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SubMicron Systems Corporation
$20,000,000 Principal Amount
of
12% Senior Subordinated Notes Due February 1, 2002
Warrants to Purchase 6,616,367 Shares
of Common Stock
PURCHASE AGREEMENT
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Dated November 26, 1997
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TABLE OF CONTENTS
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SECTION 1. PURCHASE AND SALE OF SECURITIES..................................................................... 1
1.1 Issue of Securities....................................................................... 1
1.2 Sale and Purchase of the Securities; the Closing.......................................... 2
1.3 Purchaser's Representations............................................................... 3
1.4 Failure to Close; Postponement............................................................ 4
1.5 Expenses.................................................................................. 4
1.6 Indemnification........................................................................... 5
1.7 Contribution.............................................................................. 6
1.8 Registration of Securities; etc........................................................... 7
1.9 Option to Purchase Incremental Senior Subordinated Notes
and Incremental Warrants.................................................................. 7
1.10 Further Action............................................................................ 8
SECTION 2. CLOSING CONDITIONS.................................................................................. 8
2.1 Opinion of Counsel........................................................................ 8
2.2 Representations and Warranties True; No Event of Default.................................. 8
2.3 Compliance with this Agreement............................................................ 8
2.4 Officers' Certificate..................................................................... 8
2.5 Your Purchase Permitted by Applicable Laws; Legal Investment.............................. 9
2.6 The Warrant Agreement..................................................................... 9
2.7 The Registration Rights Agreement......................................................... 9
2.8 Completion of Other Transactions.......................................................... 9
2.9 Proceedings Satisfactory.................................................................. 10
2.10 Consents and Permits...................................................................... 10
2.11 Security Agreements....................................................................... 10
2.12 Monitoring Agreement...................................................................... 10
2.13 Stockholders Agreement.................................................................... 10
2.14 Amendment of Other Agreements............................................................. 10
2.15 Financial Condition; Sources and Uses of Funds............................................ 10
SECTION 3. HOLDER'S SPECIAL RIGHTS............................................................................. 11
3.1 Delivery Expenses......................................................................... 11
3.2 Issue Taxes............................................................................... 11
3.3 Direct Payment............................................................................ 11
3.4 Lost, etc. Securities..................................................................... 12
3.5 Delivery of Financial Statements and Reports.............................................. 12
3.6 Taxes..................................................................................... 13
SECTION 4. REPRESENTATIONS AND WARRANTIES...................................................................... 16
4.1 Organization, Standing and Qualification.................................................. 16
4.2 Capitalization............................................................................ 16
4.3 Authorization of Agreement and Other Documents............................................ 17
4.4 No Violation.............................................................................. 18
4.5 Use of Proceeds........................................................................... 18
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4.6 No Default................................................................................ 18
4.7 Outstanding Indebtedness; Senior Indebtedness; Preferred Stock; Liens..................... 18
4.8 Financial Statements...................................................................... 19
4.9 No Material Adverse Change................................................................ 19
4.10 Full Disclosure........................................................................... 19
4.11 Litigation................................................................................ 20
4.12 Title to and Condition of Properties...................................................... 20
4.13 Taxes..................................................................................... 20
4.14 ERISA..................................................................................... 21
4.15 Compliance with Laws...................................................................... 21
4.16 Third Party Consents...................................................................... 22
4.17 No Violation of Regulations of
Board of Governors of Federal Reserve System.............................................. 22
4.18 Private Offering.......................................................................... 22
4.19 Governmental Regulations.................................................................. 23
4.20 Brokers................................................................................... 23
4.21 Environmental Compliance.................................................................. 23
4.22 Intellectual Property..................................................................... 24
4.23 Solvency.................................................................................. 24
4.24 Labor Relations........................................................................... 24
4.25 Material Contracts........................................................................ 25
4.26 Survival of Representations and Warranties................................................ 25
SECTION 5. COVENANTS........................................................................................... 25
5.1 Payment of Notes.......................................................................... 25
5.2 SEC Reports, Financial Reports............................................................ 25
5.3 Compliance Certificate.................................................................... 26
5.4 Stay, Extension and Usury Laws............................................................ 26
5.5 Limitation on Restricted Payments......................................................... 26
5.6 Corporate Existence....................................................................... 27
5.7 Same Business............................................................................. 27
5.8 Taxes..................................................................................... 27
5.9 Investment Company Act; United States Real
Property Holding Corporation.............................................................. 27
5.10 No Merger, etc............................................................................ 27
5.11 Limitation on Additional Indebtedness..................................................... 28
5.12 Limitation on Transactions With Affiliates................................................ 28
5.13 Restrictions on Liens..................................................................... 28
5.14 Sale of Assets............................................................................ 29
5.15 Ownership of Subsidiaries................................................................. 29
5.16 Insurance................................................................................. 29
5.17 Minimum Interest Coverage Ratio........................................................... 30
5.18 Minimum EBITDA............................................................................ 30
5.19 Issuances of Capital Stock................................................................ 31
5.20 Compensation; Management Fees............................................................. 31
5.21 Employee Plans............................................................................ 32
5.22 ERISA Notices............................................................................. 32
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5.23 Maintenance of Net Worth.................................................................. 32
5.24 Limitation on Capital Expenditures........................................................ 33
5.25 Maximum Lease Payments.................................................................... 33
5.26 Inconsistent Agreements................................................................... 33
5.27 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.................................................................... 34
5.28 Limitation on Acquisitions................................................................ 34
5.29 Limitation on Research and Development Expenditures....................................... 34
5.30 Compliance with Laws...................................................................... 34
5.31 Payment of BOC Note....................................................................... 35
SECTION 5. COVENANTS........................................................................................... 35
6.1 Events of Default......................................................................... 35
6.2 Acceleration of Notes..................................................................... 37
6.3 Other Remedies............................................................................ 37
6.4 Waiver of Past Defaults................................................................... 37
6.5 Rights of Holders to Receive Payment...................................................... 37
6.6 Undertaking for Costs..................................................................... 37
SECTION 7. DEFINITIONS......................................................................................... 38
SECTION 8. MISCELLANEOUS....................................................................................... 46
8.1 Notices................................................................................... 46
8.2 Successors and Assigns.................................................................... 46
8.3 Amendment and Waiver...................................................................... 46
8.4 Counterparts.............................................................................. 47
8.5 Headings.................................................................................. 47
8.6 Governing Law............................................................................. 47
8.7 Entire Agreement.......................................................................... 47
8.8 Severability.............................................................................. 47
8.9 Confidentiality........................................................................... 47
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SCHEDULE 1.2 Company Bank Account
SCHEDULE 1.3(c) Employee Pension Benefit Plans
SCHEDULE 4.1 Organization, Standing and Qualification
SCHEDULE 4.2 Capital Stock; Warrants and Options; Registration Rights
SCHEDULE 4.7 Indebtedness and Preferred Stock
SCHEDULE 4.11 Litigation
SCHEDULE 4.14 Other Employee Benefit Plans
SCHEDULE 4.16 Third-Party Consents
SCHEDULE 4.21 Environmental Compliance
SCHEDULE 4.22 Intellectual Property
SCHEDULE 4.25 Material Contracts
SCHEDULE 5.20 Management Fees
SCHEDULE 5.26 Protected Agreements
SCHEDULE 5.27 Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries
SCHEDULE 7.01 Permitted Investments
SCHEDULE 7.02 Permitted Liens
ANNEX A NOTES
ANNEX B WARRANT AGREEMENT
ANNEX C SUBSIDIARY GUARANTEE
ANNEX D REGISTRATION RIGHTS AGREEMENT
ANNEX E OPINION OF COUNSEL TO COMPANY
ANNEX F SECURITY AGREEMENTS
ANNEX G MONITORING AGREEMENT
ANNEX H STOCKHOLDERS AGREEMENT
ANNEX I FINANCIAL STATEMENTS
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SubMicron Systems Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
November 26, 1997
To Each of the Purchasers Named
on the Signature Pages Hereof
Ladies and Gentlemen:
SubMicron Systems Corporation, a Delaware corporation (the
"Company"), ▇▇▇▇▇▇ agrees with you as follows:
SECTION 1. PURCHASE AND SALE OF SECURITIES
1.1 Issue of Securities
On or before the Closing (as hereinafter defined), the Company
will have authorized the issuance of its 12% Senior Subordinated Notes due
February 1, 2002 (the "Senior Subordinated Notes"), in the aggregate principal
amount of $20,000,000, the issuance, at the option of the Company, of Secondary
Notes (as defined below) and the issuance, at the option of the Purchasers, of
up to $4,000,000 of additional Senior Subordinated Notes (the "Incremental
Notes") due February 1, 2002 as provided in Section 1.9 hereof, each to be
issued in the form attached hereto as Annex A. The Senior Subordinated Notes,
the Secondary Notes and the Incremental Notes are collectively referred to
herein as the "Notes."
On or before the Closing, the Company will have authorized the
issuance of its warrants (the "Initial Warrants") to purchase an aggregate of
6,616,367 shares of the Common Stock of the Company, $0.0001 par value ("Common
Stock"), and the issuance of Incremental Warrants (as defined in Section 1.9
hereof), pursuant to a Warrant Agreement in the form attached hereto as Annex B
(the "Warrant Agreement"). The Initial Warrants and the Incremental Warrants are
collectively referred to herein as the "Warrants."
Capitalized terms used herein without definition shall have
the meanings specified in Section 7 hereof. The Notes, the Subsidiary Guarantees
(as defined below) and the Warrants are collectively referred to herein as the
"Securities."
Each Note will be in the principal amount of $100,000 or
integral multiples of $50,000 in excess thereof, except that Secondary Notes may
be issued in denominations of other than $100,000; and will be dated as provided
in Section 1.2 or 1.9 hereof, as applicable, or, in the case of Secondary Notes,
will be dated as of the interest payment date on which such Secondary Notes were
issued. The Notes will be guaranteed by the Subsidiary Guarantors, each of whom
shall execute a guarantee in the form attached hereto as Annex C (the
"Subsidiary Guarantees").
The Company may, at its option, elect to pay interest on the
Notes in additional Notes ("Secondary Notes") in lieu of the payment of up to
one-half of the interest in cash as provided in the
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Notes. Each issuance of Secondary Notes in lieu of any cash interest payment on
the Notes shall be made pro rata with respect to the outstanding Notes, and the
Company shall have the right to aggregate amounts of interest payable in the
form of Secondary Notes to a Holder of outstanding Notes and issue to such
Holder a single Secondary Note in payment thereof.
Each Warrant will be dated as provided in Section 1.2 hereof
and will otherwise be in the form of the Warrant attached as Exhibit A to the
Warrant Agreement. The Warrants will be exercisable, in the manner provided in
the Warrant Agreement and the Warrants, for a number of shares of Common Stock
as provided for in the Warrant Agreement (the "Warrant Shares" and together with
the Warrants, the "Equity Securities"). You will have certain registration
rights with respect to the Warrant Shares as provided in a Registration Rights
Agreement in the form attached hereto as Annex D (the "Registration Rights
Agreement").
1.2 Sale and Purchase of the Securities; the Closing
In reliance upon your representations made in Section 1.3
hereof and subject to the terms and conditions set forth herein and in the other
Documents, the Company hereby agrees to sell to you the Securities set forth
below your name on your signature page hereto, at a purchase price of $669.18
per $1,000 principal amount of Notes and $1.00 per Initial Warrant. In reliance
upon the representations and warranties of the Company contained herein and in
the other Documents, and subject to the terms and conditions set forth herein
and therein, you hereby severally agree to purchase such Securities from the
Company. Simultaneously with the execution of this Agreement, the Company is
executing a separate purchase agreement (the "Other Purchase Agreement")
identical to this Agreement with the other Purchaser (the "Other Purchaser")
listed on the signature pages hereof, pursuant to which the Company will issue
and sell Securities to such Other Purchaser in the respective aggregate amounts
set forth below its name on the signature pages hereof for the purchase price
set forth thereon. The sale of Securities to you and the Other Purchaser will be
separate sales, and this Agreement and the Other Purchase Agreement will be
separate agreements; however, references to this "Agreement" shall include the
Other Purchase Agreement, together with all modifications hereof and thereof,
where the context so permits.
You and the Company agree that, for purposes of Section
1273(b) and pursuant to Section 1273(c)(2) of the Code, the "issue price" of
each Note of $100,000 principal amount is equal to its purchase price as
specified above.
The sale and purchase of the Securities shall take place at a
closing (the "Closing") at the offices of Cozen and ▇'▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ at 10:00 a.m. on November 26, 1997, or such
other business day on or prior to December 31, 1997, as may be agreed upon by
you, the Other Purchaser and the Company (the "Closing Date"). At the Closing,
the Company will deliver to you the Securities to be purchased by you (in such
permitted denomination or denominations and registered in your name or the name
of such nominee or nominees as you may request), dated the Closing Date, against
payment of the purchase price therefor by intra-bank or federal funds bank wire
transfer of same day funds to such bank account as the Company shall designate
at least two Business Days prior to the Closing and which is identified on
Schedule 1.2 hereto. The Company shall have delivered to you or to such other
persons as you shall direct, prior to Closing, a check dated the Closing Date in
the amount of any out-of-pocket expenses for which you or your investment
advisor are entitled to reimbursement pursuant to Section 1.5 hereof, including,
without limitation, the fees and expenses of your counsel, or at your election
shall authorize you to deduct such amount from the purchase price for the
Securities, provided that you agree to provide the Company with a statement
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describing any amounts to be so paid at least one Business Day prior to the
Closing. Additionally, the Company shall deliver to you or to such other persons
as you shall direct on your signature page hereto, at the Closing, a check dated
the Closing Date and representing your pro rata interest (based on the amount of
Securities to be purchased by you) in the aggregate closing fee of $400,000 to
be paid to the Purchasers by the Company (offset by the $65,000 underwriting
deposit previously paid to you by the Company).
1.3 Purchaser's Representations
(a) You represent that you are purchasing the Securities to be
purchased by you solely for your own account and not as nominee or agent for any
other person and not with a view to, or for offer or sale in connection with,
any distribution thereof (within the meaning of the Securities Act) that would
be in violation of the securities laws of the United States of America or any
state thereof, without prejudice, however, to your right at all times to sell or
otherwise dispose of all or any part of said Securities pursuant to a
registration statement under the Securities Act or pursuant to an exemption from
the registration requirements of the Securities Act, and subject, nevertheless,
to the disposition of your property being at all times within your control.
You further represent that you are knowledgeable,
sophisticated and experienced in business and financial matters; that you have
previously invested in securities similar to the Securities and fully understand
the limitations on transfer described in Section 1.3(b) hereof and the
restrictions on sales and other dispositions in this Agreement and the
Documents; that you are able to bear the economic risk of your investment in the
Securities and are presently able to afford the complete loss of such
investment; that you are an "accredited investor" as defined in Regulation D
promulgated under the Securities Act; and that you have been afforded access to
information about the Company and the Company's financial condition, results of
operations, business, property, management and prospects sufficient to enable
you to evaluate your investment in the Securities. You acknowledge that you have
conducted your own analysis of the Company's financial condition and other
foregoing factors and that you have not relied upon the analysis of the Other
Purchaser in determining to make an investment in the Securities.
You further represent that you are a limited partnership or
limited liability company, as applicable, duly formed, validly existing and in
good standing under the laws of your jurisdiction of formation and that you have
all requisite power and authority to enter into and perform all of your
obligations under the Documents and to carry out the transactions contemplated
hereby and thereby.
You further represent that you have taken all actions
necessary to authorize the execution of, and to perform all of your obligations
under, the Documents and to consummate the transactions contemplated hereby and
thereby; that the Documents are legal, valid and binding obligations of your
limited partnership or limited liability company, as applicable, enforceable
against you in accordance with their respective terms, except for (a) the effect
thereon of bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting the rights of creditors generally and (b)
limitations imposed by federal or state law or equitable principles upon the
specific enforceability of any of the remedies, covenants or other provisions
thereof and upon the availability of injunctive relief or other equitable
remedies.
You further represent that neither the execution or delivery
of the Documents, nor the performance of your respective obligations under the
Documents, nor the consummation of the transactions contemplated hereby and
thereby will (i) violate any provision of your respective charter documents,
(ii) violate any statute, law, rule or regulation or any judgment, decree,
order, regulation or
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rule of any court or governmental authority to which you or any of your
respective properties may be subject or (iii) violate or be in conflict with, or
constitute a default under, or permit the termination of, or require the consent
of any Person under any material agreement to which you are subject or may be
bound, other than such violations, conflicts, defaults, terminations or such
failures to obtain consents, which could not reasonably be expected to result in
a Material Adverse Effect.
(b) If you desire to sell or otherwise dispose of all or any
part of the Securities or any Warrant Shares (other than pursuant to Rule 144 or
an effective registration statement under the Securities Act), if requested by
the Company, you will deliver to the Company an opinion of counsel, reasonably
satisfactory in form and substance to the Company, that an exemption from
registration under the Securities Act is available. The Company will reimburse
you for the reasonable fees and expenses incurred by you in obtaining any such
opinion of counsel. Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Securities
Act, the Securities and any Warrant Shares (and all securities issued in
exchange therefor or substitution thereof) shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER SAID ACT
EXCEPT PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS."
In addition, all Warrant Shares will bear any legend required by the
Stockholders Agreement.
