Exhibit 10.34
▇▇▇▇▇▇ BROTHERS INC
BRANDPARTNERS GROUP, INC
And
CORPORATE MEZZANINE II, L.P.
SUBORDINATED NOTE AND WARRANT
PURCHASE AGREEMENT
OCTOBER 22, 2001
TABLE OF CONTENTS
PAGE
1. Definitions ............................................................................. 1
1.1 Definitions .................................................................... 1
1.2 Accounting Terms ............................................................... 12
1.3 Knowledge of an Issuer Party ................................................... 12
1.4 Definitional Provisions ........................................................ 12
2. Purchase and Sale of Notes and Warrants ................................................. 12
2.1 Purchase and Sale of the Notes and Warrants .................................... 12
2.2 Fees and Closing; Placement Fee ................................................ 13
2.3 Closing ........................................................................ 13
2.4 Financial Accounting Positions; Tax Reporting .................................. 13
2.5 Payments ....................................................................... 13
2.6 Taxes, Etc ..................................................................... 14
3. Conditions to Obligations of CMII to Purchase the Notes and Warrants .................... 17
3.1 Representations and Warranties ................................................. 17
3.2 Compliance with this Agreement ................................................. 17
3.3 Secretary's Certificates ....................................................... 17
3.4 Documents; Due Diligence ....................................................... 17
3.5 Purchase of Notes and Warrants Permitted by Applicable Laws .................... 18
3.6 Opinion of Counsel ............................................................. 18
3.7 Approval Of Counsel To CMII .................................................... 18
3.8 Consents and Approvals ......................................................... 18
3.9 No Material Judgment or Order .................................................. 18
3.10 Good Standing Certificates ..................................................... 19
3.11 No Material Adverse Change ..................................................... 19
3.12 Warrants ....................................................................... 19
3.13 Amendment of Senior Credit Agreement ........................................... 19
3.14 Reserved ....................................................................... 19
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3.15 Notes .......................................................................... 19
3.16 Subordination Agreement ........................................................ 19
3.17 Fees ........................................................................... 19
3.18 Reserved ....................................................................... 20
3.19 Reserved ....................................................................... 20
3.20 Registration Rights Agreement .................................................. 20
3.21 Reserved ....................................................................... 20
3.22 Disbursement Letter ............................................................ 20
3.23 Lien Searches .................................................................. 20
3.24 Certificates ................................................................... 20
4. Conditions to the Obligation of BPG and ▇▇▇▇▇▇ to Issue and Sell the Notes and Warrants . 20
4.1 Representations and Warranties ................................................. 20
4.2 Compliance with this Agreement ................................................. 21
5. Representations and Warranties of Issuer Parties ........................................ 21
5.1 Disclosure ..................................................................... 21
5.2 No Material Adverse Effect ..................................................... 21
5.3 No Default ..................................................................... 21
5.4 Organization, Powers, Capitalization and Good Standing ......................... 21
5.5 Financial Statements and Projections ........................................... 22
5.6 Intellectual Property .......................................................... 23
5.7 Investigations, Audits, etc .................................................... 23
5.8 Employee Matters ............................................................... 24
5.9 Solvency ....................................................................... 24
5.10 Reserved ....................................................................... 24
5.11 Use of Proceeds; Margin Regulations ............................................ 24
5.12 Litigation ..................................................................... 24
5.13 ERISA .......................................................................... 25
5.14 Environmental Matters .......................................................... 25
5.15 Investment Company/Government Regulations ...................................... 26
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5.16 Reserved ....................................................................... 26
5.17 Private Offering ............................................................... 26
5.18 Broker's, Finder's or Similar Fees ............................................. 26
5.19 Employee Benefit Plans ......................................................... 27
5.20 Insurance ...................................................................... 27
5.21 Investments .................................................................... 27
5.22 Other Documents ................................................................ 27
6. Representations and Warranties of CMII .................................................. 28
6.1 Authorization; No Contravention ................................................ 28
6.2 Binding Effect ................................................................. 28
6.3 No Legal Bar ................................................................... 28
6.4 Purchase for Own Account ....................................................... 28
6.5 ERISA .......................................................................... 29
6.6 Broker's, Finder's or Similar Fees ............................................. 29
6.7 Governmental Authorization; Third Party Consent ................................ 29
6.8 Accredited Investor ............................................................ 29
6.9 Litigation ..................................................................... 30
7. Indemnification ......................................................................... 30
7.1 Indemnification ................................................................ 30
7.2 Notification ................................................................... 31
7.3 Survival of Indemnification Provisions ......................................... 31
8. Covenants ............................................................................... 32
8.1 Affirmative Covenants .......................................................... 32
8.2 Negative Covenants ............................................................. 40
8.3 Financial Covenants ............................................................ 47
9. Prepayment .............................................................................. 48
9.1 Optional Prepayment ............................................................ 48
9.2 Mandatory Prepayment ........................................................... 48
10. Miscellaneous ........................................................................... 48
10.1 Survival of Representations and Warranties ..................................... 48
iii
10.2 Notices ........................................................................ 48
10.3 Successors and Assigns ......................................................... 50
10.4 Amendment and Waiver ........................................................... 50
10.5 Signatures and Counterparts .................................................... 51
10.6 Headings ....................................................................... 51
10.7 GOVERNING LAW .................................................................. 51
10.8 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION .................................. 52
10.9 Severability ................................................................... 53
10.10 Rules of Construction .......................................................... 53
10.11 Entire Agreement ............................................................... 53
10.12 Certain Expenses ............................................................... 53
10.13 Publicity ...................................................................... 54
10.14 Further Assurances ............................................................. 54
10.15 Note Register .................................................................. 54
10.16 Multiple Holders ............................................................... 54
10.17 Confidentiality ................................................................ 55
Exhibit A Form of Note ................................................................... A-1
Exhibit B Compliance Certificate ......................................................... B-1
Exhibit C Form of Opinion of Counsel ..................................................... C-1
Exhibit D Form of Subordination Agreement ................................................ D-1
Exhibit E Form of Warrant ................................................................ E-1
Exhibit F Form of Registration Rights Agreement .......................................... F-1
Exhibit G Form of Subsidiary Guarantee ................................................... G-1
Schedule 5.4(a) Jurisdictions of Organization
Schedule 5.4(b) Capitalization
Schedule 5.4(d) Foreign Qualifications
Schedule 5.5 Financial Statements and Projections
Schedule 5.6 Intellectual Property
Schedule 5.7 Investigations and Audits
Schedule 5.8 Employee Matters
Schedule 5.12 Litigation
Schedule 5.14 Environmental Matters
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Schedule 5.18 Broker's, Finder's or Similar Fees
Schedule 5.19 Employee Benefit Plans
Schedule 5.20 Insurance
Schedule 5.21 Investments
Schedule 5.22 Material Agreements
Schedule 8.2(a)(ii) Existing Indebtedness
Schedule 8.2(b)(ii) Existing Liens
Schedule 8.2(h) Restrictive Agreements
v
EXECUTION
SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
October 22, 2001,
BY AND AMONG
BRANDPARTNERS GROUP, INC, a Delaware corporation ("BPG"),
▇▇▇▇▇▇ BROTHERS INC., a New Hampshire corporation ("▇▇▇▇▇▇"), and
CORPORATE MEZZANINE II, L.P., a British Virgin Island limited partnership
(together with its successors and registered assigns, subject to Section 10.16,
"CMII").
WITNESSETH:
WHEREAS, ▇▇▇▇▇▇ wishes to sell to CMII, and CMII wishes to purchase from ▇▇▇▇▇▇,
Notes (as hereinafter defined) in the aggregate principal amount of US$5,000,000
upon the terms and subject to the conditions hereinafter set forth; and
WHEREAS, BPG wishes to sell to CMII and CMII wishes to purchase from BPG certain
warrants to purchase 405,000 shares of common stock (collectively, together with
any replacements or additional warrants issued in connection therewith, the
"WARRANTS"), upon the terms and subject to the conditions hereinafter set forth
and in the Warrants.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS
1.1 Definitions
As used in this Agreement, and unless the context requires a different
meaning, the following terms have the meanings indicated:
"AFFILIATE" shall mean, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.
"AGREEMENT" shall mean this Subordinated Note and Warrant Purchase
Agreement, including the exhibits and schedules attached hereto, as the
same may be amended, supplemented or modified in accordance with the
terms hereof.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect
and all rules and regulations promulgated thereunder.
"BPG" shall have the meaning assigned to such term in the recitals
hereto.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the State of New York are
authorized or required by law or executive order to close.
"CAPITAL EXPENDITURES" shall mean expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful
life of more than one year, including the total principal portion of
Capitalized Lease Obligations.
"CAPITAL LEASE OBLIGATIONS" shall mean any Indebtedness represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"CASH INTEREST EXPENSE" shall mean, with respect to any Person for any
period, the Interest Expense of such Person for such period less all
non-cash items constituting Interest Expense during such period
(including, without limitation, (i) amortization of debt discounts,
(ii) amortization of Closing Date fees and expenses and (iii) payments
of interest on Indebtedness by issuance of Indebtedness).
"CHANGE IN CONTROL" shall mean (i) BPG shall cease to own and control
beneficially and of record, free and clear of all Liens, other
encumbrances, or voting agreements, restrictions or trusts of any kind,
67% of the equity interests of ▇▇▇▇▇▇, (ii) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ceases to
be the Chairman of the Board of BPG or (iii) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ceases
to own and control beneficially, pursuant to Rule 13d-3 under the
Exchange Act, at least 1,500,0000 shares of common stock of BPG (or an
equivalent number after giving effect to splits, combinations,
reclassifications and similar events).
"CLOSING" shall have the meaning given that term in Section 2.3.
"CLOSING DATE" shall have the meaning given that term in Section 2.3.
"COMPLIANCE CERTIFICATE" shall mean a certificate in substantially the
same form as Exhibit B signed by a Financial Officer of any Issuer
Party and delivered by such Issuer Party to CMII.
"CONSOLIDATED" shall mean the consolidation in accordance with GAAP of
the accounts or other items as to which such term applies.
"CONTROL" shall mean, with respect to a specified Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through
the ability to exercise voting power, by contract or otherwise.
"CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"CMII" shall have the meaning assigned to such term in the preamble
hereto.
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"CONDITION OF BPG" shall mean the assets, business, properties,
prospects, operations and financial condition of BPG and its
Subsidiaries taken as a whole.
"CONDITION OF ▇▇▇▇▇▇" shall mean the assets, business, properties,
prospects, operations and financial condition of ▇▇▇▇▇▇ and its
Subsidiaries taken as a whole.
"CONTRACTUAL OBLIGATIONS" as applied to any Person shall mean any
indenture, mortgage, deed of trust, contract, undertaking, agreement or
other instrument to which that Person is a party or by which it or any
of its properties is bound or to which it or any of its properties is
subject including, without limitation, the Transactions Documents.
"DEFAULT" shall mean any Event of Default or any event that would
constitute an Event of Default but for the requirement expressly set
forth in Section 7 of the Notes that notice be given or time elapse or
both.
"DEFERRED AMOUNT" shall have the meaning assigned to such term in
Section 8.2(f).
"DEFINED BENEFIT PLAN" shall mean a defined benefit plan within the
meaning of Section 3(35) of ERISA or Section 414(j) of the Internal
Revenue Code, whether funded or unfunded, qualified or non-qualified
(whether or not subject to ERISA or the Internal Revenue Code).
"EBITDA" shall mean with respect to any fiscal period, the Consolidated
Net Income of ▇▇▇▇▇▇ and its Subsidiaries in such period plus (to the
extent deducted in determining such Consolidated Net Income) the sum of
(i) the Interest Expense of ▇▇▇▇▇▇ and its Subsidiaries in such period,
plus (ii) depreciation, amortization and other noncash charges of
▇▇▇▇▇▇ and its subsidiaries in such period, plus (iii) all income and
franchise taxes of ▇▇▇▇▇▇ and its Subsidiaries paid or provided for in
such period, on a Consolidated basis in conformity with GAAP; provided,
however, that Growth Capital Expenditures in amounts not to exceed
$200,000 in Fiscal Year, 2001 and $750,000 in each of Fiscal Years 2002
and 2003, (upon notification thereof in writing to CMII together with
reasonable supporting documentation) shall be permitted to be added
back into EBITDA in each such respective Fiscal Year but no other
Fiscal Year.
"ENVIRONMENTAL LAW" shall mean any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, relating to
pollution or protection of the environment, protection of occupational
health or safety or protection or preservation of natural resources,
including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations promulgated
thereunder.
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"ERISA AFFILIATE" shall mean any Person that for purposes of Title IV
of ERISA is a member of the controlled group of any Issuer Party, or
under common control with any Issuer Party, within the meaning of
Section 414 of the Internal Revenue Code.
"ERISA EVENT" shall mean (a) any "reportable event," as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect
to a Plan (other than an event for which the 30-day notice period is
waived); (b) the existence with respect to any Plan of an "accumulated
funding deficiency" (as defined in Section 412 of the Code or Section
302 of ERISA), whether or not waived; (c) the filing pursuant to
Section 412(d) of the Code or Section 303(d) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan;
(d) the incurrence by any Issuer Party or any of its ERISA Affiliates
of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by any Issuer Party or any
ERISA Affiliate from the Pension Benefit Guaranty Corporation or a plan
administrator of any notice relating to an intention to terminate any
Plan or Plans or to appoint a trustee to administer any Plan; (f) the
incurrence by any Issuer Party or any of its ERISA Affiliates of any
liability with respect to the withdrawal or partial withdrawal from any
Plan or Multiemployer Plan; or (g) the receipt by any Issuer Party or
any ERISA Affiliate of any notice, concerning the imposition of
liability to a Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in the
Notes.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"EXERCISABLE SHARES" shall have the meaning assigned to that term in
Section 8.1(n).
"FINANCIAL OFFICER" shall mean, with respect to any Person, the chief
executive officer, chief financial officer, principal accounting
officer, treasurer or controller of such Person.
"FISCAL YEAR" shall mean a year ending December 31.
"FULLY LOADED FIXED CHARGE COVERAGE RATIO" shall mean the ratio of (A)
EBITDA minus Capital Expenditures to (B) the sum of (i) Interest
Expense, (ii) scheduled principal payments of Indebtedness under the
Senior Credit Agreement and under the Notes, (iii) payments of
Capitalized Lease Obligations and (iv) taxes.
"GAAP" shall mean the generally accepted accounting principles in the
United States of America in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean the government of any nation,
state, city, locality or other political subdivision of any thereof,
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or
4
other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"GROWTH CAPITAL EXPENDITURES" shall mean certain one-off expenditures
not included as Capital Expenditures to be funded solely from the
proceeds of the Notes and utilized to develop and grow the business of
▇▇▇▇▇▇.
"GUARANTEE" of or by any Person (the "GUARANTOR") shall mean any
obligation, contingent or otherwise, of the guarantor guaranteeing or
having the economic effect of guaranteeing any Indebtedness or other
obligation of any other Person (the "PRIMARY OBLIGOR") in any manner,
whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation or to purchase (or to advance or supply funds for the
purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the
owner of such Indebtedness or other obligation of the payment thereof,
(c) to maintain working capital, equity capital or any other financial
statement condition or liquidity of the primary obligor so as to enable
the primary obligor to pay such Indebtedness or other obligation (d) as
an account party in respect of any letter of credit or letter of
guaranty issued to support such Indebtedness or obligation; provided,
that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business.
"GUARANTOR" shall mean each Person that has issued a Guarantee of the
Obligations.
"HAZARDOUS MATERIALS" shall mean all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or
other pollutants, including petroleum or petroleum distillates,
asbestos or asbestos containing materials, polychlorinated biphenyls,
radon gas, infectious or medical wastes and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.
"HEDGING AGREEMENT" shall mean any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity
price hedging arrangement
"INDEBTEDNESS" as applied to any Person, shall mean, without
duplication, (a) all items which in accordance with GAAP would be
included in determining total liabilities as shown on the liability
side of a balance sheet of such Person as at the date as of which
Indebtedness is to be determined, including, without limitation,
Capitalized Lease Obligations, (b) all obligations of other Persons
which such Person has Guaranteed, (c) all reimbursement obligations in
connection with letters of credit or letter of credit guaranties issued
for the account of such Person, and (d) in the case of ▇▇▇▇▇▇ (without
duplication), the Obligations.
"INTEREST COVERAGE RATIO" shall mean, for any period, the ratio of (i)
EBITDA for such period less all non-financed Capital Expenditures made
in such period less dividends and distributions
5
made by ▇▇▇▇▇▇ to the extent permitted under this Agreement and paid
during such period to (ii) the Cash Interest Expense of ▇▇▇▇▇▇ for such
period.
"INDEMNIFIED PARTY" shall have the meaning assigned to that term in
Section 7.1.
"INTEREST EXPENSE" shall mean, for any period, the sum of total
interest expense (including that portion attributable to Capitalized
Lease Obligations in accordance with GAAP and capitalized interest) of
▇▇▇▇▇▇ and its Subsidiaries on a Consolidated basis with respect to all
outstanding Indebtedness of ▇▇▇▇▇▇ and its Subsidiaries, including all
commissions, discounts and other fees and charges owed with respect to
Letters of Credit and banker's acceptance financing.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended from time to time (or any successor statute thereto), and
the regulations promulgated and rulings issued thereunder.
"INVESTMENT" shall mean (i) any direct or indirect purchase or other
acquisition by ▇▇▇▇▇▇ or any of its Subsidiaries of any beneficial
interest in, including stock, partnership interest or other equity
securities of, or ownership interest in, any other Person; and (ii) any
direct or indirect loan, advance or capital contribution by ▇▇▇▇▇▇ or
any of its Subsidiaries to any other Person, including all indebtedness
and accounts receivable from that other Person that are not current
assets or did not arise from sales to that other Person in the ordinary
course of business.
"LC GUARANTY" shall mean any guarantee pursuant to which a Senior
Lender or any Affiliate of a Senior Lender shall guaranty the payment
or performance by ▇▇▇▇▇▇ of its reimbursement obligation under any
Letter of Credit.
"LETTERS OF CREDIT" shall mean any letter of credit, including without
limitation, standby letters of credit and documentary letters of credit
issued by a Senior Lender or any Affiliates of a Senior Lender for the
account of ▇▇▇▇▇▇.
"ISSUER PARTY" shall mean, at any time, ▇▇▇▇▇▇ and its Subsidiaries and
BPG.
"LIABILITIES" shall have the meaning assigned to that term in Section
7.1.
"LIEN" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a
lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the
same economic effect as any of the foregoing) relating to such asset
and (c) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.
"MANAGEMENT FEE" shall mean the fees paid by ▇▇▇▇▇▇ to BPG for managing
the business of ▇▇▇▇▇▇, which fees shall be paid quarterly and shall
not exceed $100,000 per quarter.
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"MATERIAL ADVERSE EFFECT" shall mean as to any Person, a material
adverse effect on (a) the business, assets, operations, prospects or
condition, financial or otherwise, of such Person and its Subsidiaries
taken as a whole, (b) the ability of any such Person to perform any of
its material obligations under this Agreement and the other Transaction
Documents, taken as a whole, or (c) the rights of or benefits available
to the holders of the Notes or Warrants under this Agreement and the
other Transaction Documents, taken as a whole.
"MATURITY DATE" shall have the meaning assigned to such term in the
Note(s).
"MONEY BORROWED" shall mean (i) Indebtedness arising from the lending
of money by any Person to ▇▇▇▇▇▇ or any of its Subsidiaries; (ii)
Indebtedness, whether or not in any such case arising from the lending
by any Person of money to ▇▇▇▇▇▇ or any of its Subsidiaries, (A) which
is represented by notes payable or drafts accepted that evidence
extensions of credit, (B) which constitutes obligations evidenced by
bonds, debentures, notes or similar instruments, or (C) upon which
interest charges are customarily paid (other than accounts payable) or
that was issued or assumed as full or partial payment for property;
(iii) Indebtedness that constitutes a Capitalized Lease Obligation;
(iv) reimbursement obligations with respect to Letters of Credit or LC
Guaranties and (v) Indebtedness for Money Borrowed under clauses (i)
through (iii) hereof, if owed directly by ▇▇▇▇▇▇ or any of its
Subsidiaries.
"NET INCOME" shall mean, for any period, the net income (or loss) of
▇▇▇▇▇▇ and its Subsidiaries on a Consolidated basis for such period
taken as a single accounting period determined in conformity with GAAP;
provided that there shall be excluded therefrom (i) the income (or
loss) of any Person (other than a Subsidiary of ▇▇▇▇▇▇) in which any
other Person (other than ▇▇▇▇▇▇ or any of its Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other
distributions actually paid to ▇▇▇▇▇▇ or any of its Subsidiaries by
such Person during such period, (ii) the income of any Subsidiary of
▇▇▇▇▇▇ to the extent that the declaration or payment of dividends or
similar distributions by that Subsidiary of that income is not at the
time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary.
"NOTE" shall mean each subordinated promissory note due October 22,
2008, to be purchased by CMII from ▇▇▇▇▇▇ on the Closing Date, which
promissory notes shall be substantially in the form attached hereto as
Exhibit A and which shall be in the aggregate principal amount of
US$5,000,000, as each may be amended, modified, replaced, substituted
or renewed from time to time in accordance with their terms
"OBLIGATIONS" shall mean the obligations, liabilities and indebtedness
of the Issuer Parties under the Transaction Documents including,
without limitation, (a) the obligation to pay principal, interest
(including, without limitation, interest accrued after the commencement
of a proceeding under the Bankruptcy Code in which any Issuer Party is
a debtor, whether or not a claim in respect of such interest is an
allowed claim in such proceeding), charges, expenses, fees,
7
attorneys' fees and disbursements, indemnities and other amounts
(including amounts payable as the purchase price (together with
interest thereon and other amounts payable in connection therewith) in
connection with any repurchase by BPG of the Warrants) payable by any
Issuer Party under any Transaction Document and (b) the obligation of
any Issuer Party to reimburse any amount in respect of any of the
foregoing that CMII, in accordance with the provisions of any
Transaction Document, may elect to pay or advance on behalf of any
Issuer Party.
