and no Purchaser
shall be liable or responsible for the acts or omissions of any other Purchaser.
57
11.18 NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement and the other Note
Transaction Documents. In the event an ambiguity or question of intent or
interpretation arises under any provision of this Agreement or any Note
Transaction Document, this Agreement or such other Note Transaction Document
shall be construed as if drafted jointly by the parties thereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement or any other
Note Transaction Document. No knowledge of, or investigation, including without
limitation, due diligence investigation, conducted by, or on behalf of, any
Purchaser shall limit, modify or affect the representations set forth in Article
5 of this Agreement or the right of any Purchaser to rely thereon.
11.19 PAYMENT FOR CONSENT. None of Holdings, the Borrower or any
Affiliate of Holdings or the Borrower shall, directly or indirectly, pay or
cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Purchaser or subsequent holder of a Note for or as an
inducement to any consent, waiver, or amendment of any terms or provisions of
this Agreement or the Notes unless such consideration is offered to be paid to
all holders of Notes that so consent, waive or agree to amend in the time frame
set forth in solicitation documents relating to such consent, waiver or
agreement.
11.20 CONFIDENTIALITY. Without limiting the Purchasers' obligations
under the Confidentiality Agreement dated as of October 25, 2001 with Whitney &
Co., the Confidentiality Agreement dated as of October 26, 2001 with Carlyle,
and the Confidentiality Agreement dated as of November 2, 2001 with Blackstone
Mezzanine Advisors, LP, each of the Purchasers agrees to use reasonable
precautions to keep confidential, in accordance with customary procedures for
handling confidential information of the same nature and in accordance with safe
and sound commercial practices, any non-public information supplied to it by
Holdings or any of its Subsidiaries pursuant to this Agreement that is
identified by such Person as being confidential at the time the same is
delivered to such Purchaser; provided that nothing herein shall limit the
disclosure of such information (a) after such information shall have become
public other than through a violation of this Section 11.20, (b) to the extent
required pursuant to a subpoena, civil investigative demand (or similar
process), order, statute, rule or other legal requirement promulgated or impose
by a court or by a judicial, regulatory, self-regulatory or legislative body,
organization, agency or committee or otherwise in connection with any judicial
or administrative proceeding (including, without limitation, in response to oral
questions, interrogatories or request for information or documents), (c) to
counsel, auditors or accountants for any of the Purchasers, (d) to any
Governmental Authority having jurisdiction over any of the Purchasers (provided
prior notice is given to Holdings to the extent reasonably practicable), (d) to
any other Purchaser, (f) in connection with any litigation to which any one or
more of the Purchasers is a party, or in connection with the enforcement of
rights or remedies hereunder or under any of the Note Transaction Documents, (g)
to a Subsidiary or Affiliate, by provisions substantially similar to this
Section 11.20, (h) to any assignee or participant (or prospective assignee
pursuant to Section 11.04 that agrees to be bound by the terms hereof), or (i)
with the consent of Holdings. Each of the Purchasers agrees that it will not
buy, sell, trade or otherwise dispose of any Common Stock of Holdings during any
period that Holdings has instructed its directors, officers and employees that
any trading is prohibited, provided that such Purchaser has received notice in
the same manner as the directors, officers and employees of Holdings. Each of
the Purchasers agrees that it will not cause, induce or recommend to any of its
Restricted Affiliates to buy, sell, trade or otherwise dispose of any Common
Stock of Holdings during any period that Holdings has instructed its directors,
officers and employees that any trading is prohibited, provided that such
Purchaser has received notice in the same manner as directors, officers and
employees of
58
Holdings. If any of The Whitney Group or Blackstone Partners shall have notified
Holdings that it waives the right to (i) have a designee under Section 8.11 and
(ii) access to the information provided to such designee thereunder and to the
Purchaser as set forth herein, then the three preceding sentences of this
Section 11.20 shall cease to apply to such person for a period beginning on the
date that is fifteen (15) days following delivery of such notice to Holdings
until a date on which such Person notifies Holdings that they have completed any
contemplated transaction in Holdings' Common Stock and reinstate their rights
under Section 8.11. "Restricted Affiliate" means, with respect to any Person,
any Affiliate to whom such Person has disclosed confidential non public
information regarding Holdings or any of its Subsidiaries provided that such
Affiliate will cease to be a Restricted Affiliate at the time such information
ceases to be both non public and material.
11.21 PRIOR NOTIFICATION. Unless prohibited by applicable law or court
order, each of the Purchasers shall, prior to disclosure thereof, notify
Holdings of any request for disclosure of any confidential non-public
information by any governmental agency or representative thereof (other than any
such request in connection with an examination of the financial condition of
such Purchaser by such governmental agency) or pursuant to legal process, and
shall consult with Holdings on the advisability of taking legally available
steps to resist or narrow any such request. In the event that such steps are not
available or effective, or are deemed inadvisable by counsel to such Purchaser
(which may be in-house counsel to such Purchaser), as the case may be, or in the
event that Holdings waives compliance with the provisions of this Section 11.21,
such Purchaser, and/or its respective representatives, as the case may be, may
disclose to any tribunal only the portion of such non-public information which
it is advised by counsel (which may be in-house counsel to such Person) is
legally required to be disclosed, and shall exercise reasonable efforts to
obtain assurances that confidential treatment will be accorded such non-public
information. Such Purchaser shall be entitled to reimbursement from Holdings for
expense incurred by it, including the fees and expense of counsel, in connection
with any action taken pursuant to this Section 11.21.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective officers hereunto
duly authorized as of the date first above written.
AVIALL SERVICES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman, CEO and President
AVIALL, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman, CEO and President
▇. ▇. ▇▇▇▇▇▇▇ MEZZANINE FUND, L.P.
By: ▇▇▇▇▇▇▇ ▇▇, L.L.C.,
Its General Partner
By: /s/ ▇▇▇▇▇ ▇. O'▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. O'▇▇▇▇▇
Chief Financial Officer
WHITNEY PRIVATE DEBT FUND, L.P.
By: Whitney Equity Partners V, LLC,
Its General Partner
By: /s/ ▇▇▇▇▇ ▇. O'▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. O'▇▇▇▇▇
Chief Financial Officer
WHITNEY LIMITED PARTNER HOLDINGS, LLC
By: /s/ ▇▇▇▇▇ ▇. O'▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. O'▇▇▇▇▇
Chief Financial Officer
BLACKSTONE MEZZANINE PARTNERS L.P.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Managing Director
60
BLACKSTONE MEZZANINE HOLDINGS L.P.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Managing Director
CARLYLE HIGH YIELD PARTNERS, L.P.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇
Managing Director
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities GenPar, L.P., its
General Partner
By: Oak Hill Securities MGP, Inc., its
General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
Vice President
OAK HILL SECURITIES FUND II, L.P.
By: Oak Hill Securities GenPar II, L.P., its
General Partner
By: Oak Hill Securities MGP II, Inc., its
General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
Vice President
▇▇▇▇▇▇ ENTERPRISES, L.P.
By: Oak Hill Asset Management, Inc., as
advisor and attorney-in-fact to ▇▇▇▇▇▇
Enterprises, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
Vice President
61
P & PK LIMITED PARTNERSHIP
By: Oak Hill Asset Management, Inc., as
advisor and attorney-in-fact to P & PK
Limited Partnership
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
Vice President
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