(c) You represent that no part of the funds to be used to
purchase the Securities to be purchased by you constitutes assets allocated to
any trust which contains the assets of any employee pension benefit plan listed
on Schedule 1.3(c) (being pension benefit plans with respect to which the
Company or any corporation considered an affiliate of the Company within the
meaning of Section 407(d)(7) of ERISA is a party in interest or disqualified
person). The representation made by you in the preceding sentence is made in
reliance upon your review of the list of employee pension benefit plans set
forth on Schedule 1.3(c). As used in this Section 1.3(c), the terms "employee
pension benefit plan," "separate account" and "party in interest" shall have the
meanings assigned to such terms in Section 3 of ERISA and the terms
"disqualified person" and "prohibited transaction" shall have the meanings
assigned to such terms in Section 4975 of the Code.
(d) Except for ▇▇▇▇ & Co., Inc., the Purchasers have not dealt
with any broker, finder, commission agent or other Person (a "Broker") in
connection with the purchase of the Securities and the transactions contemplated
by this Agreement and have incurred no obligation to pay any broker's or
finder's fee or commission or similar payment (a "Broker's Fee") in connection
with such transaction (other than the fee of $1,300,000 payable by the Company
to ▇▇▇▇ & Co., Inc., as provided in Section 4.20 hereof).
1.4 Failure to Close; Postponement
If the Closing fails to occur on or before December 31, 1997,
either party shall, at its election and notwithstanding anything to the contrary
in this Agreement, be relieved of all further obligations under this Agreement
without thereby waiving any rights it may have by reason of such nonfulfillment
or failure; provided that, nothing in this Section 1.4 shall operate to relieve
the Company from any of its obligations under Section 1.5 and 1.6 hereof.
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1.5 Expenses
Whether or not the Securities are sold, the Company agrees to
pay or reimburse all expenses reasonably incurred by you relating to this
Agreement, including but not limited to:
(a) the cost of preparing and reproducing this Agreement, the
Securities, the other Documents and any other documents contemplated hereby or
thereby;
(b) all reasonable out-of-pocket expenses incurred by you or
your investment advisor in connection with the transactions contemplated by this
Agreement and the other documents referred to in clause (a) above, including,
without limitation, travel and lodging expenses and all costs incurred in
connection with your review of the Company's business and operations;
(c) to the extent not specifically included in subparagraph
(b) immediately above, the reasonable fees and other charges of your counsel,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, in connection herewith;
(d) the cost of delivering to your home office or the office
of your designee, insured to your satisfaction, the Securities, the other
Documents and any other documents contemplated hereby or thereby;
(e) any reasonable out-of-pocket fees and expenses (including
the reasonable fees and expenses of counsel) in connection with any registration
or qualification of the Securities required in connection with the offer and
sale of the Securities at the Closing pursuant to this Agreement under the
securities or "blue sky" laws of any jurisdiction requiring such registration or
qualification or in connection with obtaining any exemptions from such
requirements;
(f) all your reasonable out-of-pocket expenses (including the
reasonable fees and expenses of counsel) relating to any amendment,
modification, waiver, consent or preservation or enforcement of rights under
this Agreement and the other Documents and any other documents contemplated
hereby or thereby; and
(g) all other reasonable expenses, including counsel's fees,
incurred by the Company in connection with the transactions contemplated by this
Agreement.
1.6 Indemnification
In addition to any and all obligations to indemnify you
pursuant to that certain letter agreement, dated November 6, 1997, by and
between you and the Company and pursuant to the Registration Rights Agreement or
any of the other Documents, each party hereto (the "Indemnifying Party") hereby
agrees, without limitation as to time, to indemnify the other party and its
Agents and Affiliates (collectively, the "Indemnified Parties") against, and
hold it and them harmless from, all losses, claims, damages, liabilities and
costs (including the costs of preparation and reasonable attorneys' fees and
expenses) (collectively, "Losses") incurred by it or them and arising out of or
in connection with a breach of any representation, warranty, covenant or
agreement in this Agreement or the other Documents (or any other document or
instrument executed herewith or pursuant hereto or thereto), whether or not the
transactions contemplated by this Agreement are consummated and whether or not
any Indemnified Party is a formal party to any proceeding, other than to the
extent, and only to the extent, that any Losses directly result from action on
the part of any Indemnified Party which is finally judicially determined to
constitute either gross negligence or willful misconduct. The Indemnifying Party
agrees to reimburse any
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Indemnified Party promptly for all such Losses as they are incurred by such
Indemnified Party. The obligations of the Indemnifying Party to each Indemnified
Party hereunder shall be separate obligations and the Indemnifying Party's
liability to any such Indemnified Party hereunder shall not be extinguished
solely because any other Indemnified Party is not entitled to indemnity
hereunder. The obligations of the Indemnifying Party under this Section 1.6
shall survive the payment or prepayment of the Notes, at maturity, upon
acceleration, redemption or otherwise, the exercise of the Warrants purchased by
you, the redemption or repurchase of any Equity Securities, any transfer of the
Securities by you, and the termination of this Agreement and the other
Documents.
In case any action shall be brought against any Indemnified
Party with respect to which indemnity may be sought against the Indemnifying
Party hereunder, such Indemnified Party shall promptly notify the Indemnifying
Party in writing and the Indemnifying Party shall, if it so desires, assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party and payment of all reasonable fees and expenses. The
failure to so notify such Indemnifying Party shall not affect any obligation it
may have to any Indemnified Party under this Agreement or otherwise except to
the extent it is materially adversely affected by such failure. Each Indemnified
Party shall have the right to employ separate counsel in such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Party unless: (i) the Indemnifying
Party has agreed in writing to pay such expenses; or (ii) the Indemnifying Party
has failed to assume the defense and employ counsel or (iii) the named parties
to any such action (including any impleaded parties) include any Indemnified
Party and such Indemnifying Party, and such Indemnified Party shall have been
advised by outside counsel that there may be one or more legal defenses
available to it which are inconsistent with or additional to those available to
the Indemnifying Party, provided that, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel in the
circumstances described in clauses (i), (ii) or (iii) above, the Indemnifying
Party shall not have the right to assume the defense of such action or
proceeding; provided, however, that the Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings arising out of the same general
allegations or circumstances, be responsible hereunder for the fees and expenses
of more than one such firm of separate counsel (in addition to any necessary
local counsel), which counsel shall be designated by such Indemnified Party. The
Indemnifying Party shall not be liable for any settlement of any such action
effected without its written consent (which shall not be unreasonably withheld).
The Indemnifying Party agrees that it will not, without the Indemnified Party's
prior consent, which shall not be unreasonably withheld, settle or compromise
any pending or threatened claim, action or suit in respect of which
indemnification or contribution may be sought hereunder unless the foregoing
contains an unconditional release of the Indemnified Parties from all liability
and obligation arising therefrom.
1.7 Contribution
If the indemnification provided for in Section 1.6 is
unavailable to any Indemnified Party in respect of any Losses referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Persons,
shall have an obligation to contribute to the amount paid or payable by such
Persons as a result of such Losses in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party, its subsidiaries and/or
any other Person or Persons (other than Indemnified Parties) and the Indemnified
Parties in connection with the actions which resulted in such Losses as well as
any other relevant equitable considerations. The amount paid or payable by any
such Person as a result of the Losses referred to above shall be deemed to
include, subject to the limitations set forth in Section 1.6, any legal or other
fees or expenses reasonably incurred by such Person in connection with any
investigation, lawsuit or legal or administrative action or proceeding.
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The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 1.7 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
1.8 Registration of Securities; etc.
(a) The Company shall maintain a register for the Securities
in which it shall provide for the registration and transfer of the Securities.
(b) Upon surrender for registration of transfer of any Note or
Warrant, the Company, at its expense, shall execute and deliver, in the name of
the designated transferee or transferees, one or more new Notes or Warrant
certificates of the same type, and of a like aggregate principal amount or
number of shares.
(c) Notes or Warrant certificates may be exchanged at the
option of any Holder thereof for Notes or Warrant certificates of a like
aggregate principal amount or number of shares, but in different denominations.
Whenever any Notes or Warrant certificates are so surrendered for exchange, the
Company, at its expense, shall execute and deliver the Notes or Warrant
certificates which the holder making the exchange is entitled to receive.
(d) All Notes or Warrant certificates issued upon any
registration of transfer or exchange of such Notes or Warrant certificates shall
be the legal and valid obligations of the Company, evidencing the same
interests, and entitled to the same benefits, as Notes or Warrants surrendered
upon such registration of transfer or exchange.
(e) Every Note or Warrant certificate presented or surrendered
for registration of transfer or exchange shall (if so required by the Company)
be duly endorsed or shall be accompanied by a written instrument of transfer in
form satisfactory to the Company duly executed by the Holder thereof or its
attorney duly authorized in writing.
1.9 Option to Purchase Incremental Senior Subordinated Notes and
Incremental Warrants
(a) If there occurs any payment default or borrowings in
excess of the borrowing base, which in either case is continuing under the
Senior Credit Facility at any time on or prior to the second anniversary of the
Closing Date, the Purchasers shall have the option (subject to the Company's
right to cure, within seven days, borrowings in excess of the borrowing base),
exercisable from time to time by the delivery of written notice to the Company
(the "Incremental Purchase Notice") and subject to the conditions set forth in
subsection (b) below, to purchase an aggregate principal amount of newly-issued
Incremental Notes, allocated in accordance with the amounts set forth below each
Purchasers' name on the signature pages hereto, up to or equal to the lesser of
(i) $4,000,000 and (ii) the greater of (A) the amount of such payment default or
borrowings in excess of the borrowing base and (B) $1,000,000, and to purchase
up to that number of Incremental Warrants equal to the product of (x) 2,878,459
multiplied by (y) a fraction, the numerator of which is the actual principal
amount of Incremental Notes and the denominator of which is $4,000,000 (the
"Incremental Warrants") (allocated ratably in accordance with the principal
amount of Incremental Notes so purchased); provided that, if either Purchaser
fails to exercise such option in full, the other Purchaser may exercise such
option as to
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the principal amount of Incremental Notes and Incremental Warrants not purchased
by the first Purchaser. Any such issuance will be subject to all of the
conditions to Closing set forth in this Agreement, including the delivery of an
opinion of counsel and officers' certificates as set forth in Section 2 hereof,
and will be consummated not less than 10 days following the delivery of the
Incremental Purchase Notice. The purchase option described above shall be
exercisable upon any payment default or borrowing in excess of the borrowing
base, provided that the aggregate principal amount of Notes purchased in all
such exercises may not exceed the $4,000,000 limit set forth above.
(b) In no event shall the Purchasers have any option to
purchase any Incremental Notes or Incremental Warrants unless and until all
applicable requirements of law and the applicable rules and regulations of any
stock exchange or the Nasdaq Stock Market have been satisfied. Without limiting
the generality of the foregoing, Purchasers may not exercise such purchase
option unless: (i) the Company has received written confirmation from the
Company's principal stock exchange or the Nasdaq Stock Market that the issuance
of such Incremental Notes and Incremental Warrants will not require stockholder
approval under such organization's rules and regulations or (ii) stockholder
approval for such issuance has been obtained. The Company agrees to use its
reasonable best efforts to cause all of the conditions relating to the issuance
of the Incremental Notes and Incremental Warrants to be satisfied.
1.10 Further Action
During the period from the date hereof to the Closing Date,
the Company shall use its best efforts, and shall take all action necessary or
appropriate, to cause its representations and warranties contained in Section 4
hereof to be true as of the Closing Date, after giving effect to the
transactions contemplated by this Agreement, as if made on and as of such date.
SECTION 2. CLOSING CONDITIONS
Your several obligations to purchase and pay for the
Securities to be delivered to you at the Closing shall be subject to the
satisfaction of the following conditions on or before the Closing Date:
2.1 Opinion of Counsel
You shall have received a favorable opinion, dated the Closing
Date and addressed to you, from ▇▇▇▇▇ and ▇'▇▇▇▇▇▇, counsel for the Company, in
form and substance satisfactory to you, as to the matters set forth on Annex E
to this Agreement. In rendering such opinion, such counsel may rely as to
factual matters upon certificates or other documents furnished by officers and
directors of the Company (copies of which shall be delivered to you) and by
government officials, and upon such other documents as such counsel deem
appropriate as a basis for their opinion. Such counsel may specify the
jurisdictions in which they are admitted to practice and that they are not
admitted to practice in any other jurisdiction and are not experts in the law of
any other jurisdiction.
2.2 Representations and Warranties True; No Event of Default
The representations and warranties of the Company contained in
Section 4 hereof shall be true in all material respects at and as of the Closing
Date, after giving effect to the transactions contemplated by this Agreement, as
if made on and as of such date. There shall exist at and as of the Closing Date
(after giving effect to the transactions contemplated by this Agreement) no
Default or Event of Default.
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2.3 Compliance with this Agreement
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained herein, in the
other Documents and any other document contemplated hereby or thereby which are
required to be performed or complied with by the Company on or before the
Closing Date.
2.4 Officers' Certificate
You shall have received a certificate or certificates, dated
the Closing Date and signed by each of the Chief Executive Officer and the Chief
Financial Officer of the Company, certifying that the conditions set forth in
Sections 2.2, 2.3, 2.6, 2.7, 2.8, 2.10, 2.11, 2.12 and 2.13, hereof are
satisfied on and as of such date and further certifying as to such other matters
as you may request in the exercise of your reasonable discretion.
2.5 Your Purchase Permitted by Applicable Laws; Legal Investment
Your purchase of and payment for the Securities to be
purchased by you (a) shall not be prohibited by any applicable law or
governmental regulation (including, without limitation, Regulations G, T, U and
X of the Board of Governors of the Federal Reserve System), (b) shall not
subject you to any penalty or, in your reasonable judgment, other onerous
condition under or pursuant to any applicable law or governmental regulation,
and (c) shall be permitted by the laws and regulations of the jurisdictions to
which you are subject.
The Company shall have delivered to you factual certificates
or other evidence requested by you, in form and substance satisfactory to you,
to enable you to establish compliance with this condition.
2.6 The Warrant Agreement
The Company shall have entered into the Warrant Agreement, and
you shall have received an original, duly executed by the Company, of the
Warrant Agreement.
2.7 The Registration Rights Agreement
The Company shall have entered into the Registration Rights
Agreement, and you shall have received an original, duly executed by the
Company, of the Registration Rights Agreement.
2.8 Completion of Other Transactions
Simultaneously with the sale to you of the Securities to be
purchased by you at the Closing:
(a) The Company and the Senior Lender shall have
entered into the Senior Credit Facility providing for revolving credit
availability of up to $15,000,000.
(b) The Senior Lender shall have entered into the
Subordination Agreements which shall be in such form and shall contain
such terms and conditions as are reasonably satisfactory to you.
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(c) The Other Purchaser shall have consummated its
purchase of Securities pursuant to the Other Purchase Agreement. If the
Other Purchaser shall not have consummated such purchase on the Closing
Date, the Company shall immediately refund to you any portion of the
purchase price for the Securities previously paid by you.
Counterparts, conformed as executed, of all other documents
delivered at the Closing, shall be delivered to you.
2.9 Proceedings Satisfactory
All proceedings taken in connection with the sale of the
Securities, the transactions contemplated hereby, and all documents and papers
relating thereto, shall be reasonably satisfactory to you. You and your counsel
shall have received copies of such documents and papers as you or they may
reasonably request in connection therewith, or as a basis for the Closing
opinions, all in form and substance satisfactory to you. Any document annexed to
this Agreement or any other document contemplated by this Agreement not approved
by you in writing as to form and substance on the date this Agreement is
executed shall be satisfactory in form and substance to you on or before the
Closing.
2.10 Consents and Permits
The Company shall have received all consents, approvals, and
authorizations and sent or made all notices, filings, registrations and
qualifications disclosed or required to be disclosed on Schedule 4.16.
2.11 Security Agreements
The Company and the Subsidiary Guarantors, as applicable,
shall have entered into the Security Agreements in the forms attached hereto as
Annex F and you shall have received an original, duly executed by the Company or
the Subsidiary Guarantors, as applicable, of the Security Agreements. The
Company and the Subsidiary Guarantors shall also have delivered all financing
statements, lien releases and other items you may reasonably request in
connection with such agreement and the perfection of the liens granted
thereunder.
2.12 Monitoring Agreement
The Company and the Purchasers shall have entered into a
Monitoring Agreement in the form attached hereto as Annex G, and you shall have
received an original, duly executed by the Company, of the Monitoring Agreement.
2.13 Stockholders Agreement
The Stockholders Agreement shall have been entered into by the
parties thereto in the form attached hereto as Annex H, and you shall have
received an original, duly executed by the parties thereto, of the Stockholders
Agreement.
2.14 Amendment of Other Agreements
The Company shall have entered into, and shall have obtained
the consent of all parties whose rights are affected by, amendments to existing
documents and agreements applicable to the
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Company and its Subsidiaries, including without limitation existing registration
rights agreements, as may be reasonably requested by Purchasers in connection
with the transactions contemplated hereby.
2.15 Financial Condition; Sources and Uses of Funds
You shall have received from ▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial
Officer of the Company, (a) certificates of financial condition for the Company
after giving effect to the issuance of the Securities, the application of the
proceeds therefrom, and the other transactions contemplated hereby, which
certificates shall be satisfactory to you and your counsel, and (b) a detailed
statement, dated the Closing Date, of sources and uses of funds from your
investment in the Securities and the other transactions being undertaken by the
Company concurrently herewith.