"PERMITTED ENCUMBRANCES" shall mean:
(a) Liens imposed by law for taxes, assessments, governmental
charges or levies that are not yet due or are being contested
in compliance with Section 8.2(g);
(b) Liens arising in the ordinary course of ▇▇▇▇▇▇'▇ business by
operation of law or regulation, but only if payment in respect
of any such Lien is not at the time required and such Liens do
not, in the aggregate, materially detract from the value of
the Property of ▇▇▇▇▇▇ or materially impair the use thereof in
the operation of ▇▇▇▇▇▇'▇ business;
(c) omitted;
(d) omitted;
(e) judgment liens in respect of judgments that do not constitute
an Event of Default under Section 7(a)(x) of a Note;
(f) omitted;
(g) Liens securing Indebtedness owing by ▇▇▇▇▇▇ to one of ▇▇▇▇▇▇'▇
Subsidiaries or by one of ▇▇▇▇▇▇'▇ Subsidiaries to ▇▇▇▇▇▇ or
another Subsidiary of ▇▇▇▇▇▇; and
(h) such other Liens as CMII may hereafter approve in writing.
provided, that the term "Permitted Encumbrances" shall not include any
Lien securing Indebtedness or Money Borrowed.
"PERMITTED INVESTMENTS" shall mean:
(a) any Property received in connection with a bankruptcy
proceeding or a settlement;
(b) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the
United States of America (or by any agency thereof to the
extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing
within one year from the date of acquisition thereof;
8
(c) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service,
Inc.;
(d) investments in certificates of deposit, banker's acceptances
and time deposits maturing within one year from the date of
acquisition thereof issued or guaranteed by or placed with,
and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the
laws of the United States of America or any State thereof
which has a combined capital and surplus and undivided profits
of not less than $100,000,000;
(e) investments in money market mutual funds having assets in
excess of $2,000,000,000;
(f) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above
and entered into with a financial institution satisfying the
criteria described in clause (c) above; and
(g) investments in a Subsidiary that has complied with Section
8.1(j).
"PERMITTED PURCHASE MONEY INDEBTEDNESS" shall mean Purchase Money
Indebtedness of ▇▇▇▇▇▇ and its Subsidiaries incurred after the date
hereof which is secured by a Purchase Money Lien and which, when
aggregated with the principal amount of all other Purchase Money
Indebtedness and Capitalized Lease Obligations of ▇▇▇▇▇▇ and its
Subsidiaries at the time outstanding, does not exceed $1,000,000. For
purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of capitalized leases shall be computed as a
Capitalized Lease Obligation.
"PERMITTED SELLER NOTES AMOUNT" shall mean the sum of the $7.5 Million
Note Amount (as such term in defined in the Senior Credit Agreement as
in effect on the Closing Date) and the Two Million Note Amount (as such
term in defined in the Senior Credit Agreement as in effect on the
Closing Date).
"PERMITTED SELLER NOTES PRINCIPAL" shall have the meaning given in the
Senior Credit Agreement as in effect on the Closing Date.
"PERSON" shall mean and includes natural persons, corporations, limited
liability companies, limited partnerships, limited liability
partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts or other organizations, whether or not legal
entities, and governments and agencies and political subdivisions
thereof and their respective permitted successors and assigns (or in
the case of a governmental person, the successor functional equivalent
of such Person).
"PLANS" shall have the meaning given in Section 5.19.
9
"PROJECTIONS" shall mean forecasted consolidated and consolidating: (a)
balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared, to the
extent applicable, on a division-by-division and
Subsidiary-by-Subsidiary basis on a consistent basis with any
historical financial statements, together with appropriate supporting
details and a statement of material underlying assumptions.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, general or intangible.
"PURCHASE MONEY INDEBTEDNESS" shall mean and include (i) Indebtedness
for the payment of all or any part of the purchase price of any fixed
assets, (ii) any Indebtedness incurred at the time of or within 10 days
prior to or after the acquisition of any fixed assets for the purpose
of financing all or any part of the purchase price thereof and (iii)
any renewals, extensions or refinancings thereof, but not any increases
in the principal amounts thereof outstanding at the time.
"PURCHASE MONEY LIEN" shall mean a Lien upon fixed assets of ▇▇▇▇▇▇ or
any of its Subsidiaries which secures Purchase Money Indebtedness, but
only if such Lien shall at all times be confined solely to the fixed
assets the purchase price of which was financed through the incurrence
of the Purchase Money Indebtedness secured by such Lien.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement substantially in the form of Exhibit F hereto, as the same
may be amended, modified or supplemented from time to time.
"REGULATION U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System, as the same is from time to time in effect, and
all rulings and interpretations thereunder or thereof.
"REQUIREMENTS OF LAW" shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule, regulation, right,
privilege, qualification, license or franchise or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable or binding upon such Person or any of its property or to
which such Person or any of its property is subject or pertaining to
any or all of the transactions contemplated or referred to herein.
"RESTRICTED JUNIOR PAYMENT" shall mean: (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of stock or other equity security of, or ownership interest in, ▇▇▇▇▇▇
or any Subsidiary thereof now or hereafter outstanding, except a
dividend payable solely in shares of that class of stock to the holders
of that class; (ii) any redemption, conversion, exchange, retirement,
sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock or other
equity security of, or ownership interest in, ▇▇▇▇▇▇ or any Subsidiary
thereof now or hereafter outstanding; (iii) any payment or prepayment
of interest on, principal of, premium, if any, redemption, conversion,
10
exchange, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, any Indebtedness subordinated to the
Obligations; and (iv) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of stock or other equity security of, or
ownership interest in, ▇▇▇▇▇▇ or any Subsidiary thereof now or
hereafter outstanding other than pursuant to the Warrants or in
connection with transactions relating to the Warrants or Put Notes (as
such term is defined in the Warrants).
"SEC" shall mean the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the SEC thereunder.
"SELLER NOTES" shall have the meaning given in the Senior Credit
Agreement as in effect on the Closing Date.
"SENIOR CREDIT AGREEMENT" shall mean the credit agreement dated as of
January 11, 2001 among ▇▇▇▇▇▇ and Fleet Capital Corporation, as amended
from time to time in accordance with its terms and the terms of Section
3.4.2 of the Subordination Agreement. References to the "Senior Credit
Agreement as in effect on the Closing Date" shall mean and refer to the
Senior Credit Agreement as amended through the amendments contained in
the Second Amendment and Waiver Agreement, dated the date hereof,
between ▇▇▇▇▇▇ and Fleet Capital Corporation.
"SENIOR DEBT" has the meaning given to "Bank Indebtedness" in the
Subordination Agreement.
"SENIOR DOCUMENTS" shall mean "Bank Documents" as defined in the
Subordination Agreement.
"SENIOR LENDERS" shall mean each Person that is or shall become a
Lender under the Senior Credit Agreement for so long as such Person
shall be a party to that agreement.
"SUBORDINATION AGREEMENT" shall mean a subordination and intercreditor
agreement to be entered into by CMII, ▇▇▇▇▇▇ and Fleet Capital
Corporation, which agreement shall be substantially in the form of
Exhibit D, as such agreement may be amended, modified or supplemented
from time to time in accordance with its terms.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership, association or other business entity of which more than
fifty percent (50%) of the total voting power of shares of stock (or
equivalent ownership or controlling interest) entitled (without regard
to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof.
11
"SUBSIDIARY GUARANTEE" shall mean the guarantee substantially in the
form attached hereto as Exhibit G executed and delivered by each
Subsidiary of ▇▇▇▇▇▇ at the Closing, as the same shall be amended and
modified from time to time in accordance with its terms.
"TAXES" shall have the meaning assigned to that term in Section 2.6.
"TOTAL DEBT" shall mean, as at any date of determination, the aggregate
stated balance sheet amount of all Indebtedness for Money Borrowed of
▇▇▇▇▇▇ and its Subsidiaries, including without limitation, the Senior
Debt, the Notes and Capitalized Lease Obligations, determined on a
consolidated basis in accordance with GAAP.
"TRANSACTION DOCUMENTS" shall mean, collectively, this Agreement, the
Notes, the Warrants, the Registration Rights Agreement, and the
Subordination Agreement (and each other agreement entered into between
any Issuer Party and CMII with respect to the payment of fees or
otherwise in connection with any of the foregoing).
"WARRANTS" shall mean the warrants to purchase shares of common stock
of BPG to be issued pursuant to Section 2.1 substantially in the form
of Exhibit E hereto, as the same may be amended, modified or
supplemented from time to time.
"WARRANT SHARES" shall mean the shares of common stock of BPG issuable
upon the exercise of the Warrants.
"▇▇▇▇▇▇" shall have the meaning assigned to such term in the preamble
hereto.
1.2 Accounting Terms
Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with
GAAP; provided that, if ▇▇▇▇▇▇ notifies CMII that ▇▇▇▇▇▇ requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof
on the operation of such provision (or if CMII notifies ▇▇▇▇▇▇ that
CMII requests an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such
change in GAAP or in the application thereof, then such provision shall
be interpreted on the basis of GAAP as in effect and applied
immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in
accordance herewith.
1.3 Knowledge of an Issuer Party
All references to the knowledge of an Issuer Party or to facts known by
an Issuer Party shall mean actual knowledge or notice of any officer of
such Issuer Party or any Subsidiary or division thereof.
12
1.4 Definitional Provisions
References in the Transaction Documents to any agreement or contract,
or section or provision thereof or definition contained therein shall
mean and be a reference to such agreement or contract, or correlative
section, provision or definition as amended, amended and restated,
refinanced, supplemented or otherwise modified from time to time in
accordance with its terms.
2. PURCHASE AND SALE OF NOTES AND WARRANTS
2.1 Purchase and Sale of the Notes and Warrants
(a) Subject to the terms and conditions herein set forth,
▇▇▇▇▇▇ agrees that it will issue and sell to CMII,
and CMII agrees that it will acquire from ▇▇▇▇▇▇ on
the Closing Date, the Notes in the aggregate original
principal amount of US$5,000,000 in substantially the
form attached hereto as Exhibit A, appropriately
completed in conformity herewith, the purchase price
for which shall be US$4,500,000;
(b) Subject to the terms and conditions herein set forth
and in the Warrants, BPG agrees that it will issue
and sell to CMII and CMII agrees that it will acquire
from BPG on the Closing Date for the purchase price
of $500,000 and in consideration for the purchase of
the Notes, the Warrants for the purchase of, 405,000
shares of common stock of BPG (subject to adjustment
as set forth in the Warrant) at a price of US$0.01
per share (subject to adjustment as set forth in the
Warrant) (the "EXERCISE PRICE"). The Warrants are
being issued substantially in the form of Exhibit E
hereto. The holders of Warrant Shares will be
entitled to the benefits of the Registration Rights
Agreement; and
(c) Each of ▇▇▇▇▇▇, BPG and CMII acknowledges that the
purchase prices set forth above for each of the Notes
and the Warrants represent their relative fair market
values, and agree to be bound by this allocation for
all tax purposes pursuant to Treasury Regulation
Section 1.1273-2(h).
2.2 Fees and Closing; Placement Fee
On the Closing Date, ▇▇▇▇▇▇ shall pay to CMII a placement fee equal to
US$75,000. In addition, on the Closing Date, ▇▇▇▇▇▇ shall pay or
reimburse all of CMII's reasonable out-of-pocket expenses (including
reasonable lawyers' fees, charges and disbursements and reasonable
consultants' fees and expenses) incurred in connection with the
transactions described herein. All payments made pursuant to this
Section 2.2 shall be made by wire transfer of immediately available
funds to an account or accounts designated by CMII.
13
2.3 Closing
The purchase and issuance of the Notes and the Warrants shall take
place at the closing (the "CLOSING") to be held at the offices of
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP in New York City, on October 22,
2001, or at such other time and place as the parties may agree upon
(the date and time of the Closing, the "CLOSING DATE"). On the Closing
Date, (a) ▇▇▇▇▇▇ shall deliver its Note(s) to CMII against delivery by
CMII to ▇▇▇▇▇▇ of the purchase price therefor, and (b) BPG shall
deliver the Warrants to CMII against delivery by CMII to BPG of the
purchase price therefor, in each case such purchase price to be paid by
wire transfer of immediately available funds to an account or accounts
specified in writing by ▇▇▇▇▇▇ or BPG, as applicable.
2.4 Financial Accounting Positions; Tax Reporting
Each of the parties hereto agrees to take reporting and other positions
with respect to the Notes and Warrants that are consistent with the
purchase price of the Notes and Warrants set forth herein for all
financial accounting purposes, unless otherwise required by applicable
GAAP or SEC rules. Each of the parties to this Agreement agrees to take
reporting and other positions with respect to the Notes and Warrants
that are consistent with the purchase price of the Notes and Warrants
set forth herein for all other purposes, including, without limitation,
for all federal, state and local tax purposes.
2.5 Payments
The Issuer Parties shall make all payments under the Transaction
Documents irrespective of any right of counterclaim or set-off. Unless
otherwise stated therein, the Issuer Parties shall make all such
payments not later than 1:00 p.m. (New York City time) on the day when
due in U.S. Dollars to the bank account most recently designated by
CMII (by at least two Business Days' prior notice) by a wire transfer
of immediately available funds, with payments being received by CMII
after such time being deemed to have been received on the next
succeeding Business Day. Whenever any payment under any of the
Transaction Documents is stated to be due on a day other than a
Business Day, such payment shall be due on the next succeeding Business
Day.
2.6 Taxes, Etc.
(a) Any and all payments by each Issuer Party under any
Transaction Document shall be made, in accordance
with Section 2.5 of this Agreement, free and clear of
and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect
thereto, excluding, in the case of CMII, net income
taxes that are imposed by the United States and
franchise taxes and net income and/or capital gain
taxes that are imposed on CMII by the state or
foreign jurisdiction under the laws of which CMII is
organized or any political subdivision thereof or in
which CMII's lending
14
office is located or by a jurisdiction as a result of
a present, former or future connection with CMII
(other than a connection resulting from or
attributable to such Person having executed,
delivered or performed its obligations or received a
payment under, or enforced, this Agreement) or any
branch profits tax imposed by the United States or
any similar tax imposed by any other jurisdiction in
which CMII is located (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings
and liabilities being referred to in this Section 2.6
as "TAXES"). If any Issuer Party shall be required by
law to deduct any Taxes from or in respect of any sum
payable under any of the Transaction Documents to
CMII, (i) the sum payable shall be increased by such
Issuer Party as may be necessary so that after making
all required deductions (including deductions
applicable to additional sums payable under this
Section) CMII receives an amount equal to the sum it
would have received had no such deductions been made,
(ii) such Issuer Party shall make such deductions and
withholding and (iii) such Issuer Party shall pay the
full amount deducted to the relevant taxation
authority or other authority in accordance with
applicable law.
(b) In addition, each Issuer Party shall pay any present
or future stamp, documentary, excise, property or
similar taxes, charges or levies that arise from any
payment made by such Issuer Party under any of the
Transaction Documents or from the execution, delivery
or registration of, or otherwise with respect to, any
of the Transaction Documents (referred to in this
Section 2.6 as "OTHER TAXES").
(c) Each Issuer Party shall indemnify CMII for the full
amount of Taxes and Other Taxes, and for the full
amount of Taxes and Other Taxes imposed by any
jurisdiction on amounts payable under this Section,
paid by CMII and any liability (including penalties,
additions to tax, interest and expenses but excluding
penalties, additions to tax, interest and expenses
caused by the gross negligence or willful misconduct
of CMII) arising therefrom or with respect thereto.
This indemnification shall be made within 30 days
from the date CMII makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes
by or on behalf of any Issuer Party, such Issuer
Party shall furnish to CMII, at its address referred
to in Section 10.2, the original receipt of payment
thereof or a certified copy of such receipt. In the
case of any payment under any Transaction Document by
or on behalf of any Issuer Party through an account
or branch outside the United States or on behalf of
such Issuer Party by a payor that is not a United
States person, if such Issuer Party determines that
no Taxes are payable in respect thereof, such Issuer
Party shall furnish, or shall cause such payor to
furnish, to CMII, at such address, an opinion of
counsel acceptable to CMII stating that such payment
is exempt from Taxes. For purposes of this paragraph
(d) and Section 2.6(e), the
15
terms "UNITED STATES" and "UNITED STATES PERSON"
shall have the meanings specified in Section 7701 of
the Internal Revenue Code.
(e) CMII (and any successor or transferee of CMII
organized under the laws of a jurisdiction outside
the United States) shall, on or prior to the date of
its execution and delivery of this Agreement as at
the date hereof, and in the case of CMII or any
successor or transferee of CMII after the date hereof
and as soon as practicable thereafter (and from time
to time thereafter if requested in writing by any
Issuer Party at the time or times prescribed by law,
but only so long thereafter as it remains lawfully
able to do so), provide such Issuer Party with
Internal Revenue Service form W8-IMY, W8-BEN and/or
W8-ECI, as appropriate, or any successor form[s]
prescribed by the Internal Revenue Service,
certifying that the beneficial owner of the Notes is
exempt from or is entitled to a reduced rate of
United States withholding tax on interest payments on
the Notes. If the forms provided by such Person at
the time it first becomes a party to this Agreement
indicate a United States interest withholding tax
rate in excess of zero, withholding tax at such rate
shall be considered excluded from Taxes unless and
until it provides the appropriate forms certifying
that a lesser rate applies, whereupon withholding tax
at such lesser rate shall be considered excluded from
Taxes only for periods governed by such forms;
provided, however, that, if at the date of the
succession or transfer pursuant to which such Person
becomes a party to this Agreement, its immediate
predecessor was entitled to payments under Section
2.6(a) in respect of United States withholding tax
with respect to interest paid at such date, then, to
such extent, the term "Taxes" shall include (in
addition to withholding taxes that may be imposed in
the future or other amounts otherwise includable in
Taxes) United States withholding tax, if any,
applicable with respect to the successor/transferee
on such date. If any form or document referred to in
this paragraph (e) and requested by any Issuer Party
pursuant to this paragraph (e) requires the
disclosure of information, other than information
necessary to compute the tax payable and information
required by Internal Revenue Service forms W8-IMY,
W8-BEN and/or W8-ECI (including any amended or
successor forms) that the provider reasonably
considers to be confidential, the provider shall give
notice thereof to such Issuer Party and shall not be
obligated to include in such form or document such
confidential information, provided that if the
failure to provide such information results in the
imposition of United States withholding tax at a rate
in excess of the rate at which such tax would be
imposed if such information were provided, then such
excess withholding tax shall be considered excluded
from Taxes.
(f) For any period with respect to which CMII or any
successor or transferee of CMII has failed to provide
any Issuer Party with the appropriate form described
in
16
Section 2.6(e) (other than if such failure is due to
a change in law occurring after the date on which a
form originally was required to be provided or if
such form otherwise is not required under Section
2.6(e)), such Person shall not be entitled to
indemnification under Section 2.6(a) or (c) with
respect to Taxes imposed by the United States
relating to interest payments on the Notes of such
Issuer Party; provided, however, that should such
Person become subject to Taxes because of its failure
to deliver a form required hereunder, once such forms
are delivered to the relevant Issuer Party, such
Issuer Party shall take such reasonable steps as such
Person shall reasonably request to assist such Person
to recover such Taxes.
(g) If CMII receives a refund for (or determines that
there has been an overpayment of) any Taxes or other
amounts as to which CMII has been indemnified
pursuant to Section 2.6(c) or on account of which
additional amounts have been paid pursuant to Section
2.6(a), CMII shall promptly notify the relevant
Issuer Party and pay over such refund or overpayment
to such Issuer Party (but only to the extent CMII has
been indemnified pursuant to Section 2.6(c)) or of
additional amounts paid by such Issuer Party under
this Section 2.6 with respect to Taxes or other
amounts on account of which additional amounts have
been paid) net of all out-of-pocket expenses of CMII
and without interest (other than any interest
actually received thereon from the respective
Governmental Authority with respect to such refund
net of any Taxes estimated by CMII to be payable by
it in respect of such interest). If, at any time
after CMII makes a payment to any Issuer Party
pursuant to the preceding sentence, CMII determines
that it was not entitled to the full amount of any
refund or overpayment (together with interest thereon
(if any)) reimbursed to such Issuer Party, such
Issuer Party upon the demand of CMII shall promptly
pay to CMII the amounts so refunded or overpaid and
paid over to such Issuer Party (plus any penalties,
interest or other charges imposed by the relevant
Governmental Authority and attributable solely to the
amount of such refund or overpayment paid over to
such Issuer Party). If any Issuer Party determines in
good faith that a reasonable basis exists for
contesting a Tax or Other Tax, and if it so requests,
CMII shall cooperate in challenging such Tax or Other
Tax at such Issuer Party's expense. If CMII becomes
aware that it is entitled to claim a refund in
respect of a Tax or Other Tax as to which it has been
indemnified by an Issuer Party pursuant to Section
2.6(c) or with respect to which an Issuer Party paid
additional amounts pursuant to Section 2.6(a), it
shall promptly notify the Issuer Parties of the
availability of such refund claim and shall, within
30 days after receipt of a request by such Issuer
Party, make a claim to the applicable Governmental
Authority for such refund at such Issuer Party's
expense. Nothing contained in this Section 2.6(g)
shall require CMII to make available its tax returns
(or any other information relating to its taxes that
it deems confidential) to any Issuer, Party or any
other Person.