SECTION 3. HOLDER'S SPECIAL RIGHTS
The provisions of this Section 3 (other than Section 3.3(b))
shall apply, notwithstanding anything to the contrary in this Agreement, with
respect to Transfer Restricted Securities only, provided, however, that Section
3.6 shall apply only to Notes which are Transfer Restricted Securities.
3.1 Delivery Expenses
If a Holder surrenders any Security to the Company for any
reason, the Company agrees to pay the cost of delivering to or from such
▇▇▇▇▇▇'s home office or to or from the office of such ▇▇▇▇▇▇'s designee from or
to the Company, as the case may be, insured to such ▇▇▇▇▇▇'s reasonable
satisfaction, the surrendered Security and each Security issued in substitution
or replacement for the surrendered Security.
3.2 Issue Taxes
Notwithstanding anything to the contrary in Section 3.6, the
Company agrees to pay all taxes (other than taxes in the nature of income,
franchise or gift taxes) in connection with the issuance, sale, delivery or
transfer by the Company to the Purchasers of the Securities and the execution
and delivery of the Documents and any other agreements and instruments
contemplated thereby and any modification of any of such Securities, Documents
or such other agreements and instruments and will save you harmless without
limitation as to time against any and all liabilities with respect to all such
taxes. The obligations of the Company under this Section 3.2 shall survive the
payment or prepayment of the Securities, the exercise of the Warrants and the
termination of this Agreement.
3.3 Direct Payment
(a) The Company will pay or cause to be paid all amounts
payable with respect to any Note (without any presentment of such Note and
without any notation of such payment being made thereon) by crediting (before
1:00 p.m., New York time), by federal funds bank wire transfer to each Holder's
account in any bank in the United States as may be designated and specified in
writing by such Holder at least two Business Days prior thereto. Your initial
bank account for this purpose is on your signature page hereof.
(b) Notwithstanding anything to the contrary contained in the
Notes, if any principal amount payable with respect to a Note is payable on a
Legal Holiday, then the Company shall pay such amount on the next succeeding
Business Day, and interest shall accrue on such amount until the date on
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which such amount is paid and payment of such accrued interest shall be made
concurrently with the payment of such amount, provided that the Company may
elect to pay in full (but not in part) any such amount on the last Business Day
prior to the date such payment otherwise would be due, and no such additional
interest shall accrue on such amount. Notwithstanding anything to the contrary
contained in the Notes, if any interest payable with respect to a Note is
payable on a Legal Holiday, then the Company shall pay such interest on the next
succeeding Business Day, and such extension of time shall be included in the
computation of the interest payment, provided that the Company may elect to pay
in full (but not in part) any such interest on the last Business Day prior to
the date such payment otherwise would be due, and such diminution in time shall
be included in the computation of the interest payment.
3.4 Lost, etc. Securities
Notwithstanding any provision to the contrary, if any Security
of which the Purchasers or any other institutional Holder (or nominee thereof)
which is a transferee is the owner is mutilated, destroyed, lost or stolen, then
the affidavit of the Purchaser's or such ▇▇▇▇▇▇'s treasurer or assistant
treasurer (or other authorized officer), briefly setting forth the circumstances
with respect to such mutilation, destruction, loss or theft, shall be accepted
as satisfactory evidence thereof, and no indemnity, security or payment of
charges or expenses shall be required as a condition to the execution and
delivery by the Company or the transfer agent with respect to such Security, of
new Securities for a like aggregate principal amount or number of shares, as
applicable, in substitution therefor, other than such Purchaser's or such
Holder's unsecured written agreement reasonably satisfactory to indemnify the
Company or the transfer agent, as the case may be.
3.5 Delivery of Financial Statements and Reports
(a) The Company will deliver to each Holder of Securities the
following:
(1) as soon as available, but in any event not later
than 45 days after the last day of each month commencing with the month
ending January 31, 1998, a consolidated balance sheet of the Company
and its Subsidiaries as of the end of such month and related
consolidated statements of operations and cash flow, of the Company and
its Subsidiaries for such month and for the portion of the fiscal year
through the end of such month in the format used by the Company for
internal review purposes, together with related consolidating
statements for such periods, all in reasonable detail and prepared in
accordance with GAAP consistently applied, and accompanied by a
comparison of current month results and year-to-date results as
reported in such consolidated statements to (A) results for the
corresponding periods of the prior fiscal year and (B) results
projected for such periods in the budget and business plans delivered
to Holders under Section 3.5(a)(3) below at the commencement of the
current fiscal year;
(2) as soon as available, but in any event not later
than 90 days after the close of each fiscal year, an audited
consolidated balance sheet of the Company and its Subsidiaries as of
the close of such fiscal year, and related audited consolidated
statements of operations, cash flow and changes in stockholders' equity
of the Company and its Subsidiaries for such fiscal year, reported on
(without any material qualification arising from the scope of the
audit) by a nationally recognized firm of independent certified public
accountants and prepared in accordance with GAAP consistently applied;
(3) as soon as available, but in any event not later
than 45 days following the first day of each fiscal year beginning on
or after January 1, 1998, reasonably detailed monthly
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budget and business plans for the Company for the immediately
forthcoming fiscal year, which plans will be updated within 45 days
following any business acquisition to reflect management's planning
with respect to the acquired business;
(4) as soon as available to the Company, copies of
any financial statements and other reports prepared with respect to
nonconsolidated subsidiaries or joint ventures in which the Company has
made any Investment or otherwise has any ownership interest, in the
form received or prepared by the Company;
(5) copies of all reports and letters delivered by
the Company's independent auditors to management of the Company with
respect to the Company's internal controls, financial condition or
other material matters; and
(6) copies of any financial or other report or notice
delivered to, or received from, any holders of Senior Indebtedness, not
otherwise delivered to the Holders pursuant to this Section 3.5.
(b) Each financial statement delivered pursuant to paragraph
(a)(1) of this Section 3.5 shall be in the format used by the Company for
internal review purposes and (a)(2) of this Section 3.5 shall be in a form
reasonably acceptable to the Purchasers; provided that, financial statements
complying the requirements of Regulation S-X shall be deemed to be reasonably
acceptable to the Purchasers; and shall be accompanied by a brief narrative
description of business and financial trends and developments material to the
Company and its Subsidiaries and significant transactions that have occurred in
the appropriate period or periods covered thereby, together with information or
updates regarding any litigation or other contingent liability that has arisen
or been threatened against the Company or its Subsidiaries.
(c) The requirements of paragraphs (a) and (b) of this Section
3.5 shall not apply to the Company in the event that the Company is required to
deliver and does deliver reports to the Holders pursuant to Section 5.2.
(d) Nothing in this Section shall be deemed to require the
Company to consolidate the results of operations of any person in its financial
statements, if such consolidation is not otherwise required pursuant to GAAP.
3.6 Taxes
(a) All payments by the Company on account of any Note or
pursuant to this Agreement shall be made free and clear of and without reduction
for or on account of any present or future taxes, assessments or governmental
charges, and all liabilities with respect thereto, excluding:
(i) any taxes, assessments or governmental charges
imposed by any jurisdiction other than the United States or any
political subdivision thereof,
(ii) any taxes, assessments or governmental charges
imposed by the United States or any political subdivision thereof by
means of withholding at the source, if and to the extent that such
taxes, assessments or governmental charges shall be in effect and shall
apply on the Applicable Date, as defined below, after giving effect to
any applicable provisions of income tax treaties to which the United
States is a party, with respect to (A) payments to be made to the
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Purchasers, (B) the allocable share of such payments of any partner of
any Purchaser as of the date hereof that is a foreign person for United
States federal income tax purposes or a partnership one or more of
whose partners is such a foreign person (a "Foreign Person"), (C)
payments to be made to any transferee that is a Foreign Person (a
"Foreign Transferee"), or (D) the allocable share of such payments of
any Foreign Transferee of any partnership interest in any Purchaser or
any Foreign Transferee;
(iii) any taxes, assessments, or other governmental
charges imposed on any holder or the beneficial owner of a Note (or any
partner thereof) based on or measured by overall net income (including,
without limitation, any branch profits tax, accumulated earnings tax or
alternative minimum tax) and any other franchise or net worth taxes and
any taxes imposed in lieu of such net income, franchise or net worth
taxes;
(iv) any estate, inheritance, gift, or personal
property taxes or any similar taxes, assessments or other governmental
charges;
(v) any taxes that would not have been imposed but
for the status of any person as a 10 percent shareholder within the
meaning of Section 871(h)(3)(B) of the Code or as a bank receiving
interest on an extension of credit made pursuant to a loan agreement
entered into in the ordinary course of its trade or business within the
meaning of Section 881(c)(3)(A) of the Code; and
(vi) any taxes, assessments or other governmental
charges to the extent the same would not have been imposed but for (A)
a failure by the holder or beneficial owner of a Note to comply with
applicable certification, information, documentation or other reporting
requirements concerning its nationality, residence, identity, or
connection with the United States, if without regard to any tax treaty,
such person would be entitled under applicable law to claim, and such
person's compliance with the foregoing requirements is required by
statute or regulation of the United States as a precondition to relief
or exemption from such taxes, assessments or other governmental charges
or (B) any change in the status of the holder or beneficial owner of a
Note or any partner thereof attributable to action taken by such person
that is not required or expressly contemplated by this Agreement or the
Documents.
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Covered Taxes"). The
"Applicable Date" shall be for purposes of clauses (ii) (A) and (B) above, the
date hereof, and, for purposes of clauses (ii) (C) and (D), the date of the
transfer described in each such clause, respectively.
(b) If the Company shall be required by law to deduct any
taxes from or in respect of any sum payable on account of any Note or pursuant
to this Agreement, (i) the sum payable shall be increased as may be necessary so
that after making all required deductions for Covered Taxes (including
deductions applicable to additional sums payable under this subsection) each
Purchaser (or such Foreign Transferee) receives an amount equal to the sum it
would have received had no deductions for such Covered Taxes been made, (ii) the
Company shall make deductions for all taxes as required under applicable law and
(iii) the Company shall pay the full amount deducted to the relevant
governmental authority in accordance with applicable law.
(c) The Company will indemnify each Purchaser and each Partner
thereof (or Foreign Transferee of an interest in any Note or this Agreement or
of any partnership interest in such Purchaser
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or in any Foreign Transferee) for the (i) full amount of Covered Taxes arising
in connection with amounts payable by the Company on account of the Notes or
pursuant to this Agreement (less any amount paid by the Company pursuant to
clause (b)(iii) above with respect to the same Covered Taxes), and (ii) any
taxes (including any penalties, interest or additions to tax) imposed by any
jurisdiction, reduced by any tax credits or other tax benefits, on amounts
payable under this subsection paid by such Person.
(d) If the Company determines, and provides to the holder or
beneficial owner of a Note an opinion of outside counsel of recognized standing
confirming, that the Company has or will become obligated to pay additional
amounts with respect to a Note pursuant to subparagraph (a), (b) or (c) of this
Section 3.6 as a result of any change in, or amendment to, the laws (or any
regulations or rulings promulgated thereunder) of the United States or any
political subdivision or taxing authority thereof or therein or any treaties to
which the United States is a party, or any change in official position regarding
the application or interpretation or such laws, regulations, rulings or
treaties, which change or amendment becomes effective on or after the date of
this Agreement, the Company, at its option, may redeem such Note, or, if such
obligation relates only to one partner or certain partners in a Purchaser, may
redeem such portion of the Note that corresponds to the allocable shares of the
affected partners, at its outstanding principal balance plus accrued interest
and any additional amounts due pursuant to subsection (a), (b) or (c) of this
Section 3.6 (but otherwise without any premium or penalty). To the extent that
the portion of a Note allocable to a partner of a Purchaser is redeemed pursuant
to this Section 3.6(d), such partner shall be treated for purposes of this
Section 3.6 as having terminated its interest in the Purchaser as of the date of
such redemption.
(e) No provision of this Section 3.6 shall be interpreted or
construed to negate, reduce or otherwise limit the Company's obligation to pay
certain taxes pursuant to Section 3.2 of this Agreement and to indemnify the
Purchasers with respect to such taxes.
(f) Within 30 days after the date of any payment of Covered
Taxes, the Company will furnish to each Purchaser (or any Foreign Transferee of
an interest in any Note or in this Agreement), at its address referred to on the
signature page hereof (or at such address as is provided to the Company), the
original or a certified copy of a receipt evidencing payment thereof.
(g) The obligations of the Company under this Section 3.6
shall survive the payment or prepayment of principal of and interest on the
Notes, and the termination of this Agreement.
(h) Each Purchaser and each partner thereof agree to pursue
reasonable measures in good faith, not including the assignment or transfer of
any interest in this Agreement or the Note or of any partnership interest in the
Purchaser (within 60 days after notice from the Company that a Covered Tax may
be imposed with respect to payments to such Purchaser) to avoid the imposition
of such Covered Tax.
(i) Each holder or beneficial owner of a Note shall notify the
Company of any change or amendment described in subsection (d) of this Section
3.6 of which it has actual knowledge and that would by reason of the status of
such Person result in the Company becoming obligated to pay additional amounts
with respect to a Note under subsection (a), (b) or (c) of this Section 3.6.
Such Person shall provide such notice as soon as is reasonably practicable, but
in no event more than 30 days after (i) the date of enactment in the case of a
law, (ii) the date of announcement of an exchange of instruments of ratification
(or other official actions that finalize the change) in the case of a treaty, or
(iii) the date of issuance or official announcement in the case of a regulation,
ruling or change in official position regarding the application or
interpretation of such laws, regulations, ruling or treaties. If the change or
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amendment affects any Partner of a Purchaser, but does not relate to all
Partners of such Purchaser, the notice shall specify the allocable share of each
Partner that is known by the party providing such notice to be affected. Failure
to supply such notice within the foregoing periods shall result in a waiver of
the right to receive such additional amounts with respect to such Person or
partner, but shall not constitute a waiver of the right to receive any other
additional amounts.
(j) Each Purchaser may at any time after receiving notice of
the Company's intention to redeem any Note pursuant to subsection (d) of this
Section 3.6 elect to waive the right to receive all such additional amounts (or,
if such additional amounts relate to a partner in the Purchaser, all such
additional amounts relating to that partner) giving rise to the Company's right
of redemption. In that event, the Company shall not be entitled to redeem the
Note (or, in the circumstances described in the preceding parenthetical, the
applicable portion of the Note) by reason of having an obligation to pay such
additional amounts and the obligation to pay such additional amounts shall be
waived. Such waiver shall not constitute a waiver of the right to receive any
other additional amounts that would have been payable if such Notes had been
redeemed.
SECTION 4. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants as follows:
4.1 Organization, Standing and Qualification
(a) Each of the Company and its Subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation; has all requisite power and authority to own or
lease and operate its properties and to carry on its business as now conducted
and as proposed to be conducted; and is duly qualified or licensed to do
business as a foreign corporation in good standing in all jurisdictions in which
it owns or leases property or in which the conduct of its business requires it
so to qualify or be licensed, except where the failure to be so qualified or
licensed would not have a Material Adverse Effect. The Company has heretofore
delivered to your counsel complete and correct copies of the Charter Documents
of the Company and the Subsidiary Guarantors and has identified on Schedule
4.1(a) all jurisdictions in which it or its Subsidiaries is qualified or
licensed to do business as a foreign corporation.
(b) The Company has all requisite power and authority to enter
into and perform all of its obligations under the Documents, to issue and
perform all of its obligations under the Securities and to carry out the
transactions contemplated hereby and thereby.
(c) The Company has identified on Schedule 4.1(c) (i) the name
and jurisdiction of incorporation or organization of each of its Subsidiaries
and (ii) the percentage of the issued and outstanding capital stock and other
equity securities (including rights, warrants and options to acquire, and all
securities convertible into or exchangeable for, such capital stock) of each
such Subsidiary owned directly or indirectly by the Company. All such shares of
capital stock and other equity securities have been duly authorized and validly
issued and are fully paid and nonassessable and are owned by the Company or its
Subsidiaries beneficially and of record, free and clear of any Lien except as
set forth on Schedule 4.1(c).
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4.2 Capitalization
The authorized capital stock of the Company consists solely of
100,000,000 shares of Common Stock, $0.0001 par value, of which 17,537,963
shares are issued and outstanding as of the date hereof and 5,000 shares of
Preferred Stock of which 1,349 shares are designated Series A Convertible
Preferred Stock (the "Preferred Stock"), and of which 1,054.35 are issued and
outstanding as of the date hereof.
All such outstanding shares have been duly authorized and
validly issued and are fully paid and nonassessable.
Except as set forth in Schedule 4.2 hereto or as provided in
the Warrant Agreement, (a) there are no outstanding subscriptions, warrants,
options, calls or commitments of any character relating to or entitling any
Person to purchase or otherwise acquire any Capital Stock of the Company; (b)
there are no obligations or securities convertible into or exchangeable or
exercisable for shares of any Capital Stock of the Company or any commitments of
any character relating to or entitling any Person to purchase or otherwise
acquire any such obligations or securities; and (c) there are no preemptive or
similar rights to subscribe for or to purchase any Capital Stock of the Company.
Schedule 4.2 identifies (i) all holders of Capital Stock of
the Company and all holders of outstanding rights, warrants and options to
acquire Capital Stock of the Company who, to the knowledge of the Company,
"beneficially own" (within the meaning of Rule 13d-3 under the Exchange Act)
more than 5% of the outstanding capital stock of the Company or who are officers
or directors of the Company, (ii) the title of the class and series, and amount,
of securities held by each of such holders and (iii) the number of shares of
Common Stock into which the securities held by each of such holders may be
exercised or converted. Schedule 4.2 additionally sets forth the pro forma fully
diluted share capitalization of the Company, after giving effect to the issuance
of the Warrants. Immediately following the Closing, the total number of shares
issuable upon exercise of all Warrants will equal 20% of the aggregate number of
shares of Common Stock then outstanding, stated on a fully diluted basis (giving
effect to the issuance of the Warrant Shares, the exercise of outstanding
options to acquire Capital Stock of the Company and conversion of the Preferred
Stock).
Except as set forth on Schedule 4.2 hereto, no Subsidiary of
the Company has outstanding stock or securities convertible into or exchangeable
or exercisable for any shares of its capital stock or other equity securities,
nor does it have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, any shares of its capital stock or other equity
securities or any securities convertible into or exchangeable or exercisable for
any shares of its capital stock or other equity securities.
The Company has not entered into any agreement to register its
equity or debt securities under the Securities Act, except as identified on
Schedule 4.2 hereto and except for the Registration Rights Agreement.
4.3 Authorization of Agreement and Other Documents
The Company has taken all actions necessary to authorize it to
enter into and perform all of its obligations under the Documents, to issue and
perform all of its obligations under the Notes and Warrants and to consummate
the transactions contemplated hereby and thereby. Each Subsidiary
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Guarantor has taken all actions necessary to authorize it to enter into and
perform all of its obligations under the Subsidiary Guarantees and the Security
Agreements and to consummate the transactions contemplated hereby and thereby.
The Documents, the Notes, the Subsidiary Guarantees and the Warrants are legal,
valid and binding obligations of the Company (or of the Subsidiary Guarantors,
in the case of the Subsidiary Guarantees and the Security Agreements),
enforceable against it in accordance with their respective terms, except for (a)
the effect thereon of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the rights of creditors generally
and (b) limitations imposed by federal or state law or equitable principles upon
the specific enforceability of any of the remedies, covenants or other
provisions thereof and upon the availability of injunctive relief or other
equitable remedies.
4.4 No Violation
Neither the execution or delivery of the Documents nor the
issuance, sale or delivery of the Securities, nor the performance by the Company
or the Subsidiary Guarantors of their respective obligations under the
Documents, Subsidiary Guarantees or the Securities nor the consummation of the
transactions contemplated hereby and thereby, will:
(a) violate any provision of the Charter Documents of the
Company or any of its Subsidiaries;
(b) violate any statute, law, rule or regulation or any
judgment, decree, order, regulation or rule of any court or
governmental authority to which the Company or any of its Subsidiaries
or any of their respective properties may be subject;
(c) permit or cause the acceleration of the maturity of any
debt or obligation of the Company or any of its Subsidiaries in excess
of $100,000 or the acceleration of which would result in a Material
Adverse Effect; or
(d) violate, or be in conflict with, or constitute a default
under, or permit the termination of, or require the consent of any
Person under, or result in the creation of any Lien upon any property
of the Company or any of its Subsidiaries under, any mortgage,
indenture, loan agreement, note, debenture or other agreement for
borrowed money or any other material agreement to which the Company or
any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries (or their respective properties) may be bound, other
than such violations, conflicts, defaults, terminations and Liens, or
such failures to obtain consents, which could not reasonably be
expected to result in a Material Adverse Effect.
The Company is not in default (without giving effect to any
grace or cure period or notice requirement) under any agreement for borrowed
money or under any agreement pursuant to which any of its securities were sold.
4.5 Use of Proceeds
The net proceeds from the sale of the Securities hereunder
will be used solely for the repayment of existing debt and for general corporate
purposes, including working capital and the expenses incurred in connection with
the transactions contemplated by the Documents. Immediately upon Closing, there
shall be in full force and effect the Senior Credit Facility, under which the
Company and/or its
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Subsidiaries will have available the borrowing capacity set forth in Section
2.8, subject to a borrowing base and customary conditions precedent as specified
therein.
4.6 No Default
No event has occurred or failed to occur which constitutes a
Default or Event of Default.
4.7 Outstanding Indebtedness; Senior Indebtedness; Preferred Stock; Liens
The capitalization table on Schedule 4.7 sets forth and
identifies in reasonable detail all outstanding short-term and long-term
indebtedness and preferred stock of the Company and its Subsidiaries, including
all notes issued by the Company to finance the acquisition of real or personal
property, prior to and after giving effect to the transactions contemplated by
Sections 2.8 and 4.5 hereof. Schedule 4.7 includes the names of the holders,
principal amounts or liquidation values, required interest or dividend payments
and maturity dates of all such indebtedness and preferred stock.
(1) All Indebtedness represented by the Notes shall be
subordinated in right of payment only to the Senior Indebtedness, and only to
the extent and in the manner set forth herein and in the Subordination
Agreements; and
(2) The Company and its Subsidiaries do not have any
outstanding Indebtedness (other than the Senior Indebtedness) to which the
indebtedness represented by the Notes is in any way subordinated;
except, in each of clauses (1) and (2) above, for Indebtedness secured by
Permitted Liens.
There are no Liens outstanding on the date hereof and there
will be no Liens outstanding on the Closing Date on any property or asset of the
Company or any of its Subsidiaries other than Permitted Liens.
4.8 Financial Statements
Attached hereto as Annex I are consolidated balance sheets and
statements of income and cash flows of the Company and its Subsidiaries as of
and for the fiscal year ended December 31, 1996, and consolidated balance sheets
and statements of income of the Company and its Subsidiaries as of and for the
nine months ended September 30, 1997.
Except as otherwise stated in the notes thereto, such balance
sheets and statements of income and cash flows (which reflect all adjustments,
consisting only of normally recurring accruals which, in the opinion of the
Company, are necessary for fair presentation) have been prepared in conformity
with GAAP applied on a consistent basis through all the periods involved and
fairly present the consolidated financial position and results of operations of
the Company and its Subsidiaries as of the dates and for the periods indicated.
Except as reflected in such balance sheets and any notes
thereto, neither the Company nor any of its Subsidiaries has any material
liabilities, absolute or contingent, other than ordinary course liabilities
incurred since September 30, 1997 in connection with the conduct, consistent
with past practices, of the business of the Company and its Subsidiaries,
respectively.
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4.9 No Material Adverse Change
Since November 1, 1997, the Company and its Subsidiaries taken
as a whole have not suffered any material adverse change in their properties,
business, prospects, operations, earnings, assets, liabilities or condition
(financial or otherwise).
4.10 Full Disclosure
None of the Documents, any document attached hereto or thereto
or contemplated hereby or thereby contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading (the term "material," as used in this sentence, meaning
material in terms of the Company and its Subsidiaries, taken as a whole, or in
terms of the rights and interests of the Holders of Securities under the
Documents). There is no fact known to the Company which the Company has not
disclosed to you which could reasonably be expected to have a Material Adverse
Effect.
4.11 Litigation
Except as set forth on Schedule 4.11, there is no action,
proceeding or investigation pending, or to the knowledge of the management of
the Company after due inquiry, threatened, against or affecting the Company or
any of its Subsidiaries in any court or before any governmental authority or
arbitration board or tribunal, foreign or domestic, except for such actions
which, if adversely determined, singly and in the aggregate, would not have a
Material Adverse Effect, and there is no such action seeking to restrain,
enjoin, prevent the consummation of or otherwise challenge any of the Documents
or the issuance of the Securities or the other transactions contemplated hereby
or thereby.
Neither the Company nor its Subsidiaries is subject to any
judgment, order, decree, rule or regulation of any court, governmental authority
or arbitration board or tribunal which has or which can reasonably be expected
to have a Material Adverse Effect.
4.12 Title to and Condition of Properties
Except for such defects of title or Liens as are immaterial in
the aggregate to the business of the Company and its Subsidiaries taken as a
whole, and except for Permitted Liens, each of the Company and its Subsidiaries
has good and marketable title to all the real properties and other assets
(tangible or intangible) it purports to own, free and clear of all Liens.
Each of the Company and its Subsidiaries enjoys peaceful and
undisturbed possession under all leases to which it is a party as lessee, except
for such leases that, either singly or in the aggregate, are immaterial to the
business of the Company and its Subsidiaries taken as a whole.
All leases and other material agreements to which the Company
or any of its Subsidiaries is a party are valid and binding and in full force
and effect, no default has occurred or is continuing thereunder which could be
reasonably likely to have a Material Adverse Effect and no consent need be
obtained (other than consents which have been or will be obtained prior to the
Closing) from any Person in respect of any such lease or agreement in connection
with the transactions contemplated hereby.
Except for such assets, plants and facilities as are
immaterial in the aggregate to the business of the Company and its Subsidiaries
taken as a whole, all tangible assets, plants and facilities
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of each of the Company and its Subsidiaries are in good condition and repair and
are adequate, in the reasonable opinion of the Company, for the uses to which
they are being put or would be put in the ordinary course of business; and none
of such facilities and assets is in need of maintenance or repair, except for
routine maintenance and repair.
4.13 Taxes
All tax returns required to be filed by the Company or its
Subsidiaries in any jurisdiction (including foreign jurisdictions) have been so
filed, and all taxes, assessments, fees and other charges due or claimed to be
due from the Company or its Subsidiaries which are due and payable have been
paid, other than those being contested in good faith or those currently payable
without penalty or interest. The Company knows of no actual or proposed material
additional tax assessments for any fiscal period against the Company or any of
its Subsidiaries or of any basis therefor. Except as stated in Schedule 4.13,
none of the Company's tax returns are under audit, and no waivers of the statute
of limitations or extensions of time with respect to any tax returns have been
granted by the Company or any of its Subsidiaries. Neither the Company nor any
of its Subsidiaries is a United States real property holding corporation as
defined in Section 897(c)(2) of the Internal Revenue Code.
4.14 ERISA
(a) The execution and delivery of this Agreement, the other
Documents and the sale of the Securities to be purchased by you will not involve
any prohibited transaction within the meaning of ERISA or Section 4975 of the
Code. The representation made in the preceding sentence is made in reliance upon
and subject to the accuracy of your representation in Section 1.3 hereof as to
the source of the funds to be used by you to purchase said Securities.
(b) The Company and each of its Subsidiaries is in compliance
in all material respects with any applicable provisions of ERISA and the Code
and the regulations and published interpretations thereunder with respect to all
employee pension benefit plans (collectively, "Pension Plans") and all employee
welfare benefit plans (collectively "Welfare Plans") maintained or contributed
to by the Company or any of its Subsidiaries. No reportable event has occurred
or is reasonably expected to occur with respect to any Pension Plan. There are
no unfunded benefit liabilities under any of the Pension Plans. Neither the
Company nor any of its Subsidiaries has incurred or is reasonably expected to
incur any withdrawal liability under Title IV of ERISA with respect to any
multiemployer plan maintained or contributed to by the Company or any
Subsidiary. Except as set forth on Schedule 4.14 hereof, neither the Company nor
any of its Subsidiaries has any obligation to make any payment to or with
respect to any former employee of the Company or any of its Subsidiaries
pursuant to any retiree medical benefit or other Welfare Plan.
As used in this Section 4.14, the terms "employee pension
benefit plan," "employee welfare benefit plan," "reportable event," "unfunded
benefit liabilities," "withdrawal liability" and "multiemployer plan" shall have
the meanings assigned to such terms in ERISA.
Schedule 4.14 contains a complete list of all employee pension
benefit plans, employee welfare benefit plans and multiemployer plans which (i)
are maintained or contributed to by the Company or any of its Subsidiaries and
(ii) are not listed on Schedule 1.3(c).
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4.15 Compliance with Laws
None of the Company or any of its Subsidiaries is in violation
of any statutes, laws, ordinances, or governmental rules or regulations or any
judgment, order or decree (federal, state, local or foreign) to which any of
them is subject or has failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership or operation of
their respective properties or the conduct of their respective businesses, which
violation or failure could reasonably be expected to have a Material Adverse
Effect.
4.16 Third Party Consents
Except as disclosed on Schedule 4.16, neither the nature of
the Company or any of its Subsidiaries or of any of their businesses or
properties, nor any relationship between the Company or any of its Subsidiaries
and any other Person, nor any circumstance in connection with the offer,
issuance, sale or delivery of the Securities at the Closing or the Warrant
Shares at the times permitted by the Warrant Agreement, as contemplated hereby
and in the other Documents, nor the performance by the Company or any of its
Subsidiaries of their other obligations hereunder or under the other Documents
is such as to require a consent, approval or authorization of, or notice to, or
filing, registration or qualification with, any governmental authority or other
Person (other than the Nasdaq Stock Market) on the part of the Company or any of
its Subsidiaries as a condition to the execution and delivery of this Agreement
or the offer, issuance, sale or delivery of the Securities at the Closing or the
Warrant Shares at the times permitted by the Warrant Agreement, or any other
performance called for by the Documents, other than the filings, registrations
or qualifications under the state securities laws or "blue sky" laws of any
state of the United States of America that may be required to be made or
obtained, all of which shall have been made or obtained on the Closing Date (and
copies of which shall have been delivered to you). The Nasdaq Stock Market has
granted all necessary waivers of its rules and listing requirements to permit
the issuance of the Notes (other than the Incremental Notes) and the exercise of
the Warrants (other than the Incremental Warrants) consistent with the continued
quotation of the Company's Common Stock on the Nasdaq National Market and
without any shareholder notification requirement or other conditions subsequent.
4.17 No Violation of Regulations of Board of Governors of Federal Reserve
System
None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of the
Securities) will violate or result in a violation of Section 7 of the Exchange
Act or any regulation issued pursuant thereto, including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System.
4.18 Private Offering
The sale of the Securities hereunder is exempt from the
registration and prospectus delivery requirements of the Securities Act. The
representation made in the preceding sentence is made in reliance upon and
subject to the accuracy of your representations in Section 1.3 hereof. In the
case of each offer or sale of the Securities, no form of general solicitation or
general advertising was used by the Company or their respective representatives,
including, but not limited to, advertisements, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
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You are the sole purchasers of the Securities. Except for
shares of Common Stock issued (i) upon conversion of shares of the Company's
Preferred Stock and (ii) upon exercise of outstanding options, no securities
have been issued and sold by the Company within the six-month period immediately
prior to the date hereof. The Company agrees that neither it, nor anyone acting
on its behalf, will offer or sell the Securities, or any portion of them, if
such offer or sale might bring the issuance and sale of the Securities to you
hereunder within the provisions of Section 5 of the Securities Act, or offer any
similar securities for issuance or sale to, or solicit any offer to acquire any
of the same from, or otherwise approach or negotiate with respect thereto with,
anyone if the sale of the Securities and any such securities could be integrated
as a single offering for the purposes of the Securities Act.
4.19 Governmental Regulations
Neither the Company nor any of its Subsidiaries is subject to
regulation under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act or to any federal or state statute or regulation
limiting its ability to incur indebtedness for borrowed money. Neither the
Company nor any of its Subsidiaries is a United States real property holding
corporation as defined in Section 897(c)(2) of the Internal Revenue Code.
4.20 Brokers
The Company has not dealt with any Broker in connection with
the sale of the Securities and the transactions contemplated by this Agreement
(other than ▇▇▇▇ & Co., Inc.) and the Company is under no obligation to pay any
Broker's Fee in connection with such transactions (other than (i) the fee of
$1,300,000 payable to ▇▇▇▇ & Co., Inc., of which $650,000 shall be paid at
Closing and $650,000 shall be paid one year from the date of Closing and accrue
interest at rate not to exceed 12% per annum and (ii) the closing fee payable by
the Company to the Purchasers or their designees as set forth in Section 1.2).
The Company hereby agrees to indemnify and hold the Holders harmless from and
against any and all actions, suits, claims, costs, expenses, losses, liabilities
and/or obligations in connection with or relating to any Broker's Fees in
connection with such transactions entered into by the Company, so long as the
Company receives notice of any such action, suit, claim, etc., reasonably
promptly after the Holders become aware thereof; provided that the failure to
give such notice as provided in this sentence shall not relieve the Company of
its obligations under this sentence except to the extent, and only to the
extent, that the Company is actually prejudiced by such failure to give notice.
4.21 Environmental Compliance
Except as disclosed on Schedule 4.21, (i) each of the Company
and its respective Subsidiaries is in compliance with the provisions of all
Environmental Laws relating to its business, properties and assets, including,
without limitation, to the Real Property (as defined below) or the ownership,
use, control, management, operation or occupancy thereof; (ii) none of the
Company or any of its respective Subsidiaries has violated any provision of any
applicable Environmental Laws; and (iii) none of the Company or any of its
Subsidiaries has any liability, absolute or contingent, under any Environmental
Law; except in each case of (i), (ii) or (iii) above which is not reasonably
likely to have a Material Adverse Effect. "Environmental Laws" means any and all
Federal, state or local laws, statutes, ordinances, rules, regulations,
judgments, orders, decrees, permits, licenses, or other governmental
restrictions or requirements and the common law relating to pollution or
protection of public or employee health or the environment, including without
limitation CERCLA and RCRA; "Hazardous Material" means any hazardous substances,
pollutants or contaminants as defined in CERCLA
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and its implementing regulations, and any toxic substance, hazardous or other
waste, hazardous constituent, petroleum, including crude oil and any fractions
thereof, chemicals, materials or substances regulated under any Environmental
Laws; "Real Property" means the offices, stores, warehouses, distribution
facilities and all other real property and related facilities that are or were
owned, leased, operated, used, controlled, managed or occupied by the Company or
any of its Subsidiaries; "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section
9601 et seq.) and any regulations promulgated thereunder; "RCRA" means the
Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section
6901 et seq.) and any regulations promulgated thereunder.