17
(h) If an Issuer Party is required to make additional
payments or indemnification payments pursuant to this
Section 2.6 to or on account of a party to this
Agreement other than CMII or an Affiliate thereof as
a result of a change in law or treaty occurring after
such party first becomes a party to this Agreement or
designates a new lending office, then such party
will, at the Issuer Party's request, change the
jurisdiction of its lending office, provided that (i)
the Issuer Party has a reasonable basis for
determining that such change will eliminate or reduce
any additional or indemnification payment which may
thereafter accrue and (ii) such party determines in
its discretion that such change is not
disadvantageous to it.
3. CONDITIONS TO OBLIGATIONS OF CMII TO PURCHASE THE NOTES AND WARRANTS
The obligation of CMII to purchase the Notes and Warrants, to pay the
purchase price therefor on the Closing Date and to perform any of its
obligations hereunder, shall be subject to the satisfaction as
determined by, or waived by, CMII of the conditions set forth in this
Section 3 on or before the Closing Date. CMII shall not be obligated to
purchase any Note unless the purchase and sale of the Warrants occurs
simultaneously therewith and shall not be obligated to purchase the
Warrants unless the purchase and sale of the Notes occurs
simultaneously therewith.
3.1 Representations and Warranties
The representations and warranties contained in Section 5 hereof shall
be true and correct at and as of the Closing Date, as if made at and as
of such date.
3.2 Compliance with this Agreement
The Issuer Parties shall have performed and complied in all material
respects with all of their agreements and satisfied the conditions set
forth or contemplated herein that are required to be performed or
complied with or satisfied by each of them, respectively, on or before
the Closing Date.
3.3 Secretary's Certificates
CMII shall have received certificates from each of BPG and ▇▇▇▇▇▇, each
dated the Closing Date, and signed by an officer thereof, certifying
(a) that the attached copies of its Certificate of Incorporation and
By-laws and resolutions of the Board of Directors approving the
Transaction Documents to which it is a party and the transactions
contemplated hereby and thereby, are all true, complete and correct and
remain unamended and in full force and effect, and (b) as to the
incumbency and specimen signature of each officer thereof executing any
Transaction Document or any other document delivered in connection
herewith on behalf thereof.
18
3.4 Documents; Due Diligence
CMII shall have received prior to the Closing Date true, complete and
correct copies of such agreements, schedules, exhibits, certificates,
documents, financial information and filings as it may reasonably
request in connection with or relating to the transactions contemplated
hereby, all in form and substance satisfactory to CMII; and shall have
completed, to its reasonable satisfaction, all legal and financial due
diligence of BPG and ▇▇▇▇▇▇.
3.5 Purchase of Notes and Warrants Permitted by Applicable Laws
The acquisition of and payment for the Notes and Warrants to be
acquired by CMII hereunder and the consummation of the transactions
contemplated hereby (a) shall not be prohibited by any Requirements of
Law, (b) shall not subject CMII to any penalty or other onerous
condition under or pursuant to any Requirement of Law, and (c) shall be
permitted by all Requirements of Law to which CMII or the transactions
contemplated by or referred to herein or in the Transaction Documents
are subject; and CMII shall have received such certificates or other
evidence as it may reasonably request to establish compliance with this
condition.
3.6 Opinion of Counsel
CMII shall have received opinions of outside counsel to the Issuer
Parties, dated as of the Closing Date, relating to the transactions
contemplated by or referred to herein, in substantially the form of
Exhibit C attached hereto.
3.7 Approval Of Counsel To CMII
All actions and proceedings hereunder and all agreements, schedules,
exhibits, certificates, financial information, filings and other
documents required to be delivered by ▇▇▇▇▇▇ and BPG or in connection
with the consummation of the transactions contemplated hereby, and all
other related matters, shall have been in form and substance acceptable
to ▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to CMII, in its
reasonable judgment (including, without limitation, the opinion of
counsel referred to in Section 3.6 hereof).
3.8 Consents and Approvals
All consents, exemptions, authorizations, or other actions by, or
notices to, or filings with, Governmental Authorities and other Persons
in respect of all Requirements of Law and with respect to the
Contractual Obligations of ▇▇▇▇▇▇ and BPG necessary in connection with
the execution, delivery or performance (including, without limitation,
the payment of interest on the Notes and the issuance of the shares of
common stock of BPG upon the exercise of the Warrants) by ▇▇▇▇▇▇ and
BPG or enforcement against ▇▇▇▇▇▇ and BPG of the Transaction Documents
and the Related Transaction Documents shall have been obtained and be
in full force and effect, and CMII shall have been furnished with
appropriate evidence thereof, and all
19
waiting periods shall have lapsed without extension or the imposition
of any conditions or restrictions.
3.9 No Material Judgment or Order
There shall not be on the Closing Date any judgment or order of a court
of competent jurisdiction or any ruling of any Governmental Authority
or any condition imposed under any Requirement of Law that, in the
judgment of CMII, would prohibit the purchase of the Notes or Warrants
hereunder or subject CMII to any penalty or other onerous condition if
the Notes or Warrants were to be purchased hereunder.
3.10 Good Standing Certificates
CMII shall have received as of the Closing Date, good standing and
franchise (or similar) tax status certificates for BPG and ▇▇▇▇▇▇,
dated a recent date, from each of their respective jurisdictions of
incorporation or organization and all other jurisdictions where they
are required to be qualified as foreign corporations, in each case in
form and substance satisfactory to CMII.
3.11 No Material Adverse Change
Since December 31, 2000 there has not been any material adverse change
or any development that has caused a Material Adverse Effect and there
has not been any material transaction entered into or any material
transaction that is probable of being entered into by ▇▇▇▇▇▇ or its
Subsidiaries, other than transactions in the ordinary course of
business, that could reasonably be expected to result in a Material
Adverse Effect.
3.12 Warrants
BPG shall have authorized and reserved for issuance to CMII that number
of shares of its common stock necessary for the purpose of issuance to
CMII upon conversion of the Warrants and shall have issued to CMII and
CMII shall have received one or more Warrants to purchase not less than
an aggregate of 405,000 shares of common stock of BPG (subject to
adjustment as set forth in the Warrants).
3.13 Amendment of Senior Credit Agreement
The Senior Credit Agreement shall have been amended by amendment in the
form of Exhibit I.
3.14 Reserved
3.15 Notes
CMII shall have received the duly executed Notes.
20
3.16 Subordination Agreement
CMII shall have entered into the Subordination Agreement with Fleet
Capital Corporation and ▇▇▇▇▇▇ in the form of Exhibit D.
3.17 Fees
The payment by ▇▇▇▇▇▇, by wire transfer of immediately available funds,
of the placement fee referred to in Section 2.2 and the reasonable fees
and expenses of ▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to CMII,
related to this transaction.
3.18 Reserved
3.19 Reserved
3.20 Registration Rights Agreement
The Registration Rights Agreement shall have been duly executed and
delivered by all Persons named as parties thereto.
3.21 Reserved
3.22 Disbursement Letter
CMII shall have received a disbursement authorization letter for the
disbursement of funds hereunder, from BPG and ▇▇▇▇▇▇ in form and
substance satisfactory to CMII.
3.23 Lien Searches
CMII shall have received results of such lien searches as to ▇▇▇▇▇▇ and
BPG as it may have requested, the results of which shall be
satisfactory to CMII.
3.24 Certificates
CMII shall have received from a Financial Officer of ▇▇▇▇▇▇ a
certificate, in form and substance satisfactory to CMII, as to the
solvency of ▇▇▇▇▇▇ and a certificate from a Financial Officer of ▇▇▇▇▇▇
as to the satisfaction of the condition listed in Section 3.1.
4. Conditions to the Obligation of BPG and ▇▇▇▇▇▇ to Issue and Sell the
Notes and Warrants
The respective obligations of BPG and ▇▇▇▇▇▇ to issue and sell the
Warrants and to issue and sell the Notes, and to perform their other
respective obligations hereunder relating thereto shall be
21
subject to the satisfaction as determined by, or waived by BPG and
▇▇▇▇▇▇, of the following conditions on or before the Closing Date:
4.1 Representations and Warranties
The representations and warranties of CMII contained in Article 6
hereof shall be true and correct at and as of the Closing Date in all
material respects, as if made at and as of such date.
4.2 Compliance with this Agreement
CMII shall have performed and complied with all of its agreements and
conditions set forth or contemplated herein that are required to be
performed or complied with by CMII on or before the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER PARTIES
Each of ▇▇▇▇▇▇ and BPG hereby represents and warrants, only as to
itself (whether specifically named or referred to as an Issuer Party),
to CMII (which representations and warranties shall survive the
purchase and sale of the Notes and Warrants but which no Issuer Party
shall have an obligation to update for any changes or events occurring
after the Closing Date), both immediately prior to and after giving
effect to the transactions contemplated by this Agreement, as follows:
5.1 Disclosure
No representation or warranty of any Issuer Party contained in this
Agreement, the financial statements referred to in Section 5.5, the
other Transaction Documents or any other document, certificate or
written statement furnished by any Issuer Party to CMII, taken as a
whole, by or on behalf of any such Person for use in connection with
the Transaction Documents contains any untrue statement of a material
fact or omitted, or omits to state a material fact necessary in order
to make the statements contained herein or therein not misleading in
light of the circumstances in which the same were made.
5.2 No Material Adverse Effect
Since December 31, 2000 there shall have occurred no Material Adverse
Effect that has not been disclosed herein or in the attached Schedules.
5.3 No Default
The consummation of the transactions contemplated by the Transaction
Documents do not violate or conflict with any laws, rules, regulations
or orders of any Governmental Authority or violate, conflict with,
result in a breach of, or constitute a Default under any Contractual
Obligation of any Issuer Party except if such violations, conflicts,
breaches or Defaults have either been
22
waived on or before the Closing Date or could not reasonably be
expected to have, either individually or in the aggregate, a Material
Adverse Effect.
5.4 Organization, Powers, Capitalization and Good Standing
(a) Organization and Powers
Each of the Issuer Parties is a corporation duly
organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation
or formation, as applicable (which jurisdiction is
set forth on Schedule 5.4(a)). Each of the Issuer
Parties has all requisite corporate power and
authority to own and operate its properties, to carry
on its business as now conducted and proposed to be
conducted, to enter into each Transaction Document to
which it is a party and to carry out the transactions
contemplated thereby.
(b) Capitalization
The authorized equity securities and outstanding
options, warrants, conversion rights and similar
agreements for the purchase or issuance thereby of
each of the Issuer Parties is as set forth on
Schedule 5.4(b). All issued and outstanding shares of
capital stock of each of the Issuer Parties are duly
authorized and validly issued, fully paid and
nonassessable, and in the case of shares of capital
stock of ▇▇▇▇▇▇ free and clear of all Liens other
than Liens in favor of the Senior Lenders. All issued
and outstanding shares of capital stock of the Issuer
Parties were issued in compliance in all material
respects with all applicable state and federal laws
concerning the issuance of securities. The capital
stock of ▇▇▇▇▇▇ is owned by the stockholders of
▇▇▇▇▇▇ in the amounts set forth on Schedule 5.4(b).
No shares of the capital stock of any Issuer Party,
other than those described above, are issued and
outstanding. Except as provided in Schedule 5.4(b),
there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar
agreements or understandings for the purchase or
acquisition from any Issuer Party relating to any
shares of capital stock or other securities of any
such entity.
(c) Binding Obligation
This Agreement is, and the other Transaction
Documents when executed and delivered will be, the
legally valid and binding obligations of the
applicable parties thereto, each enforceable against
each of such parties, as applicable, in accordance
with their respective terms except as limited by
bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting
creditors' rights generally and by general principles
of equity relating to enforceability.
23
(d) Qualification
▇▇▇▇▇▇ is duly qualified and in good standing
wherever necessary to carry on its business and
operations, except in jurisdictions in which the
failure to be so qualified and in good standing could
not reasonably be expected to have a Material Adverse
Effect. All jurisdictions in which ▇▇▇▇▇▇ is
qualified to do business are set forth on Schedule
5.4(d).
5.5 Financial Statements and Projections
Except as set forth in Schedule 5.5, all financial statements
concerning ▇▇▇▇▇▇ that have been furnished to CMII pursuant to this
Agreement, as listed below, have been prepared in accordance with GAAP
consistently applied (except as disclosed therein), subject to year-end
audit adjustments and the absence of footnotes in the case of unaudited
interim financial statements, and such financial statements and the
notes thereto disclose all material liabilities, direct or contingent,
of the applicable Person, as of the dates thereof as required to be
disclosed by GAAP.
(a) The consolidated balance sheet at December 31, 2000
and the related statement of income of ▇▇▇▇▇▇ and its
Subsidiaries, for the Fiscal Year then ended, audited
by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
(b) The unaudited balance sheet at August 31, 2001 and
the related unaudited statement of income of ▇▇▇▇▇▇
and its Subsidiaries, for the eight month period then
ended.
▇▇▇▇▇▇ has heretofore furnished to CMII the Projections attached as
Schedule 5.5. The Projections are based upon what are believed to be (as
of the date made) by management of ▇▇▇▇▇▇ reasonable estimates and
assumptions, all of which are believed to be (as of the Closing Date) by
management of ▇▇▇▇▇▇ reasonable in light of the conditions which existed
at the time the Projections were made, have been prepared on the basis
of the assumptions stated therein, and reflect as of the Closing Date
the good faith estimate of ▇▇▇▇▇▇ of the results of operations and other
information projected therein, provided, that no representation is made
that any of such assumptions will be correct or that any of the
projected results will be realized.
24
5.6 Intellectual Property
▇▇▇▇▇▇ owns, is licensed to use or otherwise has the right to use, all
patents, trademarks, trade names, copyrights, technology, know-how and
processes used in or necessary for the conduct of its business as
currently conducted that are material to the Condition of ▇▇▇▇▇▇
(collectively called "INTELLECTUAL PROPERTY") and all such Intellectual
Property which is in the form of trademarks, service marks, patents and
registered copyrights is identified on Schedule 5.6 and fully protected
and/or duly and properly registered, filed or issued in the appropriate
office and jurisdictions for such registrations, filings or issuances,
except where the failure to effect such protection or registration
could not reasonably be expected to have a Material Adverse Effect. To
the knowledge of ▇▇▇▇▇▇, except as disclosed in Schedule 5.6, the use
of such Intellectual Property by ▇▇▇▇▇▇, did not, does not and, has not
been alleged by any Person to infringe on the rights of any Person
except for such infringements which could not reasonably be expected to
have a Material Adverse Effect.
5.7 Investigations, Audits, etc.
Except as set forth on Schedule 5.7, there is no review or audit by the
Internal Revenue Service concerning BPG or ▇▇▇▇▇▇ pending, and, to the
knowledge of any Issuer Party, there is no governmental investigation
concerning the violation or possible violation of any law by any of BPG
or ▇▇▇▇▇▇ pending or threatened.
5.8 Employee Matters
Except as set forth on Schedule 5.8, (a) neither ▇▇▇▇▇▇ nor any of its
employees is subject to any collective bargaining agreement, (b) no
petition for certification or union election is pending with respect to
the employees of ▇▇▇▇▇▇ and no union or collective bargaining unit has
sought such certification or recognition with respect to the employees
of ▇▇▇▇▇▇ and (c) there are no strikes, slowdowns, work stoppages or
controversies pending or, to the best knowledge of ▇▇▇▇▇▇ after due
inquiry, threatened between ▇▇▇▇▇▇ and its employees, other than
employee grievances arising in the ordinary course of business that
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. Except as set forth on Schedule
5.8, ▇▇▇▇▇▇ is not party to an employment contract, other than oral
at-will employment arrangements.
5.9 Solvency
(a) The fair saleable value of the businesses of ▇▇▇▇▇▇
on a going concern basis is not less than the amount
that will be required to be paid on or with respect
of the probable liability on the existing debts and
other liabilities (including contingent liabilities)
of ▇▇▇▇▇▇, as such debts and liabilities (including
contingent liabilities) become absolute and mature.
(b) The assets of ▇▇▇▇▇▇ do not constitute unreasonably
small capital for ▇▇▇▇▇▇ to carry out its business as
now conducted and as proposed to be conducted
including
25
the capital needs of ▇▇▇▇▇▇ taking into account the
particular capital requirements of the business
conducted by ▇▇▇▇▇▇ and projected capital
requirements and capital availability thereof.
(c) ▇▇▇▇▇▇ does not intend to incur debts beyond its
ability to pay such debts as they become due (taking
into account the timing and amounts of cash to be
received by such Persons, and of amounts to be
payable on or with respect of debt of ▇▇▇▇▇▇).
5.10 Reserved
5.11 Use of Proceeds; Margin Regulations
▇▇▇▇▇▇ is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation
U) and no part of the proceeds of the sale of the Notes or Warrants
will be used to acquire any margin stock.
5.12 Litigation
Except as set forth on Schedule 5.12, there are no legal actions,
suits, proceedings, claims or disputes pending or to the knowledge of
any Issuer Party threatened, at law, in equity, in arbitration or
before any Governmental Authority against or affecting any Issuer Party
or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect. No injunction, writ, temporary restraining
order, decree or any order of any nature has been issued by any court
or other Governmental Authority against any Issuer Party purporting to
enjoin or restrain the execution, delivery or performance of the
Transaction Documents by any Issuer Party.
5.13 ERISA
Provided that the representation and warranty in Section 6.5 is true
and correct (including with respect to all assignees of CMII pursuant
to Section 10.3) the execution and delivery of the Transaction
Documents, the purchase and sale of the Notes and Warrants hereunder
and the consummation of the transactions contemplated hereby and
thereby will not result in any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue
Code.
5.14 Environmental Matters
Except as described on Schedule 5.14, to the knowledge of each Issuer
Party:
(a) The property, assets and operations of the Issuer
Parties are and have been in compliance in all
material respects with all applicable Environmental
Laws; there
26
are no Hazardous Materials stored or otherwise
located in, on or under any of the property or assets
of any Issuer Party including the groundwater except
in compliance with applicable Environmental Laws or
as would not give rise to liability under
Environmental Law; and there have been no releases
or, to the knowledge of any Issuer Party, threatened
releases of Hazardous Materials in, on or under any
property adjoining any of the property or assets of
any Issuer Party and affecting the assets or
properties of any Issuer Party that have not been
remediated to the satisfaction of the appropriate
Governmental Authorities; in each case that could
reasonably be expected to have a Material Adverse
Effect.
(b) None of the property, assets or operations of any
Issuer Party is the subject of any federal, state or
local investigation evaluating whether (i) any
remedial action is needed to respond to a release or
threatened release of any Hazardous Materials into
the environment or (ii) any release or threatened
release of any Hazardous Materials into the
environment is in contravention of any Environmental
Law; in each case that could reasonably be expected
to have a Material Adverse Effect.
(c) No Issuer Party has received any notice or claim, nor
are there pending or, to the knowledge of any Issuer
Party, threatened or reasonably anticipated, lawsuits
or proceedings against it, with respect to violations
of an Environmental Law or in connection with the
presence of or exposure to any Hazardous Materials in
the environment or any release or threatened release
of any Hazardous Materials into the environment, and
no Issuer Party is or was the owner or operator of
any property that (i) pursuant to any Environmental
Law has been placed on any list of Hazardous
Materials disposal sites, including, without
limitation, the "National Priorities List" or
"CERCLIS List", (ii) has, or had, any underground
storage tanks located thereon, or (iii) has ever been
used as or for a waste disposal facility, a mine, a
gasoline service station or, other than for petroleum
substances stored in the ordinary course of business,
a petroleum products storage facility; in each case
that could reasonably be expected to have a Material
Adverse Effect.
(d) No Issuer Party has any absolute or contingent
liability in connection with the presence either on
or off the property of any Issuer Party of any
Hazardous Materials in the environment or any release
or threatened release of any Hazardous Materials into
the environment; in each case that could reasonably
be expected to have a Material Adverse Effect.
For the purposes of this Section 5.14, the term "PROPERTY" of any Issuer
Party includes, without limitation, property owned, operated or leased
by such Issuer Party. This Section 5.14 is the exclusive representation
and warranty relating to Environmental Law and Hazardous Materials.
27
5.15 Investment Company/Government Regulations
▇▇▇▇▇▇ is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. ▇▇▇▇▇▇ is not subject to
regulation under the Public Utility the Holding Company Act of 1935, as
amended, the Federal Power Act, the Interstate Commerce Act, or to the
knowledge of ▇▇▇▇▇▇, any federal or state statute or regulation
limiting its ability to incur Indebtedness.
5.16 Reserved
5.17 Private Offering
No form of general solicitation or general advertising was used by any
Issuer Party or its representatives in connection with the offer or
sale of the Notes or Warrants. Assuming the accuracy and validity of
representations of CMII in Section 6.4 hereof, no registration of the
Notes or Warrants pursuant to the provisions of the Securities Act or
the state securities or "blue sky" laws will be required in connection
with the offer, sale or issuance of the Notes or Warrants pursuant to
this Agreement. Each Issuer Party covenants and agrees that neither it,
nor anyone acting on its behalf, will offer or sell the Notes or
Warrants or any other security so as to require the registration of the
Notes or Warrants pursuant to the provisions of the Securities Act or
any state securities or "blue sky" laws, unless such Notes or Warrants
are so registered.
5.18 Broker's, Finder's or Similar Fees
Except as set forth on Schedule 5.18, there are no brokerage
commissions, finder's fees or similar fees or commissions payable in
connection with the transactions contemplated under any of the
Transaction Documents based on any agreement, arrangement or
understanding with any Issuer Party or any of its Subsidiaries.