Except as disclosed on Schedule 4.21, to the knowledge of the
Company, there have been no discharges, emissions, or releases of Hazardous
Material on, upon, under, into or from any real property in the vicinity of any
Real Property, including Real Property of any predecessor in interest of the
Company or its Subsidiaries.
Except as disclosed on Schedule 4.21, to the knowledge of the
Company, no Real Property of the Company or any of its Subsidiaries or any Real
Property of any predecessor in interest of the Company or its Subsidiaries is
listed or proposed for listing on the National Priorities List or the
Comprehensive Environmental Response, Compensation, and Liability Information
System, both as promulgated under CERCLA, or any comparable state list, or
listed or formally proposed for listing, on any comparable local list, and none
of the Company or any of its Subsidiaries has received any written notification
of potential or actual liability, or any written request for information, with
respect to any Real Property pursuant to CERCLA or any comparable state or local
Environmental Law.
4.22 Intellectual Property
Except as disclosed on Schedule 4.22, the Company and its
Subsidiaries own, or are licensed under, and have the rights to use, all
patents, inventions, trademarks and trade names (collectively, "Intellectual
Property") used in, or necessary for the conduct of, their businesses as
currently conducted, and the consummation of the transactions contemplated by
the Documents will not alter or impair any such rights. Except as disclosed on
Schedule 4.22, to the Company's knowledge, no claims have been asserted by any
person to the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any license or agreement related
thereto. Except as disclosed on Schedule 4.22, to the Company's knowledge, there
is no valid basis for any such claim and the use of such Intellectual Property
by the Company and its Subsidiaries does not infringe on the rights of any
person.
4.23 Solvency
The Company is not, and will not be after giving effect to the
issuance of the Securities and the execution, delivery and performance of the
Documents and any instrument governing Indebtedness of the Company or a
Subsidiary incurred as of the Closing Date, (x) insolvent or (y) left with
unreasonably small capital with which to engage in its anticipated business, and
the Company has not, and does not believe it will have after giving effect to
the issuance of the Securities and the execution, delivery and performance of
the Documents and any instrument governing Indebtedness of the Company or a
Subsidiary incurred as of the Closing Date, including the Senior Credit
Facility, incurred debts beyond its ability to pay such debts as they mature
(consistent with past practice).
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4.24 Labor Relations
To its knowledge, neither the Company nor any of its
Subsidiaries is engaged in any unfair labor practice. There is (a) no unfair
labor practice complaint pending or to the best knowledge of the Company
threatened against the Company 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 known to be
threatened, (b) no strike, labor dispute, slowdown or stoppage pending or to the
best knowledge of the Company threatened against the Company or any of its
Subsidiaries, and (c) no union representation question existing with respect to
the employees of the Company or any of its Subsidiaries and, to its knowledge,
no union organizing activities are taking place.
4.25 Material Contracts
Schedule 4.25 lists all contracts, agreements, licenses and
commitments to which the Company or any Subsidiary is a party or is bound that
involve, in any instance, an obligation or commitment on the part of the Company
or a Subsidiary in an amount greater than $100,000, or the breach or termination
of which would have a Material Adverse Effect (collectively, the "Material
Contracts"). Except as set forth on Schedule 4.25, none of the Company or any
Subsidiary is in default under any Material Contract, which defaults could
reasonably be expected to have a Material Adverse Effect.
4.26 Survival of Representations and Warranties
All statements contained in any certificate or other document
delivered to you by or on behalf of the Company pursuant to or in connection
with this Agreement or the Closing shall be deemed to constitute representations
and warranties under this Agreement with the same force and effect as the
representations and warranties expressly set forth herein. All of the Company's
representations and warranties thereunder and hereunder shall survive the
execution and delivery of the same, any investigation by you and the issuance of
the Securities.
SECTION 5. COVENANTS
So long as any of the Notes remain unpaid and outstanding, the
Company covenants to the Holders of outstanding Notes as follows:
5.1 Payment of Notes; Satisfaction of Obligations
The Company shall pay the principal of and interest on the
Notes on the dates and in the manner provided in the Notes.
If there has occurred and is continuing any Event of Default
under Sections 6.1(1) or 6.1(2) hereof, then to the extent lawful, the Company
shall pay interest (including interest accruing after the commencement of any
proceeding under any Bankruptcy Law) on all unpaid amounts outstanding under the
Notes (including overdue installments of principal or interest) at the Default
Rate, compounded monthly.
Subject to performance by all other parties thereto of their
respective obligations thereunder, the Company shall satisfy all of its
obligations under the Documents. The Company shall
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make all payments required to be made to the holders of the Warrants and Warrant
Shares under the Warrant Agreement on the dates and in the manner provided in
the Warrant Agreement.
5.2 SEC Reports, Financial Reports
The Company shall deliver to the Holders within 15 days after
it files them with the SEC copies of any reports, proxy statements and other
information which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act.
5.3 Compliance Certificate
(a) The Company shall deliver to the Holders, within 45 days
after the end of each fiscal quarter and within 90 days after the end of each
fiscal year of the Company an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal
quarter or fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Agreement, and further
stating, as to each such Officer signing such certificate, that to his knowledge
the Company has kept, observed, performed and fulfilled each and every covenant
contained in this Agreement (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he may have
knowledge) and that to his knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Securities are prohibited or if such event has
occurred, a description of the event. The Officers' Certificate shall set forth
all financial calculations for such fiscal quarter or fiscal year necessary to
demonstrate the Company's compliance with the covenants contained in this
Section 5.
(b) The Company will deliver to the Holders, forthwith upon
becoming aware of (i) any Default or Event of Default or (ii) any event of
default under any other loan agreement, mortgage, indenture or instrument
referred to in Section 6.1(6), an Officers' Certificate specifying in reasonable
detail such Default, Event of Default or default and the nature of any remedial
or corrective action the Company proposes to take with respect thereto.
5.4 Stay, Extension and Usury Laws
The Company covenants and agrees (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter enforce, which may
affect the covenants or the performance of its obligations under this Agreement
or the Securities; and the Company (to the extent it may lawfully do so) each
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Holders, but will suffer and permit
the execution of every such power as though no such law has been enacted.
5.5 Limitation on Restricted Payments
(a) The Company shall not, directly or indirectly:
(1) declare or pay any dividend on, or make any
distribution to the holders (as such) in respect of, any shares of its
Capital Stock, other than in shares of Common Stock;
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(2) purchase, redeem or otherwise acquire or retire
for value any Equity Interests of the Company or any Subsidiary (other
than any such Equity Interest of a directly or indirectly wholly-owned
Subsidiary of the Company) or other Affiliate of the Company;
(3) permit any Subsidiary to declare or pay any
dividend on, or make any distribution to the holders (as such) in
respect of, any shares of its Capital Stock except to the Company or
another directly or indirectly wholly owned Subsidiary of the Company;
(4) permit any Subsidiary to purchase, redeem or
otherwise retire for value any Equity Interests of it, the Company or
any Affiliate of either of them (other than any such Equity Interests
owned by the Company or any other directly or indirectly wholly owned
Subsidiary of the Company); or
(5) make, or permit any Subsidiary to make, any
Investment (other than a Permitted Investment) or Restricted Debt
Prepayment.
5.6 Corporate Existence
The Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate existence and the
corporate existence of each of its Subsidiaries in accordance with the
respective organizational documents of each of them and the corporate rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or corporate existence, if the
Board of Directors of the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and its
Subsidiaries taken as a whole and that the loss thereof is not adverse in any
material respect to any Holder.
5.7 Same Business
The Company and its Subsidiaries will not engage in businesses
which are not of the same general type as conducted by the Company and its
Subsidiaries on the date hereof or businesses which do not have a substantial
connection thereto.
5.8 Taxes
The Company shall, and shall cause its Subsidiaries to, pay
prior to delinquency all material taxes, assessments and governmental levies
except as contested in good faith and by appropriate proceedings.
5.9 Investment Company Act; United States Real Property Holding Corporation
Neither the Company nor any of its Subsidiaries shall become
an investment company subject to registration under the Investment Company Act
of 1940, as amended. Neither the Company nor any of its Subsidiaries shall
become a United States real property holding corporation as defined in Section
897(c)(2) of the Code.
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5.10 No Merger, etc.
Neither the Company nor any of its Subsidiaries shall
consolidate or merge with or into, or sell, lease, convey or otherwise dispose
of all or substantially all of their respective assets to, any Person; provided,
however, that any Subsidiary of the Company may consolidate or merge with or
into the Company or any of its other wholly-owned Subsidiaries if such
consolidation or merger is otherwise permissible under Section 5.6.
5.11 Limitation on Additional Indebtedness
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become or remain directly or indirectly liable with respect to
(collectively, "incur") any Indebtedness other than (i) the Indebtedness
represented by the Notes, (ii) up to $15,000,000 aggregate principal amount of
Senior Indebtedness, (iii) Indebtedness between or among the Company and its
Subsidiaries and/or between or among the Company's Subsidiaries and (iv) up to
$25,000,000 aggregate principal amount of other Indebtedness at any time
outstanding.
(b) No Indebtedness of the Company shall constitute Senior
Indebtedness for any purpose under this Agreement, the Notes or the other
Documents unless the holder of such Indebtedness has entered into the
Subordination Agreements, on or prior to the Closing Date, pursuant to Section
2.8, or (ii) shall have signed subordination agreements following the Closing
Date which shall contain substantially similar terms and conditions as are
contained in the Subordination Agreements entered into pursuant to Section 2.8.
5.12 Limitation on Transactions With Affiliates
(a) Neither the Company nor any of its Subsidiaries shall
sell, lease, transfer or otherwise dispose of any of its properties or assets to
or purchase any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, an
Affiliate (an "Affiliate Transaction"), except on terms that are no less
favorable to the Company or the relevant Subsidiary than those that could have
been obtained in a comparable transaction by the Company or such Subsidiary from
an unrelated person; provided, however, that the Company and its wholly-owned
Subsidiaries may engage in any sale, lease, transfer, or other disposition of
property among themselves and may enter into any contract, agreement,
understanding, loan, advance or guarantee among themselves.
(b) In addition, neither the Company nor any Subsidiary may
enter into an Affiliate Transaction or series of related Affiliate Transactions
involving or having a potential value of more than $50,000 unless such
transaction has been approved by the Holders of a majority in principal amount
of the Notes; provided, however, that the Company and its wholly-owned
Subsidiaries may engage in any sale, lease, transfer, or other disposition of
property among themselves and may enter into any contract, agreement,
understanding, loan, advance or guarantee among themselves.
The limitations set forth in this Section 5.12 will not apply
to any compensatory transaction approved in good faith by the Board of
Directors, with an officer, director or employee entered into the ordinary
course of business, including, without limitation, compensation, indemnity and
employee benefit arrangements.
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5.13 Restrictions on Liens
The Company will not itself, and will not permit any
Subsidiary, to create or suffer to exist any Liens upon any assets of the
Company or any Subsidiary or any shares of capital stock of any Subsidiary, in
either case now owned or hereafter acquired, provided, however, that this
Section 5.13 shall not prohibit the creation or continuing existence of any
Permitted Liens. If the Company at any time pledges shares of capital stock to
the Senior Lender, the Company shall execute and deliver to and for the benefit
of the Holders, a pledge agreement in substantially the same form as executed in
favor of the Senior Lender, except that any pledges in favor of the Holders
shall be second in priority to that of the Senior Lender pursuant to
subordination agreements containing substantially similar terms and conditions
as are contained in the Subordination Agreements entered into pursuant to
Section 2.8.
5.14 Sale of Assets
(a) Except with respect to Permitted Asset Sales, neither the
Company nor any of its Subsidiaries shall sell, lease, convey or otherwise
dispose (whether in one transaction or a series of transactions) of any assets
(including capital stock of any Subsidiaries), other than sales of inventory in
the ordinary course of business (an "Asset Sale"), if the aggregate Net Proceeds
of all Asset Sales during any fiscal year exceed $250,000.
(b) Neither the Company nor any of its Subsidiaries shall,
without the consent of the Holders of a majority in principal amount of the
Notes, enter into any Asset Sale if the consideration paid is less than an
amount equal to the greater of (x) the fair market value of such asset and (y)
the book value of such asset; provided, however, that assets with a fair market
value of not greater than $100,000 in the aggregate may be sold during any
fiscal year without regard to the foregoing requirement if the amount of
consideration received for such assets is promptly applied to the purchase of
comparable assets.
(c) Except with respect to Permitted Asset Sales, at least 90%
of the consideration for each such Asset Sale received by the Company or such
Subsidiary shall be in the form of cash; provided, however, that the amount of
(i) any liabilities (as shown on the Company's or such Subsidiary's most recent
balance sheet or in the notes thereto) of the Company or any Subsidiary that are
assumed by the transferee of any such assets or stock sold, leased, conveyed or
disposed of and (ii) any notes or other obligations received by the Company or
any Subsidiary from such transferee that are immediately converted by the
Company or such Subsidiary into cash, shall be deemed to be cash for purposes of
this Section 5.14(c).
5.15 Ownership of Subsidiaries
Except with respect to Permitted Asset Sales or as permitted
by Section 5.6 or 5.14 above, the Company shall maintain (along with one or more
Subsidiaries in the case of an indirect Subsidiary) good and valid title to
those Equity Interests of each of its Subsidiaries owned by it, free and clear
of any Lien other than Permitted Liens.
Except with respect to Permitted Asset Sales and
notwithstanding the provisions of Section 5.14 above, neither the Company nor
any Subsidiary shall dispose of the Capital Stock of any Subsidiary, if, after
giving effect to such disposition, the Company would own less than a majority of
the outstanding economic and voting interests in such Subsidiary or former
Subsidiary.
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5.16 Insurance
The Company shall maintain liability, casualty and other
insurance with a reputable insurer or insurers in such amounts and against such
risks as is carried by responsible companies engaged in similar businesses and
owning similar assets. In addition to the foregoing, the Company shall maintain
in full force and effect, with a reputable insurer or insurers, to the extent
obtainable at a commercially reasonable price, a key-man life insurance policy
or policies on ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ in an aggregate insured amount at least equal to
the lesser of (i) $10,000,000 or (ii) the aggregate amount of the Company's
outstanding obligations under the Notes and all Senior Indebtedness, naming the
Company as beneficiary and any holder of Senior Indebtedness and the Purchasers
as loss payees, which policy or policies shall be obtained as soon as
practicable by the Company after the date hereof but in no event later than 90
days after the date hereof.
5.17 Minimum Interest Coverage Ratio
The Company shall furnish to the Purchasers (or, if no
Purchaser continues to be a Holder of any Notes, to such Person as the Holders
of a majority in principal amount of the then outstanding Notes shall designate)
an Officers' Certificate within 45 days after the end of each fiscal quarter of
the Company (90 days after the end of its fiscal year), commencing with the
quarterly period ending June 30, 1998, setting forth the Company's Interest
Coverage Ratio for its four immediately preceding full fiscal quarters; provided
that for the periods ending June 30, 1998 and September 30, 1998 the Company's
Interest Coverage Ratio shall be calculated for the two- and three-quarter
periods (respectively) then ending, rather than for the four-quarter periods
then ending. The Company's Interest Coverage Ratio for the four-quarter period
(or shorter period, if applicable) ending on each such quarterly date shall not
be less than the amount set forth below alongside the date shown:
Interest
Date Coverage Ratio
---- --------------
June 30, 1998 1.00:1
September 30, 1998 1.00:1
December 31, 1998 1.50:1
March 31, 1999 2.00:1
June 30, 1999 2.50:1
September 30, 1999 2.50:1
December 31, 1999 and each
fiscal year-end thereafter 3.00:1
5.18 Minimum EBITDA
The Company shall furnish to the Purchasers (or, if no
Purchaser continues to be a Holder of any Notes, to such Person as the Holders
of a majority in principal amount of the then outstanding Notes shall designate)
an Officers' Certificate within 45 days after the end of each fiscal quarter of
the Company (90 days after the end of its fiscal year), commencing with the
quarterly period ending June 30, 1998, setting forth the Company's EBITDA for
its four immediately preceding full fiscal quarters; provided that for the
periods ending June 30, 1998 and September 30, 1998, the Company's
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EBITDA shall be calculated for the two- and three-quarter periods (respectively)
then ending, rather than for the four-quarter periods then ending. The Company's
EBITDA for the four- quarter period (or shorter period, if applicable) ending on
each such quarterly date shall not be less than the amount set forth below next
to the date shown:
Date EBITDA
---- ------
June 30, 1998 $3,000,000
September 30, 1998 $4,000,000
December 31, 1998 $6,000,000
March 31, 1999 $7,000,000
June 30, 1999 $8,000,000
September 30, 1999 $8,000,000
December 31, 1999 $10,000,000
March 31, 2000 and each fiscal
year-end thereafter $14,000,000
5.19 Issuances of Capital Stock
Neither the Company nor any of its Subsidiaries shall issue
for cash consideration any shares of Capital Stock, or rights, warrants, options
or other securities exercisable or exchangeable for or convertible into Capital
Stock, at any time after the date hereof; provided, however, that the Company
may issue shares of Capital Stock, or such rights, warrants, options or other
securities (a) to finance the acquisition of related businesses, including the
real or personal property used in such businesses or, (b) if the net proceeds of
any such issuance are applied to the payment of Senior Indebtedness or the Notes
in accordance with the optional redemption provisions thereof or (c) to
employees of the Company or its Subsidiaries pursuant to stock incentive plans
of the Company, but only to the extent that the aggregate number of shares of
Common Stock issuable under such plans does not exceed the number of shares
subject to outstanding options as of the Closing Date plus 1,000,000 (as
adjusted for any stock split or reclassification).
5.20 Compensation; Management Fees
The salary, bonus and other benefits (or any increases
therein) paid or accrued for each employee of the Company or any Subsidiary who
receives total compensation in excess of $100,000 per year shall be approved by
a Compensation Committee of the Board of Directors of the Company, a majority of
which Committee shall be comprised of directors who are neither officers nor
employees of the Company or any Subsidiary. So long as the Investors (as defined
in the Stockholders Agreement) are entitled to designate Nominees (as defined in
the Stockholders Agreement) to the Company's Board of Directors, the
Compensation Committee shall include as members both Nominees and shall not
consist of more than four members in total.
Except as set forth on Schedule 5.20, neither the Company nor
any of its Subsidiaries shall pay, agree to pay, or cause to be paid to any
holder of Capital Stock of the Company, or any Affiliate of any such holder, any
management fees without the prior written consent of the Purchasers
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(or, if no Purchaser continues to be a Holder of the Notes, without the prior
written consent of the Holders of a majority in principal amount of the then
outstanding Notes).
5.21 Employee Plans
The Company shall not, directly or indirectly, (i) terminate
any employee pension benefit plan subject to Title IV of ERISA so as to result
in any material liability to the Company or its Subsidiaries, (ii) make a
complete or partial withdrawal (within the meaning of Section 4201 of ERISA)
from any multiemployer plan so as to result in any material liability to the
Company or its Subsidiaries, or (iii) adopt, establish, maintain or enter into
any obligation to contribute to any new employee benefit plan or multiemployer
plan, modify any existing employee benefit plan so as to materially increase its
obligations thereunder, or increase a contribution obligation to any
multiemployer plan, without the written consent of the Holders of a majority in
principal amount of the then outstanding Notes. This Section shall not be deemed
to prohibit the Company from modifying its medical, dental or other employee
Welfare Plans in the ordinary course of business.
As used in this Section 5.21, the terms "employee pension
benefit plan," "multiemployer plan," and "employee benefit plan" shall have the
meanings assigned to such terms in ERISA.
5.22 ERISA Notices
Promptly, but in any event within 15 days, the Company shall
deliver to the Purchasers (or, if no Purchaser continues to be a Holder, such
Person as the Holders of a majority in principal amount of the then outstanding
Notes shall designate), if and when the Company or any of its Subsidiaries (i)
gives or is required to give notice to the Pension Benefit Guaranty Corporation
(the "PBGC") of any "reportable event" (as defined in Section 4043 of ERISA)
with respect to any employee pension benefit plan which might constitute grounds
for a termination of such plan under Title IV of ERISA or the imposition of a
tax under Section 4971 of the Code, or knows that the plan administrator of any
such plan has given or is required to give notice of any such reportable event,
a copy of the notice of such reportable event given or required to be given to
the PBGC, (ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any multiemployer plan is in reorganization or
has been terminated, a copy of such notice, (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate or appoint a trustee to
administer any employee pension benefit plan, a copy of such notice, (iv)
applies for a waiver of the minimum funding standard under Section 412 of the
Code, a copy of such application, (v) gives notice of intent to terminate any
employee pension benefit plan under Title IV of ERISA, a copy of such notice and
other information filed with the PBGC or (vi) fails to make any payment or
contribution to any employee pension benefit plan (or multiemployer plan or in
respect of any benefit arrangement) or makes any amendment to any employee
benefit plan or benefit arrangement which could result in the imposition of a
lien or the posting of a bond or other security, a certificate of the Chief
Financial Officer of the Company setting forth details as to such occurrence and
action, if any, which the Company is required or proposes to take.
As used in this Section 5.22, the terms "employee pension
benefit plan," "multiemployer plan" and "employee benefit plan" shall have the
meanings assigned to such terms in ERISA.
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5.23 Maintenance of Net Worth
The Company shall furnish to the Purchasers (or, if no
Purchaser continues to be a Holder of any Notes, to such Person as the Holders
of a majority in principal amount of the then outstanding Notes shall designate)
an Officers' Certificate within 90 days after the end of each fiscal year of the
Company, commencing with the fiscal year ending December 31, 1998, setting forth
the Company's Net Worth as of such year-end. The Company's Net Worth as of each
such year-end shall not be less than the amount set forth below under the date
shown:
1998 1999 2000 2001
---- ---- ---- ----
December 31, $4,000,000 $8,000,000 $12,000,000 $16,000,000
5.24 Limitation on Capital Expenditures
The Company shall furnish to the Purchasers (or, if no
Purchaser continues to be a Holder of any Notes, to such Person as the Holders
of a majority in principal amount of the then outstanding Notes shall designate)
an Officers' Certificate within 90 days after the end of its fiscal year,
commencing with the fiscal year ending December 31, 1998, setting forth the
Company's total Capital Expenditures, on a consolidated basis, for its
immediately preceding fiscal year. The Company's total Capital Expenditures, on
a consolidated basis, for the fiscal year ending on December 31, 1998 shall not
be greater than $3,000,000 and for the fiscal year ending on December 31, 1999
and each fiscal year end thereafter shall not be greater than $4,000,000.
5.25 Maximum Lease Payments
The Company shall furnish to the Purchasers (or, if no
Purchaser continues to be a Holder of any Notes, to such Person as the Holders
of a majority in principal amount of the then outstanding Notes shall designate)
an Officers' Certificate within 45 days after the end of each fiscal quarter of
the Company (90 days after the end of its fiscal year), commencing with the
quarterly period ending March 31, 1998, setting forth the Company's total Rental
Obligations, on a consolidated basis, for the immediately preceding fiscal
quarter. The Company's total Rental Obligations, on a consolidated basis, for
any such quarter shall not exceed $500,000.
5.26 Inconsistent Agreements
The Company shall not, and shall not permit its Subsidiaries
to, (i) enter into any agreement or arrangement which is inconsistent with, or
would be reasonably likely to impair the ability of the Company to fulfill, its
obligations under the Documents, (ii) prepay, redeem or defease any Indebtedness
of the Company or any Subsidiary that is subordinated to the Notes in right of
payment, or supplement, amend or otherwise modify the terms of any agreement or
instrument evidencing, governing or affecting the terms of any such Indebtedness
if the effect thereof would materially shorten the maturity or increase the
amortization thereof, or otherwise be materially adverse to the Holders or (iii)
supplement, amend or otherwise modify the terms of its Articles or Certificate
of Incorporation or Bylaws, or of any agreement listed on Schedule 5.26, if the
effect thereof would be materially adverse to the Holders, including without
limitation to increase the liquidation preference of, or the rate of dividends
payable on, any series of preferred stock.
5.27 Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Subsidiary of the Company to (a) pay dividends or make any other distributions
on its Capital Stock or
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any other interest or participation in, or measured by, its profits owned by, or
pay any Indebtedness owed to, the Company or a Subsidiary of the Company, (b)
make loans or advances to the Company or a Subsidiary of the Company or (c)
transfer any of its properties or assets to the Company or to any Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reasons of (i) any restrictions existing under or contemplated by agreements in
effect on the date hereof and identified on Schedule 5.27; (ii) any
restrictions, with respect to a Subsidiary of the Company that is not a
Subsidiary of the Company on the date hereof, in existence at the time such
Person becomes a Subsidiary of the Company; or (iii) any restrictions existing
under any agreement that refinances or replaces the agreements containing the
restrictions in clause (i); provided that the terms and conditions of any such
restrictions are no less favorable to the Holders than those under or pursuant
to the agreement evidencing the Indebtedness refinanced. Nothing contained in
this Section 5.27 shall prevent the Company or any of its Subsidiaries from
entering into any agreement (i) permitting or providing for the incurrence of
Liens otherwise permitted by Section 5.13 or (ii) restricting the sale or other
disposition of property securing Indebtedness.
5.28 Limitation on Acquisitions
Except with respect to Capital Expenditures permitted under
Section 5.24, the Company shall not, directly or indirectly, and shall not
permit any Subsidiary to, acquire, in one transaction or a series of
transactions, any stock or assets of any Person (an "Acquisition") involving or
having an aggregate value in excess of $200,000, unless such Acquisition has
been approved in writing by the Purchasers (or, if no Purchaser continues to be
a Holder of any Notes, by the Holders of a majority in principal amount of the
then outstanding Notes).
5.29 Limitation on Research and Development Expenditures
The Company's total research and development expenditures for
any fiscal year, commencing with the fiscal year ending December 31, 1998, shall
not exceed 8% of the Company's total revenues for the fiscal year ending
December 31, 1998, 9% of the Company's total revenues for the fiscal year ending
December 31, 1999 and 10% of the Company's total revenues for the fiscal year
ending December 31, 2000 and each fiscal year-end thereafter, as reflected in
the audited annual financial statements deliverable pursuant to Section 3.5
hereof.
5.30 Compliance with Laws
The Company will, and will cause its Subsidiaries to, comply
with all statutes, ordinances, governmental rules and regulations, judgments,
orders and decrees (including all Environmental Laws) to which any of them is
subject, and obtain and keep in effect all licenses, permits, franchises and
other governmental authorizations necessary to the ownership or operation of
their respective properties or the conduct of their respective businesses,
except to the extent that the failure to so comply or obtain and keep in effect
would not have a Material Adverse Effect.
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5.31 Payment of BOC Note
The Company agrees to use its best efforts to refinance or
amend its $5,000,000 Subordinated Promissory Note due 2000 payable to The BOC
Group, Inc. (the "BOC Note") so that such note (or refinancing thereof) will
have a maturity date not earlier than February 15, 2002. The Company agrees that
it will not repay any principal amount of the BOC Note while the Notes are
outstanding without obtaining the written consent of the Holders of a majority
in principal amount of the outstanding Notes, which consent will not be
unreasonably withheld so long as (i) the Company has a source of funds with
which to make such repayment without materially adversely affecting the
Company's ability to meet its current obligations as they become due and (ii) no
Default or Event of Default has occurred and is continuing or is reasonably
likely to occur as a result of such repayment.
SECTION 6. DEFAULTS AND REMEDIES
6.1 Events of Default
An "Event of Default" occurs if:
(1) the Company defaults in the payment of the principal of
any Note when the same becomes due and payable at maturity, upon redemption or
otherwise;
(2) the Company defaults in the payment of interest on any
Note when the same becomes due and payable and the Default continues for a
period of three days;
(3) the Company fails to comply in any material respect with
any of the agreements, covenants, or provisions of this Agreement or the Notes
and the Default continues for the period and after the notice specified below or
the Subsidiary Guarantors fail to comply in any material respect with any of the
agreements, covenants or provisions of the Subsidiary Guarantees or the Security
Agreements;
(4) the Company fails to comply in any material respect with
any of the agreements, covenants, or provisions of the Warrants, the Warrant
Agreement, the Registration Rights Agreement or the Monitoring Agreement and the
Default continues for the period and after the notice specified below;
(5) any of the representations or warranties of the Company
made in or in connection with any of the Documents are untrue in any respect
materially adverse to the Company and its Subsidiaries taken as a whole;
(6) an event of default occurs under any loan agreement, note,
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any indebtedness of the Company or any
Subsidiary for borrowed money (or the payment of which is guaranteed by the
Company or a Subsidiary), whether such indebtedness or guarantee now exists or
shall be created hereafter (other than an event of default arising from any
breach by the Purchasers of the Subordination Agreements), which default shall
result in the acceleration of such indebtedness prior to its expressed maturity
and the principal amount of such indebtedness, together with the principal
amount of any other such indebtedness the maturity of which has been so
accelerated and has not been paid, aggregates $250,000 or more;
(7) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction against the
Company or any Subsidiary of the Company and such remains
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undischarged for a period (during which execution shall not be effectively
stayed) of 30 days, provided that the aggregate of all such judgments exceeds
$250,000;
(8) the Company loses its rights under any license granted by
a governmental authority or other Person and such loss would have a Material
Adverse Effect;
(9) the Company's Common Stock ceases (whether by virtue of
suspension or de-listing) to be authorized for continued quotation of the Nasdaq
Stock Market or listed on any other national securities exchange;
(10) The Company fails to close a sale of the capital stock or
assets referred to in clause (ii) of the definition of Permitted Asset Sales
contained herein and to receive net proceeds from such sale of at least
$4,500,000 in cash on or before March 31, 1998.
(11) the Company or any Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is unable to pay its debts as the same
become due; or
(12) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any of its
Subsidiaries in an involuntary case,
(B) appoints a Custodian of the Company or any of its
Subsidiaries or for all or substantially all of its property, or
(C) orders the liquidation of the Company or any of
its Subsidiaries,
and the order or decree remains unstayed and in effect for 60 days:
The term "Bankruptcy Law" means title 11, U.S. Code or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
A Default under clause (3) or (4) (other than a Default under
Section 5.5, 5.10, 5.11, 5.14, 5.15, 5.19, 5.26, 5.28 or 5.31 of the Agreement,
which Default shall be an Event of Default without the notice or passage of time
specified in this paragraph) or (6) (other than a Default resulting from the
acceleration of any indebtedness described therein, which Default shall be an
Event of Default without the notice or passage of time specified in this
paragraph) or (7), (8) or (9) or (10) is not an Event of Default until the
Holders of at least 25%
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in aggregate principal amount of the then outstanding Notes notify the Company
of the Default and the Company does not cure the Default within 30 days, or with
respect to subsection (9), 90 days, after receipt of the notice. The notice must
specify the Default, demand that it be remedied and state that the notice is a
"Notice of Default."
6.2 Acceleration of Notes
If an Event of Default (other than an Event of Default
specified in clauses (11) and (12) of Section 6.1) occurs and is continuing, the
Holders of at least 25% in aggregate principal amount of the then outstanding
Notes, by notice to the Company, may declare the unpaid principal of and any
accrued interest on all the Notes to be due and payable. Immediately upon such
declaration, the principal and interest shall be due and payable. If an Event of
Default specified in clause (11) or (12) of Section 6.1 occurs, such an amount
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of any Holder. The Holders of a majority in
principal amount of the then outstanding Notes by notice to the Company may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration.
6.3 Other Remedies
If an Event of Default occurs and is continuing, Holders of
the Notes may pursue any available remedy to collect the payment of principal or
interest on the Notes or to enforce the performance of any provision of the
Notes or this Agreement; provided, however, that acceleration of the Notes shall
be governed by Section 6.2 hereof.
A delay or omission by any Holder of any Notes in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
6.4 Waiver of Past Defaults
The Holders of a majority in principal amount of the then
outstanding Notes by notice to the Company may waive an existing Default or
Event of Default and its consequences except a continuing Default or Event of
Default in the payment of the principal of or interest on any Notes.
6.5 Rights of Holders to Receive Payment
Notwithstanding any other provision of this Agreement, the
right of any Holder of a Note to receive payment of principal and interest on
the Note, on or after the respective due dates expressed in the Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
6.6 Undertaking for Costs
In any suit for the enforcement of any right or remedy under
this Agreement, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
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SECTION 7. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Acquisition: See Section 5.28.
Affiliate: With respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether in the capacity of officer or director of such Person, through the
ownership of voting securities, by agreement or otherwise.
Affiliate Transaction: See Section 5.12.
Agent: Any Person authorized to act and who acts on behalf of
the Purchasers with respect to the transactions contemplated by the Documents.
Agreement: See Section 1.2.
Applicable Date: See Section 3.6.
Asset Sale: See Section 5.14.
Bankruptcy Law: See Section 6.1.
BOC Note: See Section 5.31.
Business Day: Any day which is not a Legal Holiday.
Capital Expenditures: For any fiscal period, the aggregate
expenditures (whether paid in cash or accrued as a liability, including without
limitation payments under Capital Leases) for capital assets which would be
included in property, plant and equipment on a balance sheet prepared in
accordance with GAAP. Amounts expended by the Company or its Subsidiaries for
Acquisitions in compliance with the provisions of Section 5.28 shall not
constitute Capital Expenditures for purposes of Section 5.24 hereof.
Capital Lease: Any lease of any property which would in
accordance with GAAP be required to be classified and accounted for on the
balance sheet of the lessee as a capital lease.
Capitalized Lease Obligation: With respect to any Person for
any period, any obligation of such Person to pay rent or other amounts under a
Capital Lease; the amount of such obligation shall be the capitalized amount
thereof determined in accordance with such principles.
Capital Stock: Any and all shares, interests, participation or
other equivalents (however designated) of corporate stock or other equity
interests, including without limitation all common stock and preferred stock.