5.19 Employee Benefit Plans
No Issuer Party nor any ERISA Affiliate has any actual or contingent,
direct or indirect, liability in respect of any employee benefit plan
(as defined in Section 3(3) of ERISA) or other material employee
benefit arrangement, other than in respect of any such plan or
arrangement listed on Schedule 5.19 (collectively, the "PLANS"). Each
Issuer Party has made available to CMII accurate and complete copies of
all of the Plans applicable to it. All of the Plans are in substantial
compliance with all applicable Requirements of Law. No "prohibited
transaction," as defined in Section 406 of ERISA and Section 4975 of
the Internal Revenue Code, has occurred in respect of any of the Plans
that has, or could reasonably be expected to, result in excise taxes or
other penalties or liabilities that could reasonably be expected to
have a Material Adverse Effect, and no civil or criminal action brought
pursuant to Part 5 of Title I of ERISA is pending or, to the best
knowledge of each Issuer Party, is threatened against any fiduciary of
any such Plan. No Plan: (i) is subject to Title IV of ERISA, or is
otherwise a Defined Benefit Plan, or is a multiple employer plan
(within the meaning of Section 413(c) of the Internal Revenue Code);
28
or (ii) provides for post-retirement welfare benefits (other than the
continuation coverage requirements of the Consolidated Omnibus
Reconciliation Act of 1985, as amended) or, except as listed on
Schedule 5.19, a "parachute payment" (within the meaning of Section
280G(b) of the Internal Revenue Code).
5.20 Insurance
Schedule 5.20 accurately summarizes or lists all of the insurance
policies or programs of ▇▇▇▇▇▇. All such policies are in full force and
effect, and are in compliance with the criteria set forth in Section
8.1(b). All such policies will remain in full force and effect and will
not in any way be affected by, or terminate or lapse by reason of the
consummation of any of the transactions contemplated by any of the
Transaction Documents.
5.21 Investments
Except as set forth on Schedule 5.21 ▇▇▇▇▇▇ holds no Investments.
5.22 Other Documents
Each Issuer Party has made available to CMII true, complete and correct
copies of all material agreements, schedules, exhibits, certificates,
financial information, filings and other documents relating to such
Issuer Party, and all amendments and modifications thereto as requested
by CMII. Such documents (including the Senior Credit Agreement)
comprise a full and complete copy of all material agreements and
understandings between the parties thereto with respect to the subject
matter thereof and all transactions related thereto, and there are no
material agreements or understandings, oral or written, or side
agreements not contained therein that relate to or modify the substance
thereof. Except as set forth in Schedule 5.22, and except for such as
could not reasonably be expected to have a Material Adverse Effect,
each of such material agreements to which it is a party has been duly
authorized by all necessary corporate action on the part of such Issuer
Party, was validly executed and delivered thereby and is the legal,
valid and binding obligation thereof, enforceable in accordance with
its terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting
creditors' rights generally and by general principles of equity
relating to enforceability, and except for such as could not reasonably
be expected to have a Material Adverse Effect. Except for such as could
not reasonably be expected to have a Material Adverse Effect, each of
such material agreements is in full force and effect, and none of their
provisions have been waived by any party thereto.
29
6. REPRESENTATIONS AND WARRANTIES OF CMII
CMII hereby represents and warrants as follows:
6.1 Authorization; No Contravention
The execution, delivery and performance by it of this Agreement and the
other Transaction Documents to which it is a party and the consummation of
the transactions contemplated hereby, including, without limitation, the
purchase of the Notes and the Warrants: (a) is within its limited
partnership power and authority and has been duly authorized by all
necessary limited partnership action; (b) does not contravene the terms of
its organizational documents or any amendment thereof; and (c) will not
violate, conflict with or result in any breach or contravention of any of
its Contractual Obligations, or any order or decree directly relating to
it.
6.2 Binding Effect
This Agreement and the other Transaction Documents to which it is a party
have been duly executed and delivered by it and constitute its legal,
valid and binding obligations, enforceable against it in accordance with
their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
6.3 No Legal Bar
The execution, delivery and performance of this Agreement by it will not
violate any Requirement of Law applicable to it.
6.4 Purchase for Own Account
The Notes and Warrants to be acquired by it pursuant to this Agreement and
the shares of common stock underlying the Warrants are being or will be
acquired for its own account and with no present intention of distributing
or reselling such Notes, Warrants and shares of common stock or any part
thereof without prejudice, however, to its right at all times to sell or
otherwise dispose of all or any part of the Warrants and the shares of
common stock underlying the Warrants under an effective registration
statement under the Securities Act, or the Notes, the Warrants and such
shares of common stock under an exemption from such registration available
under the Securities Act, and subject, nevertheless, to the disposition of
its property being at all times within its control, subject to the terms
and conditions of the Transaction Documents. If CMII should in the future
decide to dispose of the Notes, the Warrants and/or the underlying shares
of common stock, CMII understands and agrees that it may do so only in
compliance with the Securities Act and applicable state securities laws,
as then in effect, and subject to any applicable provisions of any
Transaction Documents to which CMII is a party or is bound. CMII agrees to
the imprinting of a legend on each of the Notes to the following effect:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
30
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SUCH ACT AND SUCH LAWS." Also, CMII agrees to the imprinting of a
legend on the Warrants (and the common stock or other securities
underlying the Warrants) to the following effect: "THIS WARRANT AND THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE
PROVISIONS OF THIS WARRANT."
6.5 ERISA
No part of the funds used by it to purchase the Notes or the Warrants
hereunder constitutes assets of any "employee benefit plan" (as defined in
Section 3(3) of ERISA) or "plan" (as defined in Section 4975 of the
Internal Revenue Code) listed on Schedule 5.19.
6.6 Broker's, Finder's or Similar Fees
There are no brokerage commissions, finder's fees or similar fees or
commissions payable in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with it or any
action taken by it.
6.7 Governmental Authorization; Third Party Consent
No approval, consent, compliance, exemption, authorization, or other
action by, or notice to, or filing with, any Governmental Authority or any
other Person in respect of any Requirement of Law, and no lapse of a
waiting period under a Requirement of Law, is necessary or required in
connection with the execution, delivery or performance by it or
enforcement against it of this Agreement or the transactions contemplated
hereby.
6.8 Accredited Investor
It is an "accredited investor" within the meaning of Rule 501(a)
promulgated under the Securities Act of 1933, as amended.
6.9 Litigation
No injunction, writ, temporary restraining order, decree or any order of
any nature has been issued by any court or other Governmental Authority
against CMII purporting to enjoin or restrain the execution, delivery or
performance of the Transaction Documents by CMII.
31
7. INDEMNIFICATION
7.1 Indemnification
In addition to all other sums due hereunder or provided for in this
Agreement, each Issuer Party agrees, severally and not jointly, to
indemnify and hold harmless CMII and its Affiliates and each of its
officers, directors, agents, advisors, employees, subsidiaries, partners,
attorneys, accountants and controlling persons (each, an "INDEMNIFIED
PARTY") to the fullest extent permitted by law from and against any and
all losses, claims, damages, costs, expenses (including, without
limitation, reasonable fees, disbursements and other charges of counsel
incurred by an Indemnified Party in any action or proceeding between such
Issuer Party and such Indemnified Party (or Indemnified Parties) or
between an Indemnified Party (or Indemnified Parties) and any third party
or otherwise) or other liabilities, losses or diminution in value
(collectively, "LIABILITIES") (1) resulting from or arising out of any
breach of any representation or warranty of such Issuer Party or (2) any
legal, administrative or other actions (including actions brought by CMII
or any equity holders of such Issuer Party or derivative actions brought
by any Person claiming through or in the name of such Issuer Party),
proceedings or investigations (whether formal or informal), or written
threats thereof, based upon, relating to or arising out of this Agreement,
the transactions contemplated hereby or any Indemnified Party's role
herein or in the transactions contemplated hereby; provided, however, that
(x) no Issuer Party shall be obligated to indemnify an Indemnified Party
hereunder to the extent that any Liabilities are determined by a court of
competent jurisdiction to have been the result of the gross negligence or
willful misconduct of such Indemnified Party or the breach of a
Transaction Document by an Indemnified Party (not resulting from a breach
or misrepresentation by any Issuer Party) and (y) BPG shall have no
liability under clause (2) of this Section 7.1, except to the extent that
the action, proceeding or investigation referred to therein pertains to
the Indemnified Party in its capacity as the holder of a Warrant or Issued
Warrant Share. In connection with the obligation of each Issuer Party to
indemnify for expenses as set forth above, such Issuer Party further
agrees, upon presentation of appropriate invoices containing reasonable
detail, promptly to (and in no event later than 30 days after the
presentation of such invoice(s)) reimburse each Indemnified Party for all
such reasonable expenses (including fees, disbursements and other charges
of counsel incurred by an Indemnified Party in any action or proceeding
between such Issuer Party and such Indemnified Party (or Indemnified
Parties) or between an Indemnified Party (or Indemnified Parties) and any
third party or otherwise) as they are incurred by such Indemnified Party;
provided, however, that if an Indemnified Party is reimbursed hereunder
for any expenses, such reimbursement of expenses shall be refunded to the
extent it is finally judicially determined that the Liabilities in
question resulted primarily from (i) the willful misconduct or gross
negligence of such Indemnified Party or (ii) the breach by such
Indemnified Party of any representation, warranty, covenant or other
agreement of such Indemnified Party contained in this Agreement or any
other Transaction Document.
32
7.2 Notification
Each Indemnified Party under this Section 7 will, promptly after the
receipt of notice of the commencement of any action, investigation, claim
or other proceeding against such Indemnified Party in respect of which
indemnity may be sought from the relevant Issuer Party under this Section
7, notify such Issuer Party in writing of the commencement thereof. The
omission of any Indemnified Party so to notify such Issuer Party of any
such action shall not relieve such Issuer Party from any liability that it
may have to such Indemnified Party unless, and only to the extent that,
such omission has a material adverse effect on such Issuer Party,
including a material adverse effect on the ability of such Issuer Party to
conduct the defense. Notwithstanding Section 7.1, in case any such action,
claim or other proceeding shall be brought against any Indemnified Party
and it shall notify the relevant Issuer Party of the commencement thereof,
such Issuer Party shall be entitled to assume the defense thereof at its
own expense, with counsel reasonably satisfactory to such Indemnified
Party in its reasonable judgment; provided, however, that any Indemnified
Party may, at its own expense, retain separate counsel to participate in
such defense. Notwithstanding the foregoing, in any action, claim or
proceeding in which any Issuer Party on the one hand, and an Indemnified
Party, on the other hand, is, or is reasonably likely to become, a party,
such Indemnified Party shall have the right to employ separate counsel at
the expense of such Issuer Party and to control its own defense of such
action, claim or proceeding if, in the reasonable opinion of counsel to
such Indemnified Party, a conflict or potential conflict exists between
such Issuer Party, on the one hand, and such Indemnified Party, on the
other hand, that would make such separate representation advisable. Each
Issuer Party agrees that it will not, without the prior written consent of
the Indemnified Parties, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating
to the matters contemplated hereby (if any Indemnified Party is a party
thereto or has been actually threatened to be made a party thereto) unless
such settlement, compromise or consent includes an unconditional release
of CMII and each other Indemnified Party from all liability arising or
that may arise out of such claim, action or proceeding. No Issuer Party
shall be liable for any settlement of any claim, action or proceeding
effected against an Indemnified Party without its written consent, which
consent shall not be unreasonably withheld. The rights accorded to
Indemnified Parties hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or
otherwise; provided, however, that any claim that could be brought upon
the same facts as a claim brought under this Section 7 shall be subject to
the limitations of Section 7.1.
7.3 Survival of Indemnification Provisions
The provisions of this Section 7 shall survive the term of this Agreement
and repayment of the Notes and exercise of the Warrants.
33
8. COVENANTS
8.1 Affirmative Covenants
Until the payment by ▇▇▇▇▇▇ of all principal of and interest on the Notes
and by the Issuer Parties of all other amounts due at the time of payment
of such principal and interest to CMII under this Agreement, including,
without limitation, all expenses and amounts due at such time in respect
of indemnity obligations under Section 7, each Issuer Party will at all
times perform and comply with all covenants applicable to such Person in
this Section 8.1 and thereafter, until the full exercise of the Warrant
pursuant to the terms thereof, BPG will at all times perform and comply
with the covenants applicable to BPG contained in paragraphs (a)(v),
(a)(xi), (a)(xiii), (d), (k), (l) and (n) of Section 8.1:
(a) Information.
(i) ▇▇▇▇▇▇ shall deliver to CMII, within 90 days after the
end of each Fiscal Year, (x) a consolidated balance
sheet and consolidated income statement showing the
financial position of ▇▇▇▇▇▇ and its Subsidiaries as of
the close of such Fiscal Year and the results of their
operations during such year, and (y) a consolidated
statement of stockholders' equity and a consolidated
statement of cash flow, as of the close of such Fiscal
Year, all the foregoing financial statements to be
audited by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or other independent
public accountants reasonably acceptable to CMII (which
report shall not contain any qualification except with
respect to new accounting principles mandated by the
Financial Accounting Standards Board), and together with
supplemental consolidating balance sheets and statements
of income, stockholders' equity and cash flow prepared
by such independent public accountants as being fairly
stated in all material respects in relation to such
audited financial statements taken as a whole and
together with management's discussion and analysis
presented to the management of ▇▇▇▇▇▇ and its
Subsidiaries;
(ii) ▇▇▇▇▇▇ shall deliver to CMII, with 45 days after the end
of each of the first three (3) fiscal quarters of each
fiscal year, (x) unaudited consolidated and
consolidating balance sheets and consolidated and
consolidating income statements showing the financial
position and results of operations of ▇▇▇▇▇▇ and its
Subsidiaries as of the end of each such quarter, (y) a
consolidated and consolidating statement of
shareholders' equity and (z) a consolidated and
consolidating statement of cash flow, in each case for
the fiscal quarter just ended and for the period
commencing at the end of the immediately preceding
fiscal year and ending with the last day of such
quarter, in each case prepared and certified by a
Financial Officer of ▇▇▇▇▇▇ as presenting fairly in all
material respects the financial position and results of
operations
34
of ▇▇▇▇▇▇ and its Subsidiaries and as having been
prepared in accordance with GAAP (except the absence of
footnote disclosure), in each case subject to normal
year-end audit adjustments, together with in the case of
the second fiscal quarter of each fiscal year only,
management's discussion and analysis presented to the
Board of Directors of ▇▇▇▇▇▇ and its Subsidiaries;
(iii) ▇▇▇▇▇▇ shall deliver to CMII, within 30 days after the
end of each month, (x) unaudited consolidated and
consolidating balance sheets and income statements
showing the financial position and results of operations
of ▇▇▇▇▇▇ and its Subsidiaries as of the end of each
such month, (y) a consolidated and consolidating
statement of stockholders' equity and (z) a consolidated
and consolidating statement of cash flow, in each case
for the month just ended and for the period commencing
at the end of the immediately preceding Fiscal Year and
ending with the last day of such month, prepared and
certified by a Financial Officer of ▇▇▇▇▇▇ as presenting
fairly in all material respects the financial condition
and results of operations of ▇▇▇▇▇▇ and its Subsidiaries
and as having been prepared in accordance with GAAP
(except the absence of footnote disclosure), in each
case subject to normal year-end audit adjustments;
(iv) ▇▇▇▇▇▇ shall deliver to CMII, (x) concurrently with each
delivery under clause (a)(i) and with each delivery in
respect of the second fiscal quarter of any fiscal year
under clause (a)(ii) above, a management discussion and
analysis describing any differences between the reported
financial results under the financial statements
delivered thereunder from the budget required by (vii)
below, which shall include, among any other information
or explanation reasonably requested by CMII, an
explanation of any revenues, EBITDA, Capital
Expenditures and new or lost customers that would assist
CMII to better understand the results being reported and
(y) concurrently with any delivery under clause (a)(i)
or clause (a)(ii) above, a certificate of the firm or
Person referred to therein (A) which certificate shall,
in the case of the certificate of a Financial Officer of
▇▇▇▇▇▇, certify on behalf of ▇▇▇▇▇▇ that to the best of
his or her knowledge no Default has occurred (including
calculations demonstrating compliance, as of the dates
of the financial statements being furnished, with the
covenants set forth in paragraphs (a) through (e) of
Section 8.3) or, if such a Default or Event of Default
has occurred, specifying the nature and extent thereof
and any corrective action taken or proposed to be taken
with respect thereto and (B) which report, in the case
of the report furnished by the independent public
accountants referred in clause (a)(i) above, may be
limited to accounting matters and disclaim
responsibility for legal interpretations, but shall in
any event state
35
that to the best of such accountants' knowledge, as of
the dates of the financial statements being furnished no
Default has occurred under any of the covenants set
forth in Sections paragraphs (a) through (e) of Section
8.3 and, if such a Default has occurred, specifying the
nature and extent thereof; provided, however, that any
certificate delivered concurrently with clause (a)(i)
above shall be accompanied by a Compliance Certificate
confirming the accuracy of the accountants' certificate
(and shall in any event include calculations
demonstrating compliance with the covenants set forth in
paragraphs (a) through (e) of Section 8.3) and signed by
a Financial Officer of ▇▇▇▇▇▇;
(v) BPG and ▇▇▇▇▇▇ shall deliver to CMII, promptly after the
same become publicly available, copies of such
registration statements, annual, periodic and other
reports, and such proxy statements and other
information, if any, as shall be filed by BPG, ▇▇▇▇▇▇ or
any of their respective Subsidiaries with the Securities
and Exchange Commission pursuant to the requirements of
the Securities Act of 1933, as amended (other than
filings on Form D) or the Securities Exchange Act of
1934, as amended, if any;
(vi) ▇▇▇▇▇▇ shall deliver to CMII, concurrently with any
delivery under (a)(i) above, a management letter, if
any, prepared by the independent public accountants who
reported on the financial statements delivered under
(a)(i) above, with respect to the internal audit and
financial controls of ▇▇▇▇▇▇ and its Subsidiaries;
(vii) ▇▇▇▇▇▇ shall deliver to CMII, within 30 days prior to
the beginning of each Fiscal Year, for ▇▇▇▇▇▇ and its
Subsidiaries for such Fiscal Year (monthly balance
sheets, statements of income and of cash flow) for the
forthcoming Fiscal Year and annual projections for the
three Fiscal Years following such forthcoming Fiscal
Year;
(viii) ▇▇▇▇▇▇ shall deliver to CMII, as soon as practicable,
copies of all material financial reports, forms,
filings, loan documents and financial information
submitted to governmental agencies, and copies of
material financial reports generally distributed to its
equity holders;
(ix) ▇▇▇▇▇▇ shall deliver to CMII, promptly upon becoming
aware thereof, notice to CMII of the breach by any party
of any material agreement with ▇▇▇▇▇▇ or any of its
Subsidiaries which, in the case of this clause, could
reasonably be expected to have a Material Adverse
Effect;
(x) ▇▇▇▇▇▇ shall deliver to CMII, promptly upon becoming
aware thereof, notice to CMII of the termination by any
party of any material agreement with ▇▇▇▇▇▇
36
or any of its Subsidiaries which, in the case of this
clause, could reasonably be expected to have a Material
Adverse Effect;
(xi) BPG and ▇▇▇▇▇▇ shall deliver to CMII, notice that any
Issuer Party is the subject of any review or audit by
the Internal Revenue Service or any governmental
investigation concerning the violation or possible
violation of any law;
(xii) BPG and ▇▇▇▇▇▇ shall deliver to CMII, (w) the name of a
jurisdiction in which ▇▇▇▇▇▇ or any of its Subsidiaries
becomes qualified after the Closing Date to transact
business, (x) written notice of any material change
after the Closing Date in the authorized and issued
capital stock or other equity interests of any Issuer
Party or any other material amendment to their charter,
bylaws or other organization documents, and (y) written
notice of any Subsidiary created or acquired by ▇▇▇▇▇▇
or any of its Subsidiaries after the Closing Date, such
notice, in each case, to identify the applicable
jurisdictions, capital structures or Subsidiaries, as
applicable;
(xiii) BPG shall deliver to CMII, for any fiscal quarter or
fiscal year for which BPG is not required to file
reports under Section 13 or Section 15(d) of the
Securities and Exchange Act of 1934, as amended,
consolidated and consolidating financial statements for
BPG and its Subsidiaries and other documents of this
type, at the times and accompanied by the documents
described in Section 8.1(a)(i), 8.1(a)(ii), 8.1(a)(iii),
8.1(a)(iv) and 8.1(a)(vi);
(xiv) not later than 20 days after the end of each month (a) a
copy of the "Backlog Report" (as defined in the Senior
Credit Agreement as in effect on the Closing Date); and
(b) a "proposal/opportunity report" describing potential
new contracts; and
(xv) such other information as CMII may reasonably request.
(b) Maintenance of Property; Insurance
(i) ▇▇▇▇▇▇ will keep, and will cause each of its
Subsidiaries to keep, all property useful and necessary
in its business as then conducted in good working order
and condition, ordinary wear and tear excepted, except
as could not reasonably be expected to cause a Material
Adverse Effect.
(ii) ▇▇▇▇▇▇ will maintain and will cause each of its
Subsidiaries to maintain, to the extent commercially
available, (i) physical damage insurance on
substantially all its real and personal property in the
United States with such insurance carriers, covering
such risks and containing such terms, as is reasonably
acceptable to CMII and in accordance with industry
standards, (ii) public
37
liability insurance (including products liability
coverage) in amounts heretofore customarily maintained
by ▇▇▇▇▇▇, (iii) business interruption insurance in
amounts heretofore customarily maintained by ▇▇▇▇▇▇ and
(iv) key-man life insurance on such Persons and in such
amounts as may be required under the Senior Credit
Agreement from time to time. Prior to the Closing Date,
▇▇▇▇▇▇ will cause CMII to be named as an additional
insured on all liability insurance.
(c) Compliance with Laws
▇▇▇▇▇▇ will comply, and cause each of its Subsidiaries to
comply, with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA
and the rules and regulations thereunder) and all Contractual
Obligations, which involve amounts which are or may become
payable by ▇▇▇▇▇▇ and its Subsidiaries of more than $100,000,
(other than under the Senior Documents), in each case, except
where failure to comply could not reasonably be expected to
have a Material Adverse Effect, or where the necessity of
compliance therewith is being contested in good faith by
appropriate proceedings.
(d) Inspection of Property, Books and Records
▇▇▇▇▇▇ will keep, and will cause each of its Subsidiaries to
keep, proper books of record and account reflecting its
business and activities; and will permit, and will cause each
of its Subsidiaries to permit, representatives of CMII at
CMII's expense to visit and inspect any of their respective
properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers,
senior employees and independent public accountants, all
during normal business hours and as often as may reasonably be
desired and upon reasonable notice, which may be telephonic
(except during the occurrence and continuance of an Event of
Default, no such notice shall be required); provided that
▇▇▇▇▇▇ may, at its option, have one or more employees or
representatives present at any such inspection, examination or
discussion.
(e) Use of Proceeds
The proceeds from the sale of the Notes under this Agreement
will be used by ▇▇▇▇▇▇ to reduce its borrowings under its
revolving credit facility, in an amount of $2,000,000, and for
ongoing working capital. None of such proceeds will be used,
directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any "margin
stock" within the meaning of Regulation U.
38
(f) Environmental Matters
BPG and ▇▇▇▇▇▇ will, and will cause their respective
Subsidiaries to, promptly give to CMII notice in writing of
any complaint, order, citation or notice of violation with
respect to, or if BPG, ▇▇▇▇▇▇ or their Subsidiaries becomes
aware of, (i) the existence or alleged existence of a
violation of any applicable Environmental Law, (ii) any
release into the environment of Hazardous Materials in a
quantity that is reportable under applicable Environmental
Law, (iii) the commencement of any cleanup pursuant to or in
accordance with any applicable Environmental Law of any
Hazardous Materials, (iv) any pending legislative or
threatened proceeding for the termination, suspension or
non-renewal of any permit required under any applicable
Environmental Law, (v) any property of BPG, ▇▇▇▇▇▇ or any
Subsidiary thereof that is or will be subject to a Lien
imposed pursuant to any Environmental Law, (vi) any pending
legislative changes to existing Environmental Laws, and (vii)
any proposed acquisitions or leasing of property, which, in
each of cases (i) through (vii) above, individually or in the
aggregate, could reasonably be expected have a Material
Adverse Effect.
(g) Taxes
BPG and ▇▇▇▇▇▇ will, and will cause each of their respective
Subsidiaries to, pay and discharge promptly when due all
taxes, assessments and governmental charges or levies imposed
upon BPG and ▇▇▇▇▇▇ and their respective Subsidiaries or upon
their respective income or profits or in respect of their
respective property before the same shall become delinquent or
in default, as well as all lawful claims for labor, materials
and supplies or otherwise, which, if unpaid, would give rise
to Liens upon such properties or any part thereof; provided,
however, that such payment and discharge shall not be required
with respect to (i) any such tax, assessment, charge, levy or
claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the
applicable party shall have set aside on its books adequate
reserves with respect thereto, and such contest operates to
suspend collection of the contested tax, assessment, charge,
levy or claims and enforcement of a Lien or (ii) any tax,
assessment, charge, levy or claims, the failure to pay and
discharge when due which, individually or in the aggregate
could not reasonably be expected have a Material Adverse
Effect.
(h) Existence; Conduct of Business
Each Issuer Party will do or cause to be done all things
necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits,
privileges and franchises material to the conduct of its
business; provided
39
that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under
Section 8.2(c).
(i) Litigation and Other Notices
▇▇▇▇▇▇ will give CMII prompt written notice of the
following:
(i) to ▇▇▇▇▇▇'▇ knowledge, the issuance by any court or
Governmental Authority of any injunction, order,
decision or other restraint prohibiting, or having the
effect of prohibiting, the issuance or purchase of the
Notes or Warrants, or invalidating, or having the effect
of invalidating, any provision of this Agreement or the
other Transaction Documents that would adversely affect
CMII's ability to enforce any payment obligations
hereunder, or the initiation of any litigation or
similar proceeding seeking any such injunction, order,
decision or other restraint;
(ii) to ▇▇▇▇▇▇'▇ knowledge, the filing or commencement of any
action, suit or proceeding against ▇▇▇▇▇▇ or any of its
Subsidiaries, whether at law or in equity or by or
before any arbitrator or Governmental Authority, (i)
which is material and is brought by or on behalf of any
governmental agency or authority, or which is material
and in which injunctive or other equitable relief is
sought or (ii) as to which it is probable (within the
meaning of Statement of Financial Accounting Standards
No. 5) that there will be an adverse determination and
which, if adversely determined, would (A) reasonably be
expected to result in liability of ▇▇▇▇▇▇ or a
Subsidiary thereof in an aggregate amount of $250,000 or
more, not reimbursable by insurance, or (B) materially
impairs the right of BPG, ▇▇▇▇▇▇ or such Subsidiary to
perform its material obligations under this Agreement,
any Note, the Warrant or any other Transaction Document
to which it is a party;
(iii) any Default of which it becomes aware, specifying the
nature and extent thereof and the action (if any) which
is proposed to be taken with respect thereto;
(iv) notices given or received (with copies thereof) with
respect to any Senior Debt; and
(v) any development in the business or affairs of ▇▇▇▇▇▇ or
any of its Subsidiaries which has had or which is likely
to have, in the reasonable judgment of ▇▇▇▇▇▇, a
Material Adverse Effect.
(j) Additional Guarantors
40
▇▇▇▇▇▇ will, and will cause its Subsidiaries to, promptly
inform CMII of the creation or acquisition of any direct or
indirect Subsidiary (subject to the provisions of Section
8.2(k)) and cause each direct or indirect domestic Subsidiary
not in existence on the date hereof to enter into a Guarantee
of the Obligations of ▇▇▇▇▇▇, in form and substance
satisfactory to CMII and, in connection therewith, to cause to
be delivered to CMII such legal opinions of independent
counsel to such Subsidiary as CMII may reasonably request.
Each Guarantor shall be subject to the Subordination
Agreement.
(k) Further Assurances
(i) Each Issuer Party will promptly upon request by CMII,
correct any material defect or error that may be
discovered in any Transaction Document or in the
execution, acknowledgment, filing or recordation
thereof; and
(ii) Each Issuer Party will, promptly upon reasonable request
by CMII, do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register any
and all such further acts, deeds, agreements,
certificates, assurances and other instruments as CMII
may reasonably require from time to time in order to (A)
carry out more effectively the purposes of the
Transaction Documents, and/or (B) assure, preserve,
protect and confirm more effectively unto CMII the
rights granted or now or hereafter intended to be
granted to CMII under any Transaction Document or under
any other instrument executed in connection with any
Transaction Document to which any Issuer Party is or is
to be a party.
(l) Performance of Transaction Documents
Subject to the provisions of the Subordination Agreement, each
of BPG and ▇▇▇▇▇▇ shall, and ▇▇▇▇▇▇ shall cause its
Subsidiaries to, perform and observe all of the terms and
provisions of each Transaction Document to be performed or
observed by them, maintain each such Transaction Document in
full force and effect, enforce such Transaction Document in
accordance with its terms, and, upon reasonable request of
CMII, make to each other party to each such Transaction
Document such demands and requests for information and reports
or for action as such Issuer Party is entitled to make under
such Transaction Document.
(m) Issuance, Delivery and Payment of Notes
Subject to the provisions of the Subordination Agreement,
▇▇▇▇▇▇ shall pay the principal of, interest on and other
amounts due in respect of, its Notes on the dates and in the
manner provided in such Notes.
41
(n) Reserved
(o) Observation Rights
(i) For so long as any amount remains due and unpaid under
and pursuant to any Note, ▇▇▇▇▇▇ agrees to give CMII
notice of (in the same manner notice is given to
directors), and permit a person designated by CMII to
attend as observer, all meetings of ▇▇▇▇▇▇'▇ Board of
Directors and all executive and other committee meetings
thereof and, subject to CMII's compliance with customary
confidentiality procedures, shall provide to CMII the
same information concerning ▇▇▇▇▇▇, and access thereto,
provided to members of ▇▇▇▇▇▇'▇ Board of Directors
(provided, however, that such designee may be asked to
leave any such meeting, or be denied (but only pursuant
to this Section 8.1(o)) any information, if, upon advice
of counsel, ▇▇▇▇▇▇ determines that such designee has a
conflict of interest with ▇▇▇▇▇▇ pertaining to a
particular portion of such meeting or information, or
that the attendance or dissemination to such attendee
could remove any privilege of confidentiality from
otherwise attorney-client privileged statements or
information). The reasonable travel and lodging expenses
accrued by any such designee in attending any board or
committee meeting shall be reimbursed by ▇▇▇▇▇▇ to the
extent consistent with ▇▇▇▇▇▇'▇ then existing policy of
reimbursing directors generally for such expenses.
(ii) ▇▇▇▇▇▇ will cause its Board of Directors to meet not
less often than semi-annually.
8.2 Negative Covenants
Until the payment in full by ▇▇▇▇▇▇ of all principal of and interest on
the Notes and by the Issuer Parties of all other amounts due at the time
of payment of such principal and interest to CMII under this Agreement
including, without limitation, all expenses and amounts due at such time
in respect of indemnity obligations under Section 7, each Issuer Party
will at all times perform and comply with all covenants applicable to such
Person in this Section 8.2:
(a) Indebtedness
▇▇▇▇▇▇ will not, and will not permit any of its Subsidiaries
to, create, incur, assume or permit to exist any Indebtedness,
except:
(i) Indebtedness created under the Transaction Documents;
42
(ii) Indebtedness existing on the date hereof and set forth
in Schedule 8.2(a)(ii) and extensions, renewals and
replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof and
otherwise on substantially similar terms to such
existing Indebtedness;
(iii) Permitted Purchase Money Indebtedness;
(iv) Indebtedness of any Person that becomes a Subsidiary of
▇▇▇▇▇▇ after the date hereof, provided that such
Indebtedness exists at the time such Person becomes a
Subsidiary and is not created in contemplation of or in
connection with such Person becoming such a Subsidiary;
(v) Indebtedness of ▇▇▇▇▇▇ or any Subsidiary thereof as an
account party in respect of trade letters of credit;
(vi) Senior Debt;
(vii) Reserved;
(viii) Guarantees permitted by Section 8.2(d);
(ix) Indebtedness subject to Liens permitted under Section
8.2(b) (other then Section 8.2(b)(iv));
(x) Indebtedness arising from Hedging Agreements entered
into in the ordinary course of business to hedge or
mitigate risks to which ▇▇▇▇▇▇ or any Subsidiary thereof
is exposed in the conduct of its business or the
management of its liabilities;
(xi) accounts payable to trade creditors and current
operating expenses (other than for Money Borrowed) which
are not aged more than 60 days from billing date or more
than 15 days from the due date, in each case incurred in
the ordinary course of business and paid within such
time period, unless the same are being actively
contested in good faith and by appropriate and lawful
proceedings; and ▇▇▇▇▇▇ shall have set aside such
reserves, if any, with respect thereto as are required
by GAAP and deemed adequate by ▇▇▇▇▇▇ and its
independent accounts;
(xii) obligations to pay all payments which ▇▇▇▇▇▇ or any of
its Subsidiaries is required to make by the terms of any
lease, as long as the aggregate of all such payments
during any current or future period of 12 consecutive
months under the lease in question and all other leases
under which ▇▇▇▇▇▇ or any of its Subsidiaries is then
lessee does not exceed $1,000,000;
43
(xiii) contingent liabilities arising out of endorsements of
checks and other negotiable instruments for deposit or
collection in the ordinary course of business; and
(xiv) other unsecured Indebtedness (and if by Guarantee,
without duplicate counting of the amount guaranteed and
the underlying Indebtedness) of ▇▇▇▇▇▇ or any Subsidiary
thereof in an aggregate principal amount not exceeding
$500,000 at any time outstanding.
(b) Liens
▇▇▇▇▇▇ will not, and will not permit any of its Subsidiaries
to, create, incur, assume or permit to exist any Lien on any
property or asset now owned or hereafter acquired by it, or
assign or sell any income or revenues (including accounts
receivable) or rights in respect of any thereof, except:
(i) Permitted Encumbrances;
(ii) any Lien on any property or asset of ▇▇▇▇▇▇ or any
Subsidiary thereof existing on the date hereof and set
forth in Schedule 8.2(b)(ii); provided that (i) such
Lien shall not apply to any other property or asset of
▇▇▇▇▇▇ or any Subsidiary thereof and (ii) such Lien
shall secure only those obligations which it secures on
the date hereof and extensions, renewals and
replacements thereof that do not increase the
outstanding principal amount thereof (except pursuant to
the instrument creating such Lien) and are on
substantially similar terms;
(iii) any Lien existing on any property or asset prior to the
acquisition thereof by ▇▇▇▇▇▇ or any Subsidiary thereof
or existing on any property or asset of any Person that
becomes a Subsidiary of ▇▇▇▇▇▇ after the date hereof
prior to the time such Person becomes a Subsidiary;
provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition
or such Person becoming such a Subsidiary, as the case
may be, (ii) such Lien shall not apply to any other
property or assets of ▇▇▇▇▇▇ or any Subsidiary thereof
and (iii) such Lien shall secure only those obligations
which it secures on the date of such acquisition or the
date such Person becomes a Subsidiary of ▇▇▇▇▇▇, and
extensions, renewals and replacements thereof that do
not increase the outstanding principal amount thereof
(or except pursuant to the instrument creating such
Lien) otherwise substantially alter the terms of such
Lien;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) Liens securing Senior Debt created by the Senior
Documents; and
44
(vi) licenses, leases or subleases permitted hereunder
granted to others not interfering in any material
respect in the business of ▇▇▇▇▇▇ or any of its
Subsidiaries.
(c) Fundamental Changes
(i) ▇▇▇▇▇▇ will not, and will not permit any of its
Subsidiaries to, merge into or consolidate with any
other Person, or permit any other Person to merge into
or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series
of transactions) any of its assets, or any of the stock
or other equity units of any of its Subsidiaries (in
each case, whether now owned or hereafter acquired), or
liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no
Default shall have occurred and be continuing (i) any
wholly-owned domestic Subsidiary of ▇▇▇▇▇▇ may merge
into ▇▇▇▇▇▇ in a transaction in which ▇▇▇▇▇▇ is the
surviving corporation, (ii) any wholly-owned domestic
Subsidiary of ▇▇▇▇▇▇ may merge into any other
wholly-owned domestic Subsidiary of ▇▇▇▇▇▇ in a
transaction in which the surviving entity is a
wholly-owned domestic Subsidiary of ▇▇▇▇▇▇, as the case
may be, (iii) any wholly-owned domestic Subsidiary of
▇▇▇▇▇▇ may sell, transfer, lease or otherwise dispose of
its assets to ▇▇▇▇▇▇ and/or to another wholly-owned
domestic Subsidiary of ▇▇▇▇▇▇ and (iv) any wholly-owned
domestic Subsidiary of ▇▇▇▇▇▇ may liquidate or dissolve
if ▇▇▇▇▇▇ determines in good faith that such liquidation
or dissolution is in the best interests of ▇▇▇▇▇▇ and is
not materially disadvantageous to CMII.
(ii) ▇▇▇▇▇▇ will not, and will not permit any of its
Subsidiaries to, (i) engage to any material extent in
any business other than businesses of the type conducted
by ▇▇▇▇▇▇ and its Subsidiaries on the Closing Date and
businesses reasonably related thereto or (ii) change its
Fiscal Year, and BPG will not conduct business of the
type conducted by ▇▇▇▇▇▇ as of the Closing Date except
through ▇▇▇▇▇▇ and Subsidiaries of ▇▇▇▇▇▇.
(iii) Notwithstanding the foregoing, ▇▇▇▇▇▇ and its
Subsidiaries may make:
(1) purchases and sales of inventory and other assets
in the ordinary course;
(2) (A) sales of assets (excluding capital stock of a
Subsidiary of ▇▇▇▇▇▇) including, without
limitation, sales of accounts receivable and (B)
sales of worn out, obsolete, scrap or surplus
assets not to exceed for (A) and (B) $200,000 in
the aggregate in any Fiscal Year;
45
(3) Capital Expenditures permitted by Section 8.3(c);
(4) liquidations of Permitted Investments; and
(5) Permitted Investments and Guarantees permitted by
Section 8.2(d).
(d) Investments, Loans, Advances, Guarantees and Acquisitions
▇▇▇▇▇▇ will not, and will not permit any of its Subsidiaries
to, make, purchase, hold or acquire any Investment (including
any option, warrant or other right to acquire any of the
foregoing) in, or make or permit to exist any Guarantee any
obligations of, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any
assets of any other Person constituting a business unit,
except:
(i) Permitted Investments;
(ii) Guarantees constituting Indebtedness permitted by
Section 8.2(a);
(iii) indemnities made and surety bonds issued in the ordinary
course of business;
(iv) indemnities made in the Transaction Documents;
(v) Guarantees made in the ordinary course of business;
provided that such Guarantees are not of Indebtedness
for borrowed money except to the extent permitted
pursuant to Section 8.2(a) and otherwise could not in
the aggregate reasonably be expected to have a Material
Adverse Effect.
(e) Modification of Operating Documents
▇▇▇▇▇▇ will not and will not permit any of its Subsidiaries to
amend or alter their respective certificates or articles of
incorporation or other organizational documents, including the
terms of any preferred stock (whether or not contained in a
certificate or articles of incorporation) documents, in a
manner which could reasonably be expected to have a Material
Adverse Effect or would otherwise be materially
disadvantageous to CMII.
(f) Restricted Junior Payments
▇▇▇▇▇▇ will not, and will not permit any of its Subsidiaries
to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Junior Payment, except that (i) any
Subsidiary of ▇▇▇▇▇▇ may pay dividends or make other
distributions to its direct parent, (ii) ▇▇▇▇▇▇ may pay the
Management Fees as and when due and payable, (iii) ▇▇▇▇▇▇ may
pay the Permitted Seller Notes Amount as and when due and
payable in accordance with the terms of the Seller Notes and
46
(iv) ▇▇▇▇▇▇ may pay the Permitted Seller Notes Principal as
and when due and payable in accordance with the terms of the
Seller Notes; provided, no amounts shall be paid until each of
the following conditions, as applicable, has been satisfied:
(i) during fiscal year 2001, ▇▇▇▇▇▇ shall pay the Permitted
Seller Notes Amount only as permitted by the Senior
Credit Agreement. Commencing in fiscal 2002 and
thereafter, ▇▇▇▇▇▇ may pay the Permitted Seller Notes
Amount to BPG so long as each of the other following
conditions in this subsection 8.2(f), as applicable, has
been satisfied.
(ii) no Management Fees shall be paid to BPG, for the fiscal
year 2001 until receipt by CMII of the audited financial
statements of ▇▇▇▇▇▇ for such fiscal year and receipt
and approval by CMII of ▇▇▇▇▇▇'▇ calculation of the
Fully Loaded Fixed Charge Coverage Ratio for such fiscal
year on a pro forma basis, such that after the payment
of the Management Fees and the Permitted Seller Notes
Amount for such fiscal year, the Fully Loaded Fixed
Charge Coverage Ratio shall be not less than 1.30:1;
(iii) for fiscal year 2002 and thereafter, the Management Fees
and the Permitted Seller Notes Amount may be paid to BPG
on a quarterly basis following receipt by CMII of the
unaudited financial statements of ▇▇▇▇▇▇ as of the end
of each fiscal quarter;
(iv) the Permitted Seller Notes Principal shall not be paid
to BPG until receipt by CMII of the audited financial
statements of ▇▇▇▇▇▇ for the applicable fiscal year and
receipt and approval by CMII of ▇▇▇▇▇▇'▇ calculation of
the Fully Loaded Fixed Coverage Ratio for such fiscal
year on a pro forma basis, such that after the payment
of the Management Fees, the Permitted Seller Notes
Amount and the Permitted Seller Notes Principal for such
fiscal year, the Fully Loaded Fixed Coverage Ratio shall
be not less than 1.30:1; and
(v) no Default or Event of Default shall have occurred and
be continuing or shall occur as a result of the payment
of such amounts.
Notwithstanding the foregoing,▇▇▇▇▇▇ may pay, distribute or
lend money to BPG to fund the Earn-Out (as defined in the
Senior Credit Agreement as in effect on the Closing Date),
pursuant to Section 8.2.15 of the Senior Credit Agreement as
in effect on the Closing Date and so long as no Default is
continuing or occurs under this Agreement as a result of such
action.
Notwithstanding anything to the contrary contained in the
definition of "Management Fees" and in the first paragraph of
this Section 8.2(f), but subject
47
in all cases to the other terms and provisions of this
Agreement, including, without limitation, clauses (i) through
(v) of this Section 8.2(f):
(1) payments due by ▇▇▇▇▇▇ under the Seller Notes
for the first three fiscal quarters of Fiscal Year 2001 shall
be deferred in each of such fiscal quarters and such payments
may (subject to clauses (i) through (v) of this Section 8.2(f)
and all other provisions of this Agreement) recommence in the
fourth quarter of Fiscal Year 2001, and the maturity date
under each of the respective Seller Notes shall be extended
for an additional three fiscal quarters; and
(2) the Management Fees due by ▇▇▇▇▇▇ to BPG for
the first three fiscal quarters of Fiscal Year 2001,
aggregating $300,000, shall be deferred (the "DEFERRED
AMOUNT"), provided, that payments of such Deferred Amount may
(subject to clauses (i) through (v) of this Section 8.2(f) and
all other provisions of this Agreement) recommence on the last
day of the fiscal quarter ending June 30, 2002 and on the last
day of each of the five succeeding fiscal quarters thereafter.