Cash Equivalents: (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United
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44
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from Standard & Poor's Corporation, ▇▇▇▇▇'▇ Investors Service, Inc.
or another nationally recognized rating agency; (iii) commercial paper maturing
no more than one year from the date of issuance thereof and, at the time of
issuance, having one of the two highest ratings obtainable from Standard &
Poor's Corporation, ▇▇▇▇▇'▇ Investors Service, Inc. or other nationally
recognized rating agency; (iv) certificates of deposit or bankers' acceptances
maturing within one year from the date of acquisition thereof issued by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia having combined capital and surplus of
not less than $250,000,000; (v) Eurodollar time deposits having a maturity of
less than one year purchased from any such commercial bank directly; and (vi)
repurchase agreements and reverse repurchase agreements with any such commercial
bank relating to marketable direct obligations described in clauses (i) and (ii)
above, in each case maturing within one year from the date of acquisition
thereof.
Charter Documents: The Articles of Organization, Articles of
Incorporation or Certificate of Incorporation and Bylaws, as amended or restated
(or both) to date, of the Company or any Subsidiary of the Company, as
applicable.
Closing: See Section 1.2.
Closing Date: See Section 1.2.
Code: The Internal Revenue Code of 1986, as amended from time
to time, and any successor statute or law thereto.
Collateral Agent: Equinox Investment Partners, L.L.C.
Common Stock: The Common Stock, $0.0001 par value, of the
Company.
Company: SubMicron Systems Corporation, a Delaware
corporation.
Consolidated Net Income: For any period, the aggregate of the
Net Income of the Company and its consolidated Subsidiaries for such period, on
a consolidated basis, determined in accordance with GAAP, provided that (i) the
Net Income of any Person which is not a Subsidiary of the Company or is
accounted for by the Company by the equity method of accounting shall be
included in Consolidated Net Income only to the extent of the amount of
dividends or distributions actually paid by such Person to the Company or a
Subsidiary of the Company, (ii) the Net Income of any Person acquired by the
Company in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded from Consolidated Net Income and (iii) the
Net Income of any Subsidiary of the Company that is subject to restrictions,
direct or indirect, on the payment of dividends or the making of distributions
to the Company shall be excluded from Consolidated Net Income to the extent of
such restrictions. "Net Income" of any Person shall mean the net income (loss)
of such Person, determined in accordance with GAAP, excluding, however, any gain
(but not loss) realized upon the sale or other disposition (including, without
limitation, dispositions pursuant to sale and leaseback transactions) of any
real property or equipment of such Person which is not sold or otherwise
disposed of in the ordinary course of business and any gain (but not loss)
realized upon the sale or other disposition of any capital stock of such Person
or a subsidiary of such Person.
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Consolidated Total Indebtedness: As of any date, the aggregate
amount of all Indebtedness, without duplication, of the Company and its
consolidated Subsidiaries.
Custodian: See Section 6.1.
Default: Any event which is, or after notice or passage of
time would be, an Event of Default.
Default Rate: 15% per annum.
Documents: This Agreement, the Security Agreements, the
Warrant Agreement, the Registration Rights Agreement, the Monitoring Agreement,
the Stockholders Agreement and the Subordination Agreements collectively,
together with any exhibits, schedules or other attachments thereto.
EBITDA: For any period, the sum of the Company's (i)
Consolidated Net Income, plus (ii) consolidated interest expense (including
without limitation amortization of original issue discount) plus (iii)
provisions for income taxes plus (iv) depreciation and amortization (in each
case, with respect to clauses (ii), (iii) and (iv), as determined in accordance
with GAAP and to the extent included in the computation of Consolidated Net
Income).
Environmental Laws: See Section 4.21.
Equity Interest: Capital Stock or warrants, options or other
rights to acquire Capital Stock (but excluding any debt security which is
convertible into, or exchangeable for, Capital Stock).
Equity Securities: See Section 1.1.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute or law thereto.
Event of Default: See Section 6.1.
Exchange Act: The Securities Exchange Act of 1934, as amended,
from time to time, and any successor statute or law thereto.
Foreign Transferee: See Section 3.6.
Foreign Person: See Section 3.6.
GAAP: Those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board or through other appropriate boards or
committees thereof and which are consistently applied for all periods after the
date hereto so as to properly reflect the financial conditions, and the results
of operations and cash flows, of the Company and its consolidated Subsidiaries,
except that any accounting principle or practice required to be changed by the
Accounting Principles Board or Financial Accounting Standards Board (or other
appropriate board or committee of such boards) in order to continue as a
generally accepted accounting principle or practice may so be changed. In the
event of a change in GAAP, the Documents, to the extent GAAP applies, shall
continue to be construed in accordance with GAAP as in existence on the date
hereof; provided, however, the Purchasers and the Company will thereafter
negotiate in good faith
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46
to revise any affected covenants to make such covenants consistent with GAAP as
then in effect, and, after any such revision, the Documents will be construed in
accordance with GAAP as then in effect.
guaranty: With respect to any Person, any contract, agreement
or understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including without limitation:
(a) agreements to purchase such Indebtedness or any
property constituting security therefor;
(b) agreements to advance or supply funds (i) for the
purchase or payment of such Indebtedness, or (ii) to maintain working
capital, equity capital or other balance sheet conditions of such
person;
(c) agreements to purchase property, securities or
services primarily for the purpose of assuring the holder of such
Indebtedness of the ability of the primary obligor to make payment of
the Indebtedness;
(d) letters or agreements commonly known as
"keepwell" letters or agreements; or
(e) any other agreements to assure the holder of the
Indebtedness of the primary obligor against loss in respect thereof;
except that "guaranty" shall not include (i) the endorsement by a Person in the
ordinary course of business of negotiable instruments or documents for deposit
or collection or (ii) indemnities given by the Company or its Subsidiaries in
brokerage, management and other agreements in the ordinary course of business
substantially consistent with past practices.
Holder or Holders: each Purchaser (so long as it holds any
Securities) and any other holder of any of the Securities.
Incremental Purchase Notice: See Section 1.9.
Incremental Notes: See Section 1.1.
Incremental Warrants: See Section 1.9.
Indebtedness: With respect to any Person, the aggregate amount
of, without duplication, the following:
(a) all obligations for borrowed money;
(b) all obligations evidenced by bonds, debentures,
notes or other similar instruments;
(c) all obligations to pay the deferred purchase
price of property or services, except Trade Payables, accrued
commissions and other similar accrued current liabilities in respect of
such obligations, if such liabilities are not overdue and arise in the
ordinary course of business;
(d) all Capitalized Lease Obligations;
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47
(e) all obligations or liabilities of others secured
by a Lien on any asset owned by such Person or Persons whether or not
such obligation or liability is assumed;
(f) all obligations of such Person or Persons,
contingent or otherwise, in respect of any letters of credit or
bankers' acceptances; and
(g) all guaranties.
Initial Warrants: See Section 1.1.
Interest Coverage Ratio: For any period, the ratio of (i) the
Company's EBITDA for such period to (ii) the consolidated interest expense
(including the interest component of Capital Leases, but excluding non-cash
interest and the amortization of debt issuance costs and original issue
discount) for such period with respect to all Indebtedness of the Company and
its Subsidiaries outstanding on the date of determination.
Investment: With respect to any Person, any direct, indirect
or beneficial investment by such Person, whether by means of share purchase,
loan, advance, extension of credit (other than loans to employees in an
aggregate amount not in excess of $200,000 at any time, accounts receivable and
trade credits arising in the ordinary course of business), capital contribution
or otherwise, in or to any other Person, the guaranty by such Person of any
Indebtedness of any other Person or the subordination of any claim against any
other Person to other Indebtedness of such other Person. Amounts expended by the
Company or its Subsidiaries for Acquisitions in compliance with the provisions
of Section 5.28 shall not constitute Investments for purposes of Section 5.5
hereof.
Junior Indebtedness: The Company's 8% Convertible Subordinated
Notes due 2002, 9% Convertible Subordinated Notes due 1997 and the Company's
$5,000,000 Subordinated Promissory Note due 2000.
Legal Holiday: A Saturday, Sunday or day on which banks and
trust companies in the principal place of business of the Company or in New York
are not required to be open.
Lien: Any material mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title or resulting in a charge against real or
personal property, or security interest of any kind (including, without
limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell and any filing of
or agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction).
Material Adverse Effect: (i) Any material adverse effect
whatsoever upon the validity, perfection or enforceability of any Document or
Security, (ii) any material adverse effect on the results of operations,
financial condition, properties, assets, business or prospects of the Company
and its Subsidiaries, taken as a whole, or (iii) any material adverse effect on
the ability of the Company or the Subsidiary Guarantors to fulfill their
obligations under the Documents, the Securities and any instrument governing
Indebtedness of the Company or a Subsidiary incurred as of the Closing Date, or
any document contemplated hereby or thereby.
Material Contracts: See Section 4.25.
Monitoring Agreement: That certain Monitoring Agreement of
even date herewith by and among the Company and the Purchasers, in the form
attached hereto as Annex G.
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Net Proceeds: With respect to any sale or other disposition of
any assets or stock, (i) cash (freely convertible into U.S. dollars) received by
the Company or any Subsidiary from such sale or other disposition, after (a)
provision for all income or other taxes measured by or resulting from such sale
or other disposition, (b) payment of all brokerage commissions and other fees
and expenses related to such sale or other disposition, and (c) deduction of
appropriate amounts as a reserve, in accordance with GAAP, against any
liabilities associated with such assets or stock and retained by the Company or
any Subsidiary after such sale or other disposition thereof, including, without
limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the sale or other disposition of such assets or
stock and (ii) promissory notes received by the Company or any Subsidiary from
such sale or other disposition upon the liquidation or conversion of such notes
into cash.
Net Worth: At any date, the sum of (i) the total shareholders'
equity reflected on the balance sheet of the Company as of such date, determined
in accordance with GAAP, excluding (to the extent included in the calculation of
shareholders' equity) the cumulative effect of any net operating loss carry
forward benefit reported in the notes to the Company's financial statements from
time to time for any period commencing after the Closing Date plus (ii) the
aggregate liquidation preference of the outstanding Preferred Stock of the
Company plus (iii) the outstanding principal amount of any Junior Indebtedness.
Notes: See Section 1.1.
Officers' Certificate: A certificate signed by any two
officers, one of whom must be the Chairman of the Board, the President, the
Chief Executive Officer or Chief Financial Officer, the Treasurer or a Vice
President of the Company.
Operating Lease: Any lease other than a Capital Lease.
Partner: Any limited partner or member of a Purchaser.
Pension Plan: See Section 4.14.
Permitted Asset Sales: (i) sales of excess or obsolete
inventory, (ii) the sale of all or a portion of the assets of the Company's
Primaxx division ("Primaxx Assets") or of the capital stock of a Subsidiary of
the Company containing solely Primaxx Assets and (iii) the sale of all or a
portion of the assets of Imtec Acculine, Inc.
Permitted Investment: (i) Investments in Cash Equivalents,
(ii) Investments existing on the date hereof and identified on Schedule 7.01 and
(iii) Investments made in the ordinary course of business by the Company or by
any directly or indirectly wholly-owned Subsidiary of the Company in the Company
or any other directly or indirectly wholly-owned Subsidiary of the Company.
Permitted Liens: With respect to any Person: (i) pledges or
deposits by such Person under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Indebtedness) or leases
to which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States Government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent; (ii)
Liens imposed by law, such as carriers, warehousemen's and mechanics' Liens or
Liens arising out of judgments or awards against such Person with respect to
which such Person shall then be prosecuting appeal or other proceedings for
review; (iii) Liens securing the payment of taxes, assessments and governmental
charges or levies which are not yet subject to
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penalties for non-payment or which are being contested in good faith and by
appropriate proceedings; (iv) Liens in favor of issuers of surety bonds or
letters of credit issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; (v) minor survey exceptions,
minor encumbrances, easements or reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning of other restrictions as to the use of real
properties or Liens incidental to the conduct of the business of such Person or
to the ownership of its properties which were not incurred in connection with
Indebtedness or other extensions of credit and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of such Person; (vi) Liens listed on
Schedule 7.02 hereto; (vii) Liens on assets owned by the Company or its
Subsidiaries in favor of any holder of Senior Indebtedness securing Senior
Indebtedness permitted hereunder; (viii) purchase money Liens upon or in any
real or personal property (including fixture and other equipment) acquired or
held by the Company or any Subsidiary in the ordinary course of business to
secure the purchase price of such property or to secure Indebtedness incurred
solely for the purpose of financing the acquisition or improvement of such
property, or Liens existing on such property at the time of its acquisition
(other than any such Lien created in contemplation of such acquisition) provided
that (X) no such Lien shall extend to or cover any property other than the
property being acquired or improved and (Y) any such Indebtedness would be
permitted to be incurred pursuant to Section 5.11 hereof; and (ix) Liens
securing Capital Leases or Operating Leases.
Person: An individual, partnership, corporation, trust or
unincorporated organization or a government or agency or political subdivision
thereof.
Purchasers: The KB Mezzanine Fund II, L.P., a Delaware limited
partnership and Celerity Silicon, L.L.C., a Delaware limited liability company.
Real Property: See Section 4.21.
Registration Rights Agreement: See Section 1.1.
Rental Obligations: The maximum aggregate fixed rentals paid
or payable by a lessee under any Operating Lease during a specified period
(excluding amounts paid or payable on account of maintenance, ordinary repairs,
insurance, taxes, assessments and other similar charges, whether or not
designated as rental or additional rental), regardless of any amounts received
by such lessee as sublessor under any Operating Lease.
Restricted Debt Prepayment: Any purchase, redemption,
defeasance (including, but not limited to, in substance or legal defeasance) or
other acquisition or retirement for value, directly or indirectly, by the
Company or a Subsidiary, prior to the scheduled maturity or prior to any
scheduled repayment of principal or sinking fund payment, as the case may be, in
respect of indebtedness of the Company that is expressly subordinated in right
of payment to the Notes.
Rule 144: Rule 144 as promulgated by the Securities Exchange
Commission under the Securities Act, as amended from time to time, and any
successor rule or regulation thereto.
SEC: The Securities and Exchange Commission.
Secondary Notes: See Section 1.1.
Securities: See Section 1.1.
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Securities Act: The Securities Act of 1933, as amended from
time to time, and any successor statute or law thereto.
Security Agreements: That certain Security Agreement and that
certain Patent and Trademark Security Agreement, by and between the Subsidiary
Guarantors and the Collateral Agent, and that certain Security Agreement by and
between the Company and the Collateral Agent.
Senior Credit Facility: That certain Loan and Security
Agreement of even date herewith by and between the Company and the Senior
Lender.
Senior Indebtedness: All "GBC Debt," as defined in the
Subordination Agreements, and all deferrals, renewals, extensions, replacements,
refundings, refinancings and restructurings of, and amendments, modifications
and supplements to, any Senior Indebtedness.
Senior Lender: Greyrock Business Credit, a Division of
NationsCredit Commercial Corporation and any subsequent holder of Senior
Indebtedness.
Senior Subordinated Notes: See Section 1.1.
Stockholders Agreement: That certain Stockholders Agreement of
even date herewith by and among the Company, the Purchasers, and the other
parties identified therein, in the form attached hereto as Annex H.
Subordination Agreements: That certain Intercreditor and
Subordination Agreement and that certain Security Interest Subordination
Agreement each of even date herewith by and among the Company, the Subsidiary
Guarantors, the Purchasers and the Senior Lender.
Subsidiary: With respect to any Person (the "parent"), any
corporation, association or other business entity of which securities or other
ownership interests representing more than 50% of the ordinary voting power are,
at the time as of which any determination is being made, owned or controlled by
the parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent.
Subsidiary Guarantees: See Section 1.1.
Subsidiary Guarantors: SubMicron Systems, Inc. and SubMicron
Wet Process Stations, Inc.
Taxes: See Section 3.6.
Trade Payables: With respect to any Person, accounts payable
and other similar accrued current liabilities in respect of obligations or
indebtedness to trade creditors created, assumed or guaranteed by such Person or
any of its Subsidiaries in the ordinary course of business in connection with
the obtaining of property or services.
Transfer Restricted Securities: Securities acquired by the
Purchasers directly from the Company or acquired by the holder thereof other
than pursuant to an effective registration under Section 5 of the Securities Act
or pursuant to Rule 144; provided that a Security that has ceased to be a
Transfer Restricted Security cannot thereafter become a Transfer Restricted
Security.
Warrant Agreement: See Section 1.1.
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Warrant Shares: See Section 1.1.
Warrants: See Section 1.1.
Welfare Plan: See Section 4.14.
SECTION 8. MISCELLANEOUS
8.1 Notices
All notices and other communications provided for or permitted
hereunder shall be made by hand-delivery, first-class mail, telecopier, or
overnight air courier guaranteeing next day delivery:
(a) if to you at your address set forth on the signature page
hereof, with a copy to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.; and
(b) if to the Company, at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Executive Officer or President,
with copies to Cozen and ▇'▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back if telexed; when receipt acknowledged, if telecopied; and the
next business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. The parties may change the addresses to
which notices are to be given by giving five days' prior notice of such change
in accordance herewith.
8.2 Successors and Assigns
This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties, including, without
limitation and without the need for an express assignment, subsequent holders of
Transfer Restricted Securities.