(g) Transactions with Affiliates
▇▇▇▇▇▇ will not, and will not permit any of its Subsidiaries
to, sell, lease or otherwise transfer any property or assets
to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions
with, any of its Affiliates, except (a) in the ordinary course
of business at prices and on terms and conditions not less
favorable than could be obtained on an arm's-length basis from
unrelated third parties (other than intercompany transactions
between BPG and ▇▇▇▇▇▇ on substantially the same terms as are
in existence on the Closing Date and which would not violate
the provisions of Section 8.2(d)), (b) transactions between or
among ▇▇▇▇▇▇ and its wholly-owned Subsidiaries not involving
any other Affiliate and (c) any Restricted Junior Payment not
prohibited by Section 8.2(f).
(h) Restrictive Agreements
▇▇▇▇▇▇ will not, and will not permit any of its Subsidiaries
to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits,
restricts or imposes any condition upon (i) the ability of
▇▇▇▇▇▇ or any Subsidiary thereof to create, incur or permit to
exist any Lien upon any of its property or assets, or (ii) the
ability of any Subsidiary of ▇▇▇▇▇▇ to pay dividends or other
distributions with respect to any shares of its capital stock
or to make or repay loans or advances to ▇▇▇▇▇▇ or any other
Subsidiary thereof or to Guarantee Indebtedness of ▇▇▇▇▇▇ or
any other Subsidiary thereof; provided that (v) the
48
foregoing shall not apply to restrictions and conditions
imposed by law or by this Agreement, (w) the foregoing shall
not apply to restrictions and conditions existing on the date
hereof and contained in the Senior Documents or otherwise
identified on Schedule 8.2(h) (but shall apply to any
amendment or modification expanding the scope of, any such
restriction or condition), (x) the foregoing shall not apply
to customary restrictions and conditions contained in
agreements relating to the sale of a Subsidiary pending such
sale, provided such restrictions and conditions apply only to
the Subsidiary that is to be sold and such sale is permitted
hereunder, (y) clause (i) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating
to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or
assets securing such Indebtedness and (z) clause (i) of the
foregoing shall not apply to customary provisions in leases
and other contracts restricting the assignment thereof.
(i) Fiscal Year
▇▇▇▇▇▇ will not change its Fiscal Year.
(j) Press Release; Public Offering Materials
▇▇▇▇▇▇ and BPG will not and will not permit any of their
respective Subsidiaries to disclose the name of CMII in any
press release or in any prospectus, proxy statement or other
materials filed with any governmental entity relating to a
public offering of the capital stock of any Issuer Party (x)
without CMII's prior written consent, which shall not be
unreasonably withheld or (y) except as required by applicable
law following not less than two (2) Business Days (or such
lesser time as may be available in any given case) prior
written notice to CMII.
(k) Subsidiaries
▇▇▇▇▇▇ will not and will not permit any of its Subsidiaries
directly or indirectly to establish, create or acquire any
Subsidiary except that ▇▇▇▇▇▇ may establish, create or acquire
a domestic Subsidiary so long as concurrently with such
establishment, creation or acquisition, ▇▇▇▇▇▇ complies and
causes such Subsidiary to comply with the obligations in
respect of such Subsidiary under Section 8.1(j).
(l) Consulting Fees
▇▇▇▇▇▇ will not, and will not permit any of its Subsidiaries
to, pay any management, consulting or other fees and/or any
reimbursements of costs and expenses of any kind to BPG or any
Subsidiary thereof, or to any Affiliate of BPG, any of its
Subsidiaries or of ▇▇▇▇▇▇ or any Subsidiary thereof except (i)
as permitted by Section 8.2(f) plus (ii) reimbursement of
directors' meeting expenses
49
plus (iii) reasonable out of pocket expenses of BPG's personal
when they are engaged in efforts on behalf of ▇▇▇▇▇▇.
(m) Tax Consolidation
▇▇▇▇▇▇ will not pay the taxes covered by the Tax Sharing
Agreement among ▇▇▇▇▇▇ and BPG, dated as of January 11, 2001,
other than in accordance with such Tax Sharing Agreement.
8.3 Financial Covenants
Until the payment in full by ▇▇▇▇▇▇ of all principal of and interest on
the Notes and of all other amounts due at the time of payment of such
principal and interest to CMII under this Agreement, including, without
limitation, all expenses and amounts due at such time in respect of
indemnity obligations under Section 7, ▇▇▇▇▇▇ covenants and agrees that:
(a) Maximum Total Debt to EBITDA
▇▇▇▇▇▇ shall maintain a ratio of Total Debt to EBITDA for the
trailing twelve months ending on the dates set forth below of
less than or equal to 4.2 for each fiscal quarter during the
term of this Agreement.
(b) Minimum EBITDA
At the end of each fiscal quarter ending on or after the
Closing Date ▇▇▇▇▇▇ shall have a minimum EBITDA of not less
than $900,000 for that quarter.
(c) Minimum Interest Coverage Ratio
▇▇▇▇▇▇ shall not permit the Interest Coverage Ratio for the
four consecutive fiscal quarter periods ending on the dates
set forth below to be less than 2.1:1 for each such fiscal
quarter period during the term of this Agreement.
(d) Minimum Fully Loaded Fixed Charge Coverage Ratio
Commencing on the last day of the first fiscal quarter of
fiscal year 2002 and on the last day of each fiscal quarter
thereafter, ▇▇▇▇▇▇ shall not permit the Fully Loaded Fixed
Charge Coverage Ratio for any such fiscal quarter to be less
than 1.15:1.
50
9. PREPAYMENT
9.1 Optional Prepayment
Subject to the terms and conditions of its Notes, ▇▇▇▇▇▇ may prepay the
outstanding principal of (together with accrued interest on) the Notes in
full, or from time to time, in part, on any date in accordance with
Section 5 of each of such Notes.
9.2 Mandatory Prepayment
Subject to Section 8 of each of its Notes, ▇▇▇▇▇▇ shall prepay the
outstanding principal of (together with accrued interest on) such Notes in
accordance with the "MANDATORY PREPAYMENT" provisions set forth in Section
4 of each of such Notes.
10. MISCELLANEOUS
10.1 Survival of Representations and Warranties
All of the representations and warranties made herein shall survive the
execution and delivery of this Agreement, any investigation by or on
behalf of CMII, acceptance of the Notes and Warrants and payment therefor,
or termination of this Agreement.
10.2 Notices
All notices, demands and other communications provided for or permitted
under any Transaction Document shall be made in writing and shall be by
registered or certified first class mail, return receipt requested,
telecopier, courier service or personal delivery:
(h) If to CMII:
c/o Canaan Partners
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ Mix
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(i) if to BPG:
BrandPartners Group, Inc
51
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Executive Vice President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(j) if to ▇▇▇▇▇▇:
▇▇▇▇▇▇ Brothers, Inc
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, President
Facsimile No.:
With copies to:
52
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; five
Business Days after being deposited in the mail, postage prepaid, if
mailed; and when receipt is acknowledged, if telecopied.
10.3 Successors and Assigns
This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of the parties hereto. Subject to
applicable securities laws, in the case of the Notes, to the restrictions
at Section 11 thereof and, in the case of the Warrants, to the
restrictions in Section 10 thereof, CMII (and its permitted assigns) may
assign any of its rights under any of the Transaction Documents to any
Person and any holder of any of the Notes or Warrants may assign such Note
or Warrant to any Person; provided, however, that notwithstanding the
foregoing, other than any Affiliate of CMII, no transferee of a Note or of
any rights under this Agreement shall succeed to the rights of CMII under
Section 8.1(o) and provided, further, that no holder of a Note or Warrant
shall assign such Note or Warrant if, as a result of any such assignment
there shall be more than five (5) holders of Notes (in the case of an
assignment of a Note) or more than five (5) holders of Warrants (in the
case of an assignment of a Warrant) and provided, further, that no holder
of a Note shall assign such Note to any Person that does not agree to make
to ▇▇▇▇▇▇ the representation and warranty contained in Section 6.5 hereof.
▇▇▇▇▇▇ and BPG may not assign any of their rights under this Agreement
without the prior written consent of CMII, any such purported assignment
without such consent being null and void. Except for the provisions of the
Subordination Agreement stated to be for the benefit of the Holders of the
Senior Debt and as provided in Section 7, no Person other than the parties
hereto and their successors and permitted assigns is intended to be a
beneficiary of any of the Transaction Documents.
53
10.4 Amendment and Waiver
(a) No failure or delay on the part of any of the parties hereto
in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other
right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be
available to the parties hereto at law, in equity or
otherwise.
(b) Any amendment, supplement, modification, termination or waiver
of or to any provision of this Agreement, the Notes, the
Warrants or any of the other Transaction Documents, and any
consent to any departure by any party from the terms of any
provision of this Agreement, shall be effective (i) only if it
is made or given in writing and signed by all of the parties
hereto and, subject to Section 10.16, the holders of each of
the Warrants and Notes, and (ii) only in the specific instance
and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement, no
notice to or demand on any Issuer Party in any case shall
entitle it to any other or further notice or demand in similar
or other circumstances. Subject to Section 10.16, no
amendment, supplement, modification, termination or waiver of
any provision of any Note or Warrant shall be effective
without the written concurrence of the holder of such Note or
Warrant and no such amendment, supplement, modification,
termination or waiver shall be valid in respect of any Note or
Warrant unless all Notes or Warrants as the case may be are
amended, supplemented, modified, terminated or waived in the
same respect.
10.5 Signatures and Counterparts
Telefacsimile transmissions of any executed original document and/or
retransmission of any executed telefacsimile transmission shall be deemed
to be the same as the delivery of an executed original. At the request of
any party hereto, the other parties hereto shall confirm telefacsimile
transmissions by executing duplicate original documents and delivering the
same to the requesting party or parties. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
10.6 Headings
The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
54
10.7 GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAW OF SUCH STATE OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK.
10.8 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION
EACH OF THE PARTIES HERETO WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS OR THE VALIDITY, PROTECTION, INTERPRETATION, OR
ENFORCEMENT HEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT
AND THAT RELATE TO THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH
HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS TRANSACTION, AND
THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE
DEALINGS. EACH OF THE PARTIES HERETO FURTHER WARRANTS AND REPRESENTS THAT
EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH HAS
KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT
IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO
THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT. EACH OF THE PARTIES HERETO ALSO
WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR
THIS WAIVER, BE REQUIRED OF EACH. EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE NOTES, THE WARRANTS OR ANY AGREEMENTS OR
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL
JURISDICTION AND VENUE OF SUCH COURTS FOR
55
THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND
ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 10.2, SUCH SERVICE TO BECOME
EFFECTIVE 10 DAYS AFTER SUCH MAILING.
10.9 Severability
If any one or more of the provisions contained herein, or the application
thereof in any circumstance, is held invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits
of the remaining provisions hereof.
10.10 Rules of Construction
Unless the context otherwise requires, "or" is not exclusive, and
references to sections or Sections refer to sections or Sections of this
Agreement.
10.11 Entire Agreement
This Agreement, together with the exhibits and schedules hereto and the
other Transaction Documents, 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 among the parties,
other than those set forth or referred to herein or therein. This
Agreement, together with the exhibits and schedules hereto, and the other
Transaction Documents supersede all prior agreements and understandings
between the parties with respect to such subject matter.
10.12 Certain Expenses
▇▇▇▇▇▇, will pay on demand: (i) all reasonable costs and expenses of CMII
in connection with the preparation, negotiation, execution, delivery,
administration, amendment, supplement, modification or waiver of or to any
provision of any of the Transaction Documents, or in connection with the
consent to any departure by any Issuer Party from, the terms of any
provision of any of the Transaction Documents (including in each case,
without limitation, (A) all reasonable due diligence, transportation,
duplication, appraisal, audit, insurance, consultant, search, filing and
recording fees and expenses and (B) the reasonable fees, charges and
disbursements of counsel for CMII with respect thereto, including during a
Default or Event of Default with respect to advising CMII of its rights
and responsibilities or the protection or
56
preservation of rights or interests, under the Transaction Documents, with
respect to negotiations with the Issuer Parties or with other creditors of
the Issuer Parties or any of their respective Subsidiaries arising out of
any Default or any events or circumstances that may give rise to a Default
and with respect to presenting claims in or otherwise participating in or
monitoring any bankruptcy, insolvency or other similar proceeding
involving creditors' rights generally and any proceeding ancillary
thereto) and (ii) all costs and expenses of CMII in connection with the
enforcement of the Transaction Documents, whether in any action, suit or
litigation, any bankruptcy, insolvency or similar proceeding affecting
creditors' rights generally (including without limitation the reasonable
fees and expenses of counsel to CMII with respect thereto).
10.13 Publicity
Except as may be required by applicable law, none of the parties hereto
shall issue a publicity release or announcement or otherwise make any
public disclosure concerning this Agreement or the transactions
contemplated hereby, without prior approval by the other party hereto. If
any announcement is required by law to be made by any party hereto, prior
to making such announcement such party will deliver a draft of such
announcement to the other parties and shall give the other parties an
opportunity to comment thereon.
10.14 Further Assurances
Each of the parties shall execute such documents and perform such further
acts (including, without limitation, obtaining any consents, exemptions,
authorizations, or other actions by, or giving any notices to, or making
any filings with, any Governmental Authority or any other Person) as may
be reasonably required or desirable to carry out or to perform the
provisions of the Transaction Documents.
10.15 Note Register
▇▇▇▇▇▇ shall keep a register in which ▇▇▇▇▇▇ shall provide for the
registration of its Notes and the registration of transfers of such Notes.
Upon surrender for registration of transfer of any such Note at the office
of ▇▇▇▇▇▇ set forth herein, ▇▇▇▇▇▇ shall (if such transfer is permitted
hereunder) execute and deliver, in the name of the designated transferee
or transferees, one or more new Notes of the same type and in a like
aggregate principal amount. As an issuer of a Note, ▇▇▇▇▇▇ shall have no
obligation hereunder or under any of its Notes to any person other than
the registered holder of such Note.
10.16 Multiple Holders
In the event that there shall be at any time more than one registered
holder of a Note or Warrant, then the reference to "CMII" in this
Agreement and the Notes or in this Agreement and the Warrant shall mean
and refer to each of such holders, each such holder shall be a deemed to
be a party to this Agreement and bound by all agreements and theretofore
unperformed covenants of CMII contained herein; provided, however, that
notwithstanding the foregoing, all actions that
57
are to be taken, and all consents or waivers to be granted or consents,
amendments, waivers and other writings required to be signed by CMII under
this Agreement or under the Notes or Warrants shall be, in each case
(except for acceleration based upon an Event of Default under Section
7(a)(i) or Section 7(a)(ii) of a Note), effective only if taken or
executed and delivered by (w) in the case of any decrease in the amount of
principal payable on any date under any Note, any reduction in the rate of
interest payable on any Note, any postponement of any date on which any
principal of or interest on, any Note is due and payable or any change in
the definition of "Change in Control" or any terms relating to payment of
principal at the option of the holder of a Note upon a Change in Control,
the holder of such Note, (x) in any other case (except those described in
clause (y) or (z) below), by the holders of a majority in outstanding
principal amount of the Notes and, so long as any Warrants are
outstanding, by the holders of a majority (calculated by reference to the
number of shares of common stock of BPG into which the Warrants are then
exerciseable) of the Warrants, (y) in the case of any change in any term
of any Warrant, by the holder of such Warrant, and (z) in the case of any
change to Section 8.1(n), by all holders of the Warrants.
10.17 Confidentiality
Each holder of a Note and each holder of a Warrant agrees to maintain the
confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates' directors,
officers, employees and agents, including accountants, legal counsel and
other advisors (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to
the extent requested by any regulatory authority, (c) to the extent
required by applicable laws or regulations or by any subpoena or similar
legal process, (d) to any other party to this Agreement, (e) in connection
with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights
hereunder, (f) subject to an agreement containing provisions substantially
the same as those of this Section, to any assignee of or participant in,
or any prospective assignee of or participant in, any of its rights or
obligations under this Agreement, any Note or any Warrant, (g) with the
consent of BPG and ▇▇▇▇▇▇, or (h) to the extent such Information (i)
becomes publicly available other than as a result of a breach of this
Section 10.17 or (ii) becomes available to any holder of a Note or Warrant
on a nonconfidential basis from a source other than an Issuer Party. For
the purposes of this Section, "INFORMATION" means all information received
from the Issuer Parties relating to the Issuer Parties or their business,
other than any such information that is available to any holder of a Note
or any holder of a Warrant on a nonconfidential basis prior to disclosure
by an Issuer Party. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have
complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as
such Person would accord to its own confidential information.
58
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective officers hereunto duly authorized as of the
date first above written.
▇▇▇▇▇▇ BROTHERS INC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
BRANDPARTNERS GROUP, INC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
CORPORATE MEZZANINE II, L.P.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Attorney-in-Fact
59
EXECUTION
PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
THIS NOTE AND THE OBLIGATIONS OF THE COMPANY ARISING HEREUNDER ARE SUBORDINATED
IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AND
INTERCREDITOR AGREEMENT DATED AS OF OCTOBER 22, 2001, AS SUCH SUBORDINATION AND
INTERCREDITOR AGREEMENT MAY BE AMENDED, MODIFIED OR SUPPLEMENTED FROM TIME TO
TIME, (THE "SUBORDINATION AGREEMENT") BY AND AMONG CORPORATE MEZZANINE II, L.P.,
▇▇▇▇▇▇ BROTHERS INC AND FLEET CAPITAL CORPORATION FROM TIME TO TIME; AND EACH
HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS
OF THE SUBORDINATION AGREEMENT.
▇▇▇▇▇▇ BROTHERS INC.
16 PERCENT (16%) A.P.R. SUBORDINATED PROMISSORY NOTE
US$5,000,000 New York, New York
October 22, 2001
FOR VALUE RECEIVED, the undersigned, ▇▇▇▇▇▇ BROTHERS INC., a New Hampshire
corporation (the "COMPANY"), hereby promises to pay to the order of CORPORATE
MEZZANINE II, L.P., a British Virgin Island limited partnership (the "HOLDER"),
or its registered assigns, on the Maturity Date (as hereinafter defined) (or
earlier as hereinafter provided) the principal sum of FIVE MILLION DOLLARS
($5,000,000), plus all "PIK AMOUNTS" (as hereinafter defined) added to the
principal amount hereof pursuant to the terms of this Note, with interest on the
unpaid principal amount of this Note from time to time as provided herein. For
the purposes of this Note, the term "MATURITY DATE" shall mean October 22, 2008.
1. Purchase Agreement
This Subordinated Promissory Note (as amended, modified or supplemented
from time to time, the "NOTE") is issued by the Company, on the date
hereof, pursuant to the Subordinated Note and Warrant Purchase
Agreement (as amended, modified or supplemented from time to time, the
"PURCHASE AGREEMENT"), dated as of October 22, 2001, by and between the
Company, BrandPartners Group, Inc. and the Holder. This Note and all
notes issued pursuant to Section 11(d) or Section 12 hereof are
hereinafter referred to as the "NOTES". The Holder is entitled to the
benefits of this Note, the Purchase Agreement and the other Transaction
Documents, and may enforce the agreements of the Company contained
herein and therein and exercise the remedies provided for hereby and
thereby or otherwise available in respect hereto and thereto, to the
extent provided herein or therein. Capitalized terms used herein
without definition are used herein with the meanings ascribed to such
terms in the Purchase Agreement.
2. Interest
(a) The Company promises to pay interest on the Accreted Principal
Amount (as hereinafter defined) of this Note at the rate of
sixteen percent (16%) per annum. The Company shall pay accrued
interest quarterly on each March 31, June 30, September 30 and
December 31 of each calendar year, or, if any such date shall
not be a Business Day, on the next succeeding Business Day to
occur after such date (each date upon which interest shall be
so payable, an "INTEREST PAYMENT DATE"), beginning on December
31, 2001. Interest on this Note shall accrue from the date of
issuance until repayment of the Accreted Principal Amount and
payment of all accrued interest in full. Interest shall accrue
and be computed on the basis of the actual number of days in
the related period over 360 days. Interest on the Accreted
Principal Amount of this Note at the rate of twelve percent
(12%) per annum that shall have accrued and shall be unpaid as
of any Interest Payment Date shall be paid on such Interest
Payment Date by wire transfer of immediately available funds
to an account at a bank designated by the Holder. Interest on
the Accreted Principal Amount of this Note at the rate of four
percent (4%) per annum that shall have accrued and shall
remain unpaid as of any Interest Payment Date (for any
Interest Payment Date, a "PIK AMOUNT") shall be paid on such
Interest Payment Date by addition of such PIK Amount to the
principal amount outstanding under this Note. At any time, the
outstanding principal amount of this Note, including all PIK
Amounts added thereto through such time, is referred to in
this Note as the "ACCRETED PRINCIPAL AMOUNT". The Holder shall
promptly notify the Company in writing following the addition
of any PIK Amount to principal of this Note; provided,
however, that the failure of the Holder to do so shall not
impair or affect any of the rights of the Holder hereunder and
all PIK Amounts shall be in any event automatically added to
the principal amount of this Note, whether or not such notice
is given.
(b) Notwithstanding the foregoing provisions of this Section 2,
but subject to applicable law, upon and during the occurrence
of an Event of Default (as hereinafter defined), the Accreted
Principal Amount of this Note shall bear interest, from the
date of the occurrence of such Event of Default until such
Event of Default is cured or waived, payable on demand in
immediately available funds, at a rate equal to eighteen
percent (18%) per annum (and no PIK Amount shall be added to
the Accreted Principal Amount of this Note in respect of such
interest). In addition, any overdue interest on this Note
shall bear interest, payable on demand in immediately
available funds, at a rate equal to eighteen percent (18%) per
annum (and no PIK Amount shall be added to the Accreted
Principal Amount of this Note in respect of such interest). In
the event that any interest rate provided for herein shall be
determined to be unlawful, such interest rate shall be
computed at the highest rate permitted by applicable law. Any
payment by the Company of any interest amount in excess of
that permitted by law shall be considered a mistake, with the
excess being applied to the principal of this Note without
prepayment premium or penalty.
3. Principal
The Company shall pay the principal amount due under this Note
including all PIK Amounts on the Maturity Date.
4. Mandatory Prepayment
(a) (i) Upon a Change in Control all amounts of principal of
and interest on this Note shall become immediately
due and payable at the option of the Holder. The
Holder may upon receiving notice of a Change in
Control, exercise its right to
2
demand payment in full of this Note, by giving the
Company notice of such election within five (5)
Business Days of receiving such notice. The Holder
may elect to be paid on any Business Day not less
than twenty (20) and not more than sixty (60)
Business Days following the receipt of such notice
from the Company.
(ii) In the event that the Company consummates (x) an IPO
or (y) an Asset Disposition (as hereinafter defined),
the Company shall, within five (5) Business Days
following consummation of such IPO or Asset
Disposition, apply the Net Proceeds thereof to the
prepayment of principal of the Note, to the extent
that such Net Proceeds shall not have been required
to be applied to Senior Debt and the Company shall,
concurrently with such prepayment of principal of
this Note, pay interest on the amount prepaid (as
provided in Section 2(a) as though the date of
prepayment was an Interest Payment Date which
interest, however, shall be paid in cash and no PIK
Amount shall be added to the Accreted Principal
Amount in respect of such payment of interest.
(iii) The Company shall give written notice to the Holder
of any Change in Control, IPO or Asset Disposition at
least ten (10) and not more than sixty (60) Business
Days prior to the consummation of same. Such notice
shall be given in the manner specified in Section
10.2 of the Purchase Agreement. Nothing contained in
this Section 4 shall be deemed a consent by the
Holder to the consummation of any Asset Disposition
prohibited by the Purchase Agreement and the Company
covenants and agrees that, notwithstanding any other
provisions of any Transaction Document, it shall not
enter into any agreement for an Asset Disposition
without the consent in writing of the requisite
percentage of Holders of the Notes, unless such
agreement provides for the payment in full of the
Notes upon consummation thereof. In the event that
the closing of an IPO is not consummated within sixty
(60) days following the notice of prepayment given by
the Company in connection with an IPO, the Company
shall be under no obligation to make the payments as
set forth above. In addition, in the event that such
a notice of prepayment is delivered by the Company in
connection with a Change in Control or Asset
Disposition transaction and such transaction is not
consummated within sixty (60) days of the notice of
prepayment, the Company shall be under no obligation
to make the payments as set forth above.
(iv) If more than one Note (as defined in the Purchase
Agreement) of the Company is outstanding, the Net
Proceeds payable under this paragraph (a) shall be
applied to the Notes of the Company pro rata.
(b) For the purposes of this Note the following terms have the
meanings specified below:
"ASSET DISPOSITION" shall mean the disposition whether by
sale, lease, transfer, loss, damage, destruction, condemnation
or otherwise of all or substantially all of the capital stock
of the Company or all or substantially all of the assets of
the Company and its Subsidiaries.
"IPO" shall mean an offering of equity securities of the
Company (or any successor thereto), pursuant to a registration
statement under the Securities Act of 1933, as amended, in
which the gross proceeds realized by the Company equal not
less than $30,000,000.
"NET PROCEEDS" shall mean the cash proceeds in respect of an
IPO or Asset Disposition, net of costs and expenses relating
to such IPO or Asset Disposition, any taxes payable (or
3
reserved for after taking into account available credits and
deductions) in respect of such IPO or Asset Disposition, any
discount or commissions payable in respect of an IPO and, in
the case of an Asset Disposition, the amount required to be
applied to other Debt (excluding Senior Debt) relating to the
relevant asset with the proceeds of such Asset Disposition.
5. Prepayment Premiums
(a) Except as provided in Section 5(b), the Notes are subject to
prepayment at the option of the Company, in whole or in part,
on any date at the prepayment amounts (expressed as
percentages of the Accreted Principal Amount) set forth below
plus accrued and unpaid interest thereon (which interest shall
be paid in cash and no PIK Amount shall be added to the
Accreted Principal Amount in respect of such payment of
interest), if any, to the applicable date of prepayment as
indicated below (together with costs and expenses, including,
without limitation, reasonable fees, charges and disbursements
of counsel):
IF PREPAID DURING THE PERIOD FROM: PERCENTAGE
After the Closing Date and on or before
October 22, 2002 103.00%
After October 22, 2002 and on or before
October 22, 2003 102.00%
After October 22, 2003 and on or before
October 22, 2004 101.00%
After October 22, 2004 100.00%
(b) Notwithstanding the foregoing, in the event that any principal
of the Note is prepaid as a result of an IPO, an Asset
Disposition, a refinancing of this Note and the Holder
participates in such refinancing or as a result of or
following a Change in Control (whether through a mandatory or
voluntary prepayment), in each case, as provided in Section
4(a) hereof, there shall be no prepayment premium payable on
the amount prepaid (that is, the prepayment amount shall be
100.00% of the Accreted Principal Amount).
(c) The Company shall give written notice of voluntary prepayment
of this Note or any portion thereof not less than five (5)
Business Days prior to the date fixed for such prepayment.
Such notice of voluntary prepayment shall be given in the
manner specified in Section 10.2 of the Purchase Agreement.
Upon notice of prepayment being given by the Company, the
Company covenants and agrees that it will prepay, on the date
fixed for prepayment in the notice therefor, this Note or the
portion hereof so called for prepayment, at the Accreted
Principal Amount thereof or the portion thereof so called for
prepayment together with interest accrued and unpaid thereon
to the date fixed for such prepayment (which interest shall be
paid in cash and no PIK Amount shall be added to the Accreted
Principal Amount in respect of such payment of interest),
together with any prepayment premium and the costs and
expenses referred to in Section 5(a).
(d) All prepayments under this Section 5 shall include payment of
accrued interest on the Accreted Principal Amount so prepaid
(which interest shall be paid in cash and no PIK Amount shall
be added to the Accreted Principal Amount in respect of such
payment of
4
interest) and shall be applied first to all costs, expenses
and indemnities payable under the Purchase Agreement, then to
payment of default interest, if any, then to payment of
accrued interest, and thereafter to principal, provided,
however, each prepayment of less than the full outstanding
principal balance of the Note shall be in an aggregate
principal amount of $200,000 or a whole multiple thereof.
6. Amendment
Amendments and modifications of this Note may be made only in the
manner provided in Sections 10.4 and 10.16 of the Purchase Agreement.
7. Defaults and Remedies
(a) Events of Default
An "Event of Default" shall occur if:
(i) the Company shall default in the payment of the
principal of this Note, when and as the same shall
become due and payable, whether at maturity or at a
date fixed for prepayment or by acceleration or
otherwise; or
(ii) the Company shall default in the payment of any
installment of interest or prepayment premium on this
Note according to its terms, or the Company or any
other Issuer Party shall default in the payment of
any amount (other than principal, interest or
premium) payable under the Transaction Documents, in
any case, when and as the same shall become due and
payable and such default shall continue for a period
of 10 days; or
(iii) any Issuer Party shall default in the due observance
or performance of any covenant to be observed or
performed pursuant to (i) Section 8.1 or 8.2 of the
Purchase Agreement, and such default shall continue
unremedied for 10 days or (ii) Section 4(a)(iii)
hereof or Section 8.3 of the Purchase Agreement; or
(iv) any Issuer Party shall default in the due observance
or performance of any covenant, condition or
agreement on the part of such Issuer Party to be
observed or performed pursuant to the terms hereof or
pursuant to the terms of the Purchase Agreement or
any of the other Transaction Documents (other than
those referred to in clause (i), (ii) or (iii) of
this Section 7(a)) and such default shall continue
unremedied for a period ending on the earlier of (i)
20 days after any of the Issuer Parties first has
actual knowledge of such failure or (ii) 20 days
after notice of such failure is given by CMII to the
Company, or
(v) any representation, warranty or certification made by
or on behalf of any Issuer Party in the Purchase
Agreement, any Note or any other Transaction Document
or in any writing, certificate or other document
delivered pursuant hereto or thereto shall have been
incorrect in any material respect when made; or
(vi) (x) any default in payment shall occur under any
Material Indebtedness (excluding Senior Debt) that
entitles the holder or holders thereof (or a
requisite percentage thereof) to accelerate the
maturity of such Material Indebtedness or (y) any
event or condition shall occur under any Material
Indebtedness (including Senior Debt) that has
resulted in the acceleration of such Material
Indebtedness
5
(and such acceleration has not been rescinded) or (z)
any Material Indebtedness shall not be paid at its
final maturity; or
(vii) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i)
liquidation, reorganization or other relief in
respect of the Company or any of its Subsidiaries or
its debts, or of a substantial part of its assets,
under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a
receiver, trustee, custodian, sequestrator,
conservator or similar official for the Company or
for a substantial part of its assets, and, in any
such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be
entered; or
(viii) The Company or any of its Subsidiaries shall (i)
voluntarily commence any proceeding or file any
petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition
described in paragraph (vii) of this Section 7(a),
(iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator,
conservator or similar official for the Company or
any of its Subsidiaries or for a substantial part of
its assets, (iv) file an answer admitting the
material allegations of a petition filed against it
in any such proceeding, (v) make a general assignment
for the benefit of creditors or (vi) take any action
for the purpose of effecting any of the foregoing; or
(ix) The Company or any of its Subsidiaries shall become
unable, admit in writing its inability or fail
generally to pay its debts as they become due; or
(x) one or more judgments for the payment of money in an
aggregate amount in excess of $500,000 (not covered
by insurance where the carrier has accepted
responsibility) shall be rendered against the Company
or any of its Subsidiaries and the same shall remain
undischarged for a period of 30 consecutive days
during which execution shall not be effectively
stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any material
assets of the Company or any of its Subsidiaries to
enforce any such judgment and such action is not
stayed or bonded within such thirty (30) days; or
(xi) an ERISA Event shall have occurred that, in the
reasonable opinion of CMII, when taken together with
all other ERISA Events that have occurred, could
reasonably be expected to result in a Material
Adverse Effect.
For the purposes of this Note the following term shall have
the meaning specified below:
"MATERIAL INDEBTEDNESS" shall mean Indebtedness (other than
Indebtedness arising under the Transaction Documents), or
obligations in respect of one or more Hedging Agreements, of
the Company and its Subsidiaries in an aggregate principal
amount exceeding $500,000. For purposes of determining
Material Indebtedness, the "principal amount" of the
obligations of the Company or any Subsidiary thereof in
respect of any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting
agreements) that the Company or such Subsidiary would be
required to pay if such Hedging Agreement were terminated at
such time.
6
(b) Acceleration
If an Event of Default occurs under Section 7(a)(vii) or
7(a)(viii) hereof, then the Accreted Principal Amount of,
accrued interest on and all other amounts payable under, this
Note and the Purchase Agreement shall automatically become
immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby
expressly waived. If an Event of Default occurs and is
continuing under Section 7(a)(i) or 7(a)(ii) hereof and the
Holder so notifies the Company in writing, the Accreted
Principal Amount of, accrued interest on and all other amounts
payable under, this Note may be declared by the Holder of this
Note and the Purchase Agreement to be immediately due and
payable. If an Event of Default occurs and is continuing under
any one or more of Sections 7(a)(iii) through and including
Section 7(a)(vi) hereof or Section 7(a)(ix), Section 7(a)(x)
or Section 7(a)(xi) hereof and the holders of a majority in
outstanding principal amount of the Notes so notifies the
Company in writing, the Accreted Principal Amount of, accrued
interest on and all other amounts payable under this Note and
the Purchase Agreement may be declared by such majority
holders to be immediately due and payable. Upon any such
declaration, such principal, interest and other amounts shall
become immediately due and payable.
8. Suits for Enforcement
(a) Upon the occurrence and during the continuation of any one or
more Events of Default, the Holder of this Note may proceed to
protect and enforce its rights hereunder by suit in equity,
action at law or by other appropriate proceeding, whether for
the specific performance of any covenant or agreement
contained in the Purchase Agreement or this Note or in aid of
the exercise of any power granted in the Purchase Agreement or
this Note, or may proceed to enforce the payment of this Note,
or to enforce any other legal or equitable right of the
Holders of this Note; provided, that in the case of any Event
of Default for which acceleration requires the action of the
holders of a majority in outstanding principal amount of the
Notes, the Holder shall not so proceed without the consent of
such majority holders (including the Holder within such
majority).
(b) In case of any default under this Note, the Company will pay
to the Holder such amounts as shall be sufficient to cover the
costs and expenses of such Holder due to such default, as
provided in Section 7 of the Purchase Agreement and Section
10.12 of the Purchase Agreement.
9. Remedies Cumulative
No remedy herein conferred upon the Holder is intended to be exclusive
of any other remedy and each and every such remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
10. Remedies Not Waived
No course of dealing between the Company and the Holder or any delay on
the part of the Holder in exercising any rights hereunder shall operate
as a waiver of any right.
11. Transfer; Registration
(a) The term "HOLDER" as used herein shall also include any
registered transferee of this Note. Each transferee of this
Note acknowledges that this Note has not been registered under
the Securities Act, and each Holder agrees that, prior to any
proposed transfer of
7
this Note, if such transfer is not made pursuant to either an
effective Registration Statement under the Securities Act of
1933, as amended (the "ACT"), or an opinion of counsel,
reasonably satisfactory in form and substance to the Company,
that this Note may be sold without registration under the Act,
the Holder will, if requested by the Company, deliver to the
Company:
(i) an investment covenant reasonably satisfactory to the
Company signed by the proposed transferee;
(ii) an agreement by such transferee to the impression of
the restrictive investment legend set forth at
Section 16 below on the Note; and
(iii) an agreement by such transferee to be bound by the
provisions of this Section 11 relating to the
transfer of such Note.
(b) This Note is a registered instrument. The Company shall
maintain a register (the "NOTE REGISTER") in its principal
offices for the purpose of registering the Note and any
transfer thereof, which register shall reflect and identify,
at all times, the ownership of any interest in the Note. Upon
the issuance of this Note, the Company shall record the name
of the initial purchaser of this Note in the Note Register as
the first Holder. Upon surrender for registration of transfer
or exchange of this Note at the principal offices of the
Company, the Company shall, at its expense, execute and
deliver a new Note of like tenor and of a like aggregate
principal amount, registered in the name of the Holder or a
transferee or transferees. Every Note surrendered for
registration of transfer or exchange shall be duly endorsed,
or be accompanied by written instrument of transfer duly
executed by the Holder of such Note or such holder's attorney
duly authorized in writing. The Company shall have no
obligation hereunder to any person other than the registered
Holder of this Note.
(c) This Note may be transferred or assigned by the Holder at any
time subject to Sections 11(a), 11(b) and 13 hereof and
Section 10.3 of the Purchase Agreement.
(d) In the event that the Holder intends to transfer the Note to
more than one transferee, the Company shall, in good faith,
cooperate with the Holder to effectuate such a transfer and to
issue replacement Notes in the appropriate denominations.
(e) The Holder shall bear the costs if any of any transfer or
assignment of the Note.
12. Replacement of Note
On receipt by the Company of an affidavit of an authorized
representative of the Holder stating the circumstances of the loss,
theft, destruction or mutilation of this Note (and in the case of any
such mutilation, on surrender and cancellation of such Note), the
Company, at its expense, will promptly execute and deliver, in lieu
thereof, a new Note of like tenor. If required by the Company, such
Holder must provide an agreement to indemnify the Company, which in the
judgment of the Company, is sufficient to protect the Company from any
loss that it may suffer if a lost, stolen or destroyed Note is
replaced.
13. Covenants Bind Successors and Assigns
All the covenants, stipulations, promises and agreements in this Note
shall inure to the benefit of and be binding upon the successors and
permitted assigns of the Company. Subject to Section 11, the Holder may
assign any of its respective rights under this Note to any Person. The
Company
8
may not assign any of its rights under this Note without the prior
written consent of the Holder, any such purported assignment without
such consent being null and void. Except for the provisions of the
Subordination Agreement stated to be for the benefit of the holders of
Senior Debt and except as provided in Section 7 of the Purchase
Agreement, no Person other than the Holder of this Note and its
successors and permitted assigns is intended to be a beneficiary of any
of the Transaction Documents.
14. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAW OF SUCH STATE OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK.
15. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION
EACH OF THE COMPANY AND THE HOLDER OF THIS NOTE HEREBY WAIVES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS
NOTE OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THE
VALIDITY, PROTECTION, INTERPRETATION, OR ENFORCEMENT HEREOF OR THEREOF.
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THIS
NOTE, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH OF THE COMPANY AND THE HOLDER OF THIS NOTE ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP,
THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS
TRANSACTION, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS
RELATED FUTURE DEALINGS. EACH OF THE COMPANY AND THE HOLDER OF THIS
NOTE FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT EACH HAS KNOWINGLY AND VOLUNTARILY
WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE ISSUER
DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
NOTE. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT. EACH OF THE COMPANY AND THE
HOLDER OF THIS NOTE ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON
SUCH BOND THAT MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF EACH. EACH OF
THE COMPANY AND THE HOLDER OF THIS NOTE HEREBY IRREVOCABLY AGREES THAT
ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE
OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA
FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO
THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES
THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM
THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH OF THE COMPANY AND THE
HOLDER OF THIS NOTE HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED
9
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS
ADDRESS SET FORTH IN SECTION 10.2 OF THE PURCHASE AGREEMENT, SUCH
SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.
16. Legends
Until the Subordination Termination Date (as that term is defined in
that certain Subordination Agreement described below), the Note at all
times shall contain in a conspicuous manner the following legend:
THIS NOTE AND THE OBLIGATIONS OF COMPANY ARISING HEREUNDER ARE
SUBORDINATED IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN
SUBORDINATION AND INTERCREDITOR AGREEMENT, DATED AS OF October 22,
2001, AS SUCH SUBORDINATION AGREEMENT MAY BE AMENDED, MODIFIED OR
SUPPLEMENTED FROM TIME TO TIME (THE "SUBORDINATION AGREEMENT"), BY AND
AMONG CORPORATE MEZZANINE II, L.P., ▇▇▇▇▇▇ BROTHERS INC. AND FLEET
CAPITAL CORPORATION FROM TIME TO TIME; AND EACH HOLDER OF THIS NOTE, BY
ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE
SUBORDINATION AGREEMENT.
17. Headings
The headings in this Note are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
18. Severability
If any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, unless
the provisions held invalid, illegal or unenforceable shall
substantially impair the benefits of the remaining provisions hereof.
[Signature Page Follows]
10
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
▇▇▇▇▇▇ BROTHERS INC.
By: /s/▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
EXECUTION
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND SUCH LAWS. THE SALE OR OTHER TRANSFER OF THIS WARRANT IS ALSO SUBJECT TO
THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 10.3 OF THE "PURCHASE
AGREEMENT" (AS HEREINAFTER DEFINED).
THIS WARRANT AND THE OBLIGATIONS OF THE COMPANY AND ▇▇▇▇▇▇ BROTHERS INC.
("▇▇▇▇▇▇") ARISING HEREUNDER ARE SUBORDINATED IN THE MANNER AND TO THE EXTENT
SET FORTH IN THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT DATED AS OF
OCTOBER 22, 2001, AS SUCH SUBORDINATION AND INTERCREDITOR AGREEMENT MAY BE
AMENDED, MODIFIED OR SUPPLEMENTED FROM TIME TO TIME, (THE "SUBORDINATION
AGREEMENT") BY AND AMONG CORPORATE MEZZANINE II, L.P., ▇▇▇▇▇▇ AND FLEET CAPITAL
CORPORATION FROM TIME TO TIME; AND EACH HOLDER OF THIS WARRANT, BY ITS
ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE SUBORDINATION
AGREEMENT.
Warrant to Purchase
405,000 shares of
Common Stock
OCTOBER 22, 2001
BRANDPARTNERS GROUP, INC.
COMMON STOCK PURCHASE WARRANT
Void after October 22, 2011
BRANDPARTNERS GROUP, INC. (the "COMPANY"), a Delaware corporation, hereby
certifies that for value received, CORPORATE MEZZANINE II, L.P., a British
Virgin Island limited partnership, or its successors or assigns (the "HOLDER"),
is entitled to purchase, subject to the terms and conditions hereinafter set
forth, an aggregate of 405,000 fully paid and nonassessable Shares of Common
Stock of the Company, at an aggregate exercise price of US$0.01 per Share (as
adjusted from time to time in accordance with the terms hereof, the "PURCHASE
PRICE"), subject to adjustment as provided herein, at any time or from time to
time beginning on the date hereof and prior to 5:00 P.M., New York City time, on
October 22, 2011 (the "EXPIRATION DATE").
This Warrant is issued pursuant to the Subordinated Note and Warrant Purchase
Agreement (as amended, modified or supplemented from time to time, the "PURCHASE
AGREEMENT"), dated as of October 22, 2001, by and among the Company, ▇▇▇▇▇▇
Brothers Inc. and the Holder, and is subject to the terms thereof. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned
such terms in the Purchase Agreement. The Holder is entitled to the rights and
subject to the obligations contained in the Purchase Agreement.