8.3 Amendment and Waiver
Prior to the Closing Date, this Agreement and the other
Documents may be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may be given, provided that the same are
in writing and signed by you and the Company. Thereafter, except as heretofore
expressly provided otherwise, this Agreement may be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may be given, provided that the same are in writing and signed by the Company
and the Holders of a majority in principal amount of the Notes then outstanding;
provided, however, that any amendment, modification or supplement that (i)
affects or proposes to affect the rate or time for payment of interest on any
Note (including default interest) or the amount of principal or the principal
maturity date of any Note or the redemption or prepayment provisions with
respect thereto, (ii) makes or proposes to make any Note payable in money or
property other than that stated in the Note or (iii) makes or proposes to make
any change in Section 6.4 or 6.5 hereof or this Section 8.3 shall not be binding
upon any Holder of any outstanding Note that has not consented thereto in
writing.
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8.4 Counterparts
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.
8.5 Headings
The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
8.6 Governing Law
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
8.7 Entire Agreement
This Agreement, together with the other Documents and the
Securities, is 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 and therein. This
Agreement, together with the other Documents and the Securities, supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
8.8 Severability
In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, 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 or affected, it
being intended that all of your rights and privileges shall be enforceable to
the fullest extent permitted by law.
8.9 Confidentiality
You agree that you will not, and will not permit your
respective officers, directors, employees or agents to, disclose to any other
Person any information furnished to you by the Company or any Subsidiary, except
(i) as required by law or legal process or by any governmental authority, (ii)
such information as becomes or is generally available to the public other than
as a result of a disclosure prohibited hereby, (iii) such information that is or
becomes available to you on a nonconfidential basis from a source not bound by
this or another confidentiality agreement with the Company or any Subsidiary,
(iv) such information that you disclose to a Person who is a prospective
assignee of some or all Securities, provided that such Person has first signed a
confidentiality agreement substantially identical to that set forth in this
Section.
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If this Agreement is satisfactory to you, please so indicate
by signing the acceptance at the foot of a counterpart of this Agreement and
deliver such counterpart to the Company whereupon this Agreement will become
binding between us in accordance with its terms.
Very truly yours,
SUBMICRON SYSTEMS CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Print or type
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Title: VP Finance and CFO
-------------------------------
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THE KB MEZZANINE FUND II, L.P.
By: EIP Capital Partners, L.P.
Its: General Partner
By: Equinox Investment Partners, L.L.C.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Managing Member
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Principal amount of Notes to be purchased:
$17,000,000
Principal amount of Incremental Notes to be purchased:
$3,000,000
Number of Initial Warrants to be purchased:
5,623,912
Number of Incremental Warrants that may be purchased:
2,158,844
Aggregate purchase price (Notes):
$11,376,088.00
Aggregate purchase price (Warrants):
$5,623,912.00
Closing fee to be paid to: Equinox Investment Partners, L.L.C.
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CELERITY SILICON, L.L.C.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Partner
Address: c/o Celerity Partners II, L.L.C.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Principal amount of Notes to be purchased:
$3,000,000
Principal amount of Incremental Notes that may be purchased:
$1,000,000
Number of Initial Warrants to be purchased:
992,455
Number of Incremental Warrants that may be purchased:
719,615
Aggregate purchase price (Notes):
$2,007,545.00
Aggregate purchase price (Warrants)
$992,455.00
Closing fee to be paid to: Celerity Management Co., Inc.
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ANNEX A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF REGISTRATION UNDER SAID ACT EXCEPT PURSUANT TO AN EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT. PURSUANT TO PROVISIONS OF THE
INTERNAL REVENUE CODE OF 1986 RELATING TO ORIGINAL ISSUE DISCOUNT AND TREASURY
REGULATIONS THEREUNDER, THE ISSUER OF THIS NOTE WILL, BEGINNING NO LATER THAN
TEN (10) DAYS AFTER THE ISSUE DATE HEREOF, PROMPTLY MAKE AVAILABLE TO ANY HOLDER
UPON REQUEST TO ▇▇▇▇ ▇. ▇▇▇▇▇, ITS CHIEF FINANCIAL OFFICER, AT SUBMICRON SYSTEMS
CORPORATION, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, THE
AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE PRICE OF THIS NOTE, THE ISSUE DATE
OF THIS NOTE, AND THE YIELD TO MATURITY OF THIS NOTE.
SUBMICRON SYSTEMS CORPORATION
____________, 1997
SENIOR SUBORDINATED NOTE
DUE FEBRUARY 1, 2002
No: _______ U.S. $___________
THIS NOTE IS SUBJECT TO THE SUBORDINATION AGREEMENTS DATED AS OF NOVEMBER 26,
1997, BY AND AMONG SUBMICRON SYSTEMS CORPORATION, THE SENIOR LENDER, THE KB
MEZZANINE FUND II, L.P., AND CELERITY SILICON, L.L.C. BY ITS ACCEPTANCE OF THIS
NOTE, THE HOLDER HEREOF AGREES TO BE BOUND BY THE PROVISIONS OF SUCH AGREEMENT
TO THE SAME EXTENT AS THE SUBORDINATED LENDER (AS DEFINED THEREIN) IS BOUND AND
TO ANY SUBSEQUENT SUBORDINATION AGREEMENTS, AS PROVIDED IN THE PURCHASE
AGREEMENT.
SUBMICRON SYSTEMS CORPORATION, a Delaware corporation (the
"Company"), for value received, promises to pay to _________________________
___________________ or its registered assigns, on the 1st day of February, 2002,
the principal amount of $_________ (or such lesser principal amount as is then
unpaid) and to pay interest (computed on the basis of a 360-day year of twelve
30-day months) on the unpaid principal amount hereof at the rate of 12% per
annum. The Company shall pay interest on the unpaid principal amount of the
Notes monthly in arrears in cash; provided that on any
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interest payment date after the date of issuance through and including January
1, 2000, the Company may, at its option, issue additional Notes ("Secondary
Notes") in lieu of payment of up to one-half of the accrued interest due on such
interest payment date. If the Company elects to issue Secondary Notes in lieu of
cash payment, the Company shall, pursuant to this paragraph, deliver Secondary
Notes, dated such interest payment date, in a principal amount equal to the
amount of interest not paid in cash in respect of this Note on such interest
payment date. Each issuance of Secondary Notes in lieu of cash payments of
interest on the Notes shall be made pro rata with respect to the outstanding
Notes. Any such Secondary Notes shall be governed by the Purchase Agreement and
shall be subject to the same terms (including the maturity date and the rate of
interest from time to time payable thereon) as this Note (except, as the case
may be, with respect to the title, issuance date and aggregate principal
amount). The term Notes shall include the Secondary Notes that may be issued
under the Purchase Agreement.
Interest accruing from the date of issuance through December
31, 1997, shall be payable on January 1, 1998. Thereafter, interest shall be
payable monthly in arrears in cash or in Secondary Notes, to the extent
permitted above, commencing February 1, 1998, until the principal amount hereof
shall have been paid in full. Notwithstanding the foregoing, if there has
occurred and is continuing any Event of Default under Sections 6.1(1) or 6.1(2)
of that certain Purchase Agreement, dated as of November 26, 1997, by and among
the Company and certain Purchasers named therein (hereinafter, the "Purchase
Agreement"), then interest on all unpaid amounts outstanding hereunder
(including overdue installments of principal or interest) shall be payable at
the Default Rate, compounded monthly (to the extent permitted by applicable
law). The Company may treat the Person in whose name this Note is registered as
the owner hereof for the purpose of receiving payment and for all other
purposes. The principal and interest on this Note payable in cash is payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts in the manner set forth
in the Purchase Agreement. However, the Company may pay principal and interest
by federal funds bank wire transfer, or except as otherwise required by the
Purchase Agreement may pay interest by its check payable in such legal tender.
Certain capitalized terms shall have the meanings specified in Section 9 hereof.
1. The Notes.
This Note is one of a duly authorized issue of Senior
Subordinated Notes of the Company, designated as "12% Senior Subordinated Notes
due February 1, 2002" (hereinafter, the "Notes"), each in a denomination of
$100,000 or in integral multiples of $50,000 in excess thereof, limited to the
aggregate principal amount of U.S. $20,000,000 (plus the amount of all Secondary
Notes and Incremental Notes as provided in the Purchase Agreement) and all
maturing on the 1st day of February, 2002 and bearing interest payable at the
same rate and subject to the same limitations as provided in this Note. This
Note is issued under and pursuant to, and subject to the terms and conditions
of, the Purchase Agreement.
2. Optional Redemption.
(a) Company Option. The Company may redeem the Notes at any
time in whole or from time to time in part, at a redemption price equal to 100%
of the principal amount of the Notes so being redeemed, plus accrued interest to
the redemption date, plus a redemption premium equal to 2% of the principal
amount redeemed, provided that the aggregate principal amount of all Notes so
redeemed by the Company on any date, if less than the entire unpaid principal
amount of all Notes then outstanding, shall be in integral multiples of
$500,000. In addition, the Company may redeem Notes without premium
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or penalty pursuant to Section 3.6(d) of the Purchase Agreement under the
circumstances described therein.
(b) Holder Option. If at any time on or prior to February 1,
2002, there is a Redemption Event, Holders of a majority in principal amount of
the outstanding Notes may, by written notice to the Company, require that the
Company redeem all, but not less than all, of the outstanding Notes at a
redemption price equal to 100% of the principal amount of the Notes so being
redeemed, plus accrued interest to the redemption date, plus a redemption
premium equal to 2% of the principal amount redeemed; provided, however, that in
the event of closing of any public offering of any equity or debt securities of
the Company, the amount redeemed shall not exceed the amount of net proceeds
received by the Company in connection with such public offering.
In addition, if at any time on or prior to February 1, 2002,
there is a Refinancing Event, each Holder may, by written notice to the Company,
require that the Company redeem up to one-half of the principal amount of the
Notes held by such Holder at a redemption price equal to 100% of the principal
amount of the Notes so being redeemed, plus accrued interest to the redemption
date, plus a redemption premium equal to 2% of the principal amount redeemed;
provided, however, that the amount redeemed shall not exceed the net proceeds
received by the Company in connection with such Refinancing Event.
3. Redemption Procedures.
(a) If fewer than all of the Notes are to be redeemed, the
Company shall select the Notes to be redeemed on a substantially pro rata basis
among Noteholders.
(b) At least 30 days but not more than 60 days before a
redemption date, the Company shall mail a notice of redemption to each Holder
whose Notes are to be redeemed. The notice shall: (i) identify the Notes to be
redeemed and shall state the redemption date; (ii) state the redemption price;
(iii) indicate, if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date, upon surrender of such Note, a new Note or Notes in principal amount equal
to the unredeemed portion will be issued; (iv) state that Notes called for
redemption must be surrendered to the Company to collect the redemption price;
and (v) state that interest on the Notes called for redemption ceases to accrue
on and after the redemption date, unless the Company has defaulted on the
payment of the redemption price.
(c) The redemption date with respect to any redemption
effected at the option of the Holder under Section 2(b) hereof shall be a date
not later than the 30th day following the Redemption Event or Refinancing Event.
No later than 10 days following the occurrence of a Redemption Event or
Refinancing Event, the Company shall give notice to the Holders of their right
to elect to have the Company redeem all or a portion of their Notes. In order to
elect such redemption, Holders of a majority in principal amount of the
outstanding Notes (in case of a Redemption Event) or any Holder (in case of a
Refinancing Event) must deliver to the Company written notice of such election
within 10 days following timely receipt of the Company's notice. Upon timely
delivery of such notice, the Company will be unconditionally obligated to redeem
all of the Notes required to be redeemed on the applicable redemption date.
(d) Once notice of redemption is mailed, Notes called for
redemption become due and payable on the redemption date at the redemption
price.
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(e) Upon surrender of a Note that is redeemed in part, the
Company shall issue a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
4. Subordination.
The Notes are subordinated to Senior Indebtedness of the
Company pursuant to the terms of the Subordination Agreements and any substitute
agreements therefor as provided in the Purchase Agreement.
5. Covenants.
The Company covenants and agrees that so long as this Note
shall be outstanding:
(a) The Purchase Agreement. The Company will comply with all
of its covenants set forth in the Purchase Agreement.
(b) Principal and Interest. The Company will duly and
punctually pay or cause to be paid the principal of and interest on the Notes at
the times and places in the manner specified in this Note and in the Purchase
Agreement.
(c) Office or Agency. The Company will maintain an office or
agency in Allentown, Pennsylvania (or in any future principal place of business
of the Company with respect to which the Holders have been notified pursuant to
Section 8.1 of the Purchase Agreement) where notices, presentations and demands
to or upon the Company in respect of this Note may be given or made.
6. Purchase Agreement.
The Company issued this Note under the Purchase Agreement. The
terms of this Note include those stated in the Purchase Agreement, including
without limitation the provisions in the Purchase Agreement respecting Events of
Default and remedies. This Note is subject to all such terms, and Holders of the
Note are referred to the Purchase Agreement for a statement of such terms.
7. Modification of Notes.
The Notes may be modified without prior notice to any Holder
but with the written consent of the Holders of a majority in principal amount of
the Notes then outstanding. Subject to the provisions of the Purchase Agreement,
the Holders of a majority in principal amount of the Notes then outstanding may
waive compliance by the Company with any provision of the Notes without prior
notice to any Holder. However, without the consent of each Holder affected, an
amendment, supplement or waiver may not (a) alter the amount of Notes whose
Holders must consent to an amendment, supplement or waiver, (b) alter the rate
or the time for payment of interest on any Note, (c) alter the principal or the
maturity of any Note or alter the redemption or prepayment provisions with
respect thereto or (d) make any Note payable in money or property other than as
stated in the Notes.
8. Security and Subsidiary Guarantees.
The Company's obligations under this Note and under the
Purchase Agreement have been guaranteed by the Subsidiary Guarantors. The
Subsidiary Guarantors' obligations under the Subsidiary
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Guarantees have been secured by a security interest in certain of their assets
pursuant to the terms of those certain Security Agreements dated as of November
26, 1997 (the "Security Agreement").
9. Definitions.
The terms defined in this Section 9 shall, for all purposes of
this Note, have the meanings herein specified, unless the context otherwise
requires.
"Change of Control" shall occur or be deemed to have occurred
if (i) any Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under
the Exchange Act) shall beneficially own (other than the Purchasers or any
transferees of the Purchasers) at least 30% of the Company's voting stock and
the Purchasers shall beneficially own, directly or indirectly, less voting stock
than such other Person or "group" or (ii) a majority of the members of the Board
of Directors of the Company are not Continuing Directors.
"Company" means SubMicron Systems Corporation, a Delaware
corporation.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of the Purchase Agreement or (ii) was nominated
for election or elected to such Board of Directors with the affirmative vote of
a majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
"Default Rate" means 15% per annum.
"Event of Default" shall have the meaning provided in Section
6.1 of the Purchase Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note
is registered on the Company's books.
"Notes" shall have the meaning provided in Section 1.
"Person" means any individual, partnership, corporation,
trust, unincorporated organization or government or agency or political
subdivision thereof.
"Purchase Agreement" shall have the meaning provided in the
preamble hereto.
"Purchasers" means The KB Mezzanine Fund II, L.P., a Delaware
limited partnership and Celerity Silicon, L.L.C., a Delaware limited liability
company.
The "principal" of a debt security means the principal of the
security plus, when appropriate, the premium (if any) payable on the security.
"Redemption Event" shall occur or be deemed to have occurred
if any of the following events occur: (i) the merger or consolidation of the
Company with or into any other entity; (ii) the consummation of a sale or
disposition by the Company of all or substantially all of its assets or the
stock or assets of a material business division or Subsidiary of the Company;
(iii) a Change of Control of the
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61
Company; (iv) the closing of any public offering of any equity or debt
securities of the Company; or (v) approval by the Board of Directors of a plan
of complete liquidation or dissolution of the Company.
"Refinancing Event" shall occur or be deemed to have occurred
if the Company consummates, or is able to consummate using its reasonable best
efforts, a financing in which the Company or its Subsidiaries incur Senior
Indebtedness that refinances or increases the principal amount of any Senior
Indebtedness previously outstanding or available to the Company, and that bears
an initial interest rate of less than 12% per annum, and that permits redemption
of the Notes as provided herein.
"Secondary Notes" shall have the meaning provided in
Section 1.
"Senior Indebtedness" shall have the meaning provided in the
Purchase Agreement.
"Senior Lender" shall have the meaning provided in the
Purchase Agreement.
"Subordination Agreements" shall have the meaning provided in
the Purchase Agreement.
10. Non-Waiver.
No course of dealing between the Company and the Holder of
this Note or any delay or failure on the part of the Holder hereof in exercising
any rights hereunder shall operate as a waiver of any rights of any holder
hereof, except to the extent expressly waived in writing by the Holder hereof.
11. Governing Law.
This Note shall be construed in accordance with and governed
by the internal laws of the State of New York.
12. Successors and Assigns.
All of the covenants, promises and agreements in this Note
shall bind the Company's successors and assigns, whether so expressed or not.
13. Headings.
The headings of the sections and paragraphs of this Note are
inserted for convenience only and shall not be deemed to constitute a part
hereof.
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IN WITNESS WHEREOF, the Company has caused this Note to be
signed in its name by a duly authorized officer and to be dated as of the day
and year first above written.
SUBMICRON SYSTEMS CORPORATION
Dated: By:
----------------- -------------------------------------
Name:
--------------------------------
Title:
-------------------------------
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ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
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(Insert assignee's soc. sec. or tax I.D. no.)
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(Print or type assignee's name, address and zip code)
and irrevocably appoint
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agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: Your Signature:
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(Sign exactly as your name appears on the front of this Note)
Signature Guarantee:
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