1. Definitions
For the purposes of this Warrant, the following terms shall have the
meanings indicated:
"ACT" means the Securities Act of 1933, as amended, together with the
rules and regulations promulgated thereunder from time to time.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by or under common control with, the Holder. For purposes of
this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract
or otherwise.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"CALL CLOSING DATE" shall have the meaning ascribed to such term in
Section 17 below.
"CALL NOTICE" shall have the meaning ascribed to such term in Section
17 below.
"CLOSING PRICE" shall mean, with respect to each Share for any day, (a)
the last reported sale price regular way or, in case no such sale takes
place on such day, the average of the closing bid and asked prices
regular way, in either case as reported on the principal national
securities exchange on which the Shares are listed or admitted for
trading or (b) if the Shares are not listed or admitted for trading on
any national securities exchange, the last reported sale price or, in
case no such sale takes place on such day, the average of the highest
reported bid and the lowest reported asked quotation for the Shares, in
either case as reported on the NASDAQ or a similar service if NASDAQ is
no longer reporting such information.
"CMII" shall mean Corporate Mezzanine II, L.P.
"CMII HOLDER" means CMII and following the assignment (prior to any
full or partial exercise hereunder) by CMII of this Warrant in whole,
the Person to whom this Warrant shall have been so assigned.
"COMMISSION" shall mean the Securities and Exchange Commission or other
federal agency then administering the Act and other federal securities
laws.
2
"COMMON STOCK" shall mean each class of capital stock of the Company
that is not limited as to a fixed sum or percentage of par or stated
value in respect of rights of the holders thereof to participate in
dividends or distributions of assets upon any liquidation or winding up
of the Company.
"COMPANY" shall have the meaning ascribed to such term in the first
paragraph of this Warrant.
"ELECTION TO PURCHASE COMMON STOCK" shall have the meaning ascribed to
such term in Subsection 2(a).
"EXERCISE DATE" shall have the meaning ascribed to such term in
Subsection 2(d).
"EXERCISE RATE" shall have the meaning ascribed to such term in Section
3(c).
"EXCLUDED ISSUED WARRANT SHARE" shall mean, at any time, an Issued
Warrant Share that (i) has been registered pursuant to a Registration
Statement as of such time or (ii) can be sold under and in accordance
with Rule 144K of the Rules under the Act, at such time.
Notwithstanding the foregoing, an Issued Warrant Share that would be an
Excluded Warrant Share, but for the exercise of this Warrant for such
Issued Warrant Share under Section 2(b)(i) hereof (i.e., a "cash"
exercise), shall constitute an Excluded Issued Warrant Share.
"EXPIRATION DATE" shall have the meaning ascribed to such term in the
first paragraph of this Warrant.
"EXCLUDED WARRANT SHARES" shall mean Warrant Shares that, upon issuance
pursuant to a cashless exercise under 2(b)(ii), 2(b)(iii) or 2(b)(iv)
hereof could be sold under and in accordance with Rule 144K of the
Rules under the Act. Upon actual issuance, Warrant Shares shall not
constitute "Excluded Warrant Shares" and shall constitute "Excluded
Issued Warrant Shares" to the extent and so long as they satisfy the
requirements of such definition.
"FAIR MARKET VALUE" shall be determined in accordance with Section
3(b).
"FIRST TRADING DAY" shall have the meaning ascribed to such term in
Section 15(c).
"FORMULA PRICE" shall mean, at any time, the value for each Warrant
Share or Issued Warrant Share obtained by dividing (A) the product
obtained by multiplying (I) .045 times (II) the amount, if any, that
(i) the sum of (a) the product of (x) the trailing twelve months EBITDA
of ▇▇▇▇▇▇ ending on the last day of the calendar month ending on or
most recently prior to the date of the Put Notice, Issued Warrant Put
Notice or Call Notice times (y) 6.5, plus (b) cash and cash equivalents
on hand of ▇▇▇▇▇▇, exceeds (ii) the sum of (x) Senior Debt of ▇▇▇▇▇▇
plus (y) the then outstanding principal amount of the Notes, plus (z)
the then outstanding principal of the Seller Notes by (B) the aggregate
number of Warrant Shares issuable upon exercise of this Warrant and
Issued Warrant Shares; provided, that, the aggregate value of all
Warrant Shares and Issued Warrant Shares calculated pursuant to this
definition of Formula Price shall not exceed that amount, which when
added to all
3
interest, premium and the placement fee, paid to the CMII (it
successors and assigns) with respect to the Notes (in each case in
cash), and assuming the timely and complete payment of principal of the
Notes in cash, would result in CMII (its successors and assigns)
realizing the sum of (i) a 35% internal rate of return on its
investment in the Notes and this Warrant as of the Put Closing Date,
Issued Warrant Share Put Closing Date or Call Closing Date specified in
the Put Notice, Issued Warrant Share Put Notice or Call Notice, as
applicable, plus (ii) interest at 16% per annum on the amount of the
Warrant Repurchase Price from such Put Closing Date, Issued Warrant
Share Put Closing Date or Call Closing Date, as applicable, through the
date of receipt by CMII (its successors and assigns) of payment in full
of the Warrant Repurchase Price (whether payable in cash, a Put Note or
a combination thereof and whether the Company has taken the
Registration Option). For the purposes of calculating such internal
rate of return, payment in cash of that portion of principal of Notes
constituting "PIK Amounts" (as defined therein) added to the "Accreted
Principal Amount" (as defined therein) in lieu of cash payment interest
shall be included as payments to CMII (its successors and assigns) of
interest.
"FULLY DILUTED SHARES" shall mean at any time (i) all Shares
outstanding as of such time, and (ii) all Shares into or for which
rights, options, warrants or other securities outstanding as of such
time are exercisable, exchangeable or convertible (other than the
Warrants).
"HOLDER" shall have the meaning ascribed to such term in the first
paragraph and Section 9 of this Warrant.
"ISSUED WARRANT SHARES" shall have the meaning ascribed to such term in
Section 16 below.
"ISSUED WARRANT SHARE PUT NOTICE" shall have the meaning ascribed to
such term in Section 16 below.
"ISSUED WARRANT SHARE PUT CLOSING DATE" shall have the meaning ascribed
to such term in Section 16 below.
"LIQUIDITY EVENT" shall mean (i) a consolidation or merger involving
the Company in which a Change in Control occurs or (ii) a sale of all
or substantially all of the assets of the Company.
"NASDAQ" shall mean the Automatic Quotation System of the National
Association of Securities Dealers, Inc.
"NEW WARRANT" shall have the meaning ascribed to such term in Section
4.
"PERSON" shall mean any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint
stock company, government (or an agency or political subdivision
thereof) or other entity of any kind, and shall include any successor
(by merger or otherwise) of such entity.
4
"PURCHASE AGREEMENT" shall have the meaning ascribed to such term in
the second paragraph of this Warrant.
"PURCHASE PRICE" shall have the meaning ascribed to such term in the
first paragraph of this Warrant.
"PUT NOTICE" shall have the meaning ascribed to such term in Section 15
below.
"PUT CLOSING DATE" shall have the meaning ascribed to such term in
Section 15 below.
"PUT NOTE" shall have the meaning ascribed to such term in Section 15
below.
"PUT RESTRICTIONS" shall have the meaning ascribed to such term in
Section 15 below.
"REGISTRATION OPTION" shall have the meaning ascribed to such term in
Section 15 below.
"REGISTRATION STATEMENT" shall mean a registration statement under the
Act.
"REPURCHASE EVENT" shall have the meaning ascribed to such term in
Section 15 below.
"SHARES" shall mean the shares of Common Stock of the Company, and any
other securities resulting from successive changes or reclassification
of such shares.
"TIME OF DETERMINATION" shall have the meaning ascribed to such term in
Section 3(c) below.
"WARRANT" shall mean this Warrant and any subsequent Warrant issued
pursuant to Subsection 2(c).
"WARRANT REGISTER" shall have the meaning ascribed to such term in
Subsection 10(c).
"WARRANT REPURCHASE PRICE" shall be the amount obtained by (i)
multiplying (a) the number of Warrants Shares or Issued Warrant Shares
subject to repurchase by (b) (1) in the event the Warrant Repurchase
Price is payable to a CMII Holder, the greater of (x) the Fair Market
Value per Share and (y) the Formula Price per Share or (2) in any other
event, the Fair Market Value per Share and (ii) subtracting therefrom
the aggregate Purchase Price for such Warrant Shares (without such
subtraction in the case of repurchase of Issued Warrant Shares).
"WARRANT SHARES" shall mean the Shares issuable upon exercise of the
Warrant and, except where the context otherwise requires, shall include
Issued Warrant Shares.
"▇▇▇▇▇▇" shall have the meaning given in the first paragraph of this
Warrant.
2. Exercise of Warrant
(a) Exercise
This Warrant may be exercised, in whole or in part, at any
time or from time to time during the period beginning on the
date hereof and ending on the Expiration Date, by
5
surrendering to the Company at its principal office this
Warrant, with the form of Election to Purchase Common Stock
(the "ELECTION TO PURCHASE COMMON STOCK") attached hereto as
Exhibit A duly executed by the Holder and accompanied by
payment of the Purchase Price for the number of Shares
specified in such form.
(b) Delivery of Shares; Payment of Purchase Price
As soon as practicable after surrender of this Warrant and
receipt of payment, the Company shall promptly issue and
deliver to the Holder a certificate or certificates for the
number of Shares set forth in the Election to Purchase Common
Stock, in such name or names as may be designated by such
Holder, along with a check for the amount of cash to be paid
in lieu of issuance of fractional Shares, if any, pursuant to
Section 6. Payment of the Purchase Price may be made as
follows (or by any combination of the following): (i) in
United States currency by cash or delivery of a certified
check, bank draft or postal or express money order payable to
the order of the Company, (ii) by assigning to the Company all
or any part of the unpaid principal amount of the Notes held
by the Holder in a principal amount equal to the Purchase
Price, (iii) by surrender of a number of Shares held by the
Holder at least equal to the quotient obtained by dividing (A)
the Purchase Price payable with respect to the portion of this
Warrant then being exercised by (B) the Fair Market Value on
the Exercise Date, or (iv) by cancellation of any portion of
this Warrant with respect to the number of Shares equal at
least to the quotient obtained by dividing (A) the product
obtained by multiplying (i) the number of Shares with respect
to which this Warrant is being exercised times (ii) the
Purchase Price per Share by (B) the difference between (1)
Fair Market Value of the number of Shares to be cancelled on
the Exercise Date, and (2) the Purchase Price per Share.
(c) Partial Exercise
If this Warrant is exercised for less than all of the Shares
purchasable under this Warrant, the Company shall cancel this
Warrant upon surrender hereof and shall execute and deliver to
the Holder a new Warrant of like tenor for the balance of the
Shares purchasable hereunder.
(d) When Exercise Effective
The exercise of this Warrant shall be deemed to have been
effective immediately prior to the close of business on the
Business Day on which this Warrant is surrendered to and the
Purchase Price is received by the Company as provided in this
Section 2 (the "EXERCISE DATE") and the Person in whose name
any certificate for Shares shall be issuable upon such
exercise, as provided in Subsection 2(b), shall be deemed to
be the record holder of such Shares for all purposes on the
Exercise Date provided, that the Holder shall be responsible
for any taxes or other costs and expenses incurred in
connection with transferring the Warrant.
6
3. Adjustment of Purchase Price and Number of Capital Shares
The Purchase Price and the number of Shares issuable upon exercise of
this Warrant shall be adjusted from time to time upon the occurrence of
the following events:
(a) Dividend, Subdivision, Combination or Reclassification of
Capital Shares
If the Company shall, at any time or from time to time, (i)
declare (A) a dividend on, or (B) a distribution in respect of
Shares payable in additional Shares, (ii) subdivide the
outstanding Shares into a larger number of Shares, (iii)
combine the outstanding Shares into a smaller number of
Shares, or (iv) issue any Shares or other interests in a
reclassification of the Shares (including any such
reclassification in connection with a consolidation or
merger), then in each such case, the Purchase Price in effect
at the time of the record date for such dividend or of the
effective date of such subdivision, combination or
reclassification or other event, and the number and kind of
Shares or interests issuable on such date shall be
proportionately adjusted so that the Holder of any Warrant
exercised after such date shall be entitled to receive, upon
payment of the same aggregate amount as would have been
payable before such date, the aggregate number and kind of
Shares or interests which, if such Warrant had been exercised
immediately prior to such date, such Holder would have owned
upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification.
Any such adjustment shall become effective immediately after
the record date of such dividend or the effective date of such
subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above
shall occur. If such a dividend is declared and such dividend
of the type described above is not paid, the Purchase Price
shall again be adjusted to be the Purchase Price in effect
immediately prior to such record date and any adjustment made
to the number of Shares issuable to the Holder under this
Warrant as a consequence of the declaration of such dividend
shall be reversed. Notwithstanding the foregoing, in the event
that the Company shall, at any time or from time to time,
declare a dividend on or distribution in respect of Shares
payable in cash or other property (except Shares), then the
Holder shall be entitled to receive, and the Company shall pay
the Holder, the amount obtained by multiplying (x) the amount
of the cash dividend declared per Share or the value (as
determined in good faith by the Board of Directors of the
Company) of any such non-cash dividend per Share by (y) the
total number of Shares into which this Warrant is exercisable
on the record date set for the payment of such dividend
notwithstanding the fact that the Warrant has not been
exercised by the Holder on such date.
(b) Determination of Fair Market Value
For the purposes hereof, the Fair Market Value per Share on
any date shall be as is agreed to by the Company and the
Holder (and the Company and the Holder shall
7
attempt to agree upon such Fair Market Value within ten (10)
days). If the Company and the Holder are unable to agree upon
the Fair Market Value per Share within said ten (10) day
period, then the Fair Market Value per Share on any date shall
be deemed to be the average of the daily Closing Price per
Share for the 20 consecutive trading days ending on such date
(or, for the purposes of Section 15(c), ending on the First
Trading Day). If the Shares are not listed or admitted for
trading on any national securities exchange or quoted by
NASDAQ or a similar service, and the parties are unable
otherwise to mutually and promptly agree upon Fair Market
Value, then the Company, on the one hand, and the Holder, on
the other hand, shall each promptly appoint as an appraiser an
individual who shall be a member of a nationally recognized
investment banking firm. Each appraiser shall be instructed
within 30 days of appointment to determine the Fair Market
Value per Share as of such date. If the two appraisers
thereupon are unable to agree on the Fair Market Value per
Share within such 30-day period, then the two appraisers,
within 10 days after the end of such 30-day period, shall
jointly select a third appraiser. The third appraiser shall,
within 30 days of its appointment, determine, in good faith,
the Fair Market Value per Share and such determination shall
be controlling. If any party fails to appoint an appraiser or
if one of the two initial appraisers fails after appointment
to submit its appraisal within the required period, then the
appraisal submitted by the remaining appraiser shall be
controlling. The cost of the foregoing appraisals shall be
shared one-half by the Company and one-half by the Holder;
provided, however, in the event a third appraiser is utilized
and one of the two initial appraisals (but not the other
initial appraisal) is greater than or less than the appraisal
by such third appraiser by 10% or more, then the cost of all
of the foregoing appraisals shall be borne by the party who
appointed the appraiser who made such initial appraisal.
(c) Dilutive Issuances
If the Company shall, at any time and from time to time, after
the date hereof, directly or indirectly, sell or issue any
Shares (regardless of whether originally issued or from the
Company's treasury), or rights, options, warrants or
convertible or exchangeable securities containing the right to
subscribe for or purchase any Capital Shares, or make any
distributions (other than (i) distributions received by the
Holder pursuant to Section 3(b), (ii) upon exercise of this
Warrant, (iii) the issuance of Shares pursuant to options,
warrants, convertible securities and similar rights
outstanding on the date of this Warrant and described in
reports filed by the Company with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Securities
and Exchange Act or (iv) issued pursuant to any employee stock
option, stock purchase or other benefit plan) as a result of
which the Fair Market Value per Share immediately after such
sale, issuance or distribution represents a lesser amount than
the Fair Market Value per Share immediately prior to such
sale, issuance or distribution (the "TIME OF DETERMINATION"),
then, the number of Shares issuable upon the exercise of this
Warrant
8
(the "EXERCISE RATE") shall be adjusted in accordance with the
formula:
E' = E x O + N
-------
O + N x P
-----
M
and the Purchase Price shall be adjusted in accordance with
the following formula:
PP' = PP x E
-
E'
where:
E' = the adjusted Exercise Rate.
E = the Exercise Rate immediately
prior to the time of determination
for any such issuance, sale or
distribution.
PP' = the adjusted Purchase Price.
PP = the Purchase Price immediately
prior to the Time of Determination
for any such issuance, sale or
distribution.
O = the number of Fully Diluted
Shares outstanding immediately
prior to the time of determination
for any such issuance, sale or
distribution.
N = the number of additional Shares
issued, sold or issuable upon
exercise of such rights, options,
warrants or other securities.
P = the per share price received and
receivable by the Company in the
case of any issuance or sale of
Shares or rights, options, warrants
or other securities (inclusive of
the consideration per share of
Shares payable upon exercise of
such rights, options, warrants or
other securities.
M = the Fair Market Value per share
of Shares at the time of
determination for any such
issuance, sale or distribution.
Notwithstanding the foregoing, there shall be no adjustment under this Section
3(c) in respect of the issuance of any Shares in the event that the
consideration received by the Company for such Shares equal at least the Fair
Market Value of such Shares at the time of issuance or at the time of execution
of a binding agreement to issue Shares within two weeks of such execution, so
long as such issuance occurs within such period of two weeks. In the event that
(i) the consideration for such Shares is determined by an underwriter, placement
agent or other independent evaluator (acting in such capacity in connection with
such issuance) that is not an Affiliate of the Company, or (ii) the
consideration for
9
such Shares is at least equal to the Closing Price (if any) on the date of
issuance or at the time of execution of a binding agreement to issue shares so
long as such issuance occurs within such period of two weeks, then such
consideration shall be deemed, for the purposes of this Section 3(c), to be
equal to at least the Fair Market Value of such Shares.
4. Reorganization, Reclassification, Merger and Sale of Assets
If there occurs any capital reorganization or any reclassification or
other modification of the economic terms of the Shares of the Company,
the consolidation or merger of the Company with or into another Person
(other than a merger or consolidation of the Company in which the
Company is the continuing entity and which does not result in any
reorganization, reclassification or modification of its outstanding
Shares) or the sale or conveyance of all or substantially all of the
assets of the Company to another Person, then, the Holder will be
entitled to receive upon surrender of the Warrant to the Company (x) to
the extent there are cash proceeds resulting from the consummation of
such reorganization, reclassification, consolidation, merger, sale or
conveyance, in exchange for such Warrant, cash in an amount equal to
the cash proceeds that would have been payable to the Holder had the
Holder exercised such Warrant immediately prior to the consummation of
such reorganization, reclassification, consolidation, merger, sale or
conveyance, and (y) to the extent that the Holder would be entitled to
receive securities (in addition to or in lieu of cash in connection
with any such reorganization, reclassification, consolidation, merger,
sale or conveyance), the same kind and amounts of securities or other
assets, or both, that are issuable or distributable to the holders of
outstanding Shares of the Company with respect to their Shares upon
such reorganization, reclassification, consolidation, merger, sale or
conveyance, as would have been deliverable to the Holder had the Holder
exercised such Warrant immediately prior to the consummation of such
reorganization, reclassification, consolidation, merger, sale or
conveyance; provided, however, that upon the occurrence of any such
reorganization, reclassification, consolidation, merger, sale or other
conveyance, at the sole option and discretion of the Holder, the Holder
may, by notice to the Company, require the Company to issue to the
Holder a warrant (the "NEW WARRANT") for the purchase of all or any
portion of any such securities upon terms and conditions which provide
to the Holder the same rights, protections and benefits in respect of
such securities as this Warrant provides to such Holder with respect to
the Shares, including, without limitation, the right to exercise rights
of the type granted pursuant to Section 15 and Section 16 hereof
pursuant to the provisions thereof, and in any event, the right to
require the Company to purchase the New Warrants or Shares issued upon
exercise thereof upon the same terms and conditions as contained in
Section 15 and Section 16. The Company will not effect any such
reclassification, reorganization, consolidation or merger in which the
Company is not the surviving entity unless upon or prior to the
consummation thereof the successor entity (being other than the
Company) resulting from such reclassification, reorganization,
consolidation or merger shall assume by written instrument, executed
and mailed or delivered to each Holder at the last address thereof
appearing on the books of the Company, the obligation to deliver to
such Holder New Warrants for such securities that, in accordance with
the foregoing provisions, the Holder may be entitled
10
to purchase. In the event that the Company and the Holder are unable to
mutually agree upon an appropriate adjustment as described above, the
parties shall utilize one or more third party appraisers, in the manner
described in Section 3(b) above, to determine the appropriate
adjustment. Nothing contained in this Section 4 shall limit or affect
the right of the Holder to exercise its rights under Section 15 and
Section 16.
5. Certificate as to Adjustments
Whenever the Purchase Price and/or the number of Shares issuable, or
the securities or other property deliverable, upon the exercise of this
Warrant shall be adjusted pursuant to the provisions hereof, the
Company shall promptly give written notice thereof to the Holder, in
accordance with Section 14, in the form of a certificate signed by a
Financial Officer of the Company stating the adjusted Purchase Price,
the number of Shares issuable, or the securities or other property
deliverable, upon exercise of the Warrant calculated to the nearest
cent or the nearest Share and setting forth in reasonable detail the
method of calculation and the facts requiring such adjustment and upon
which such calculation is based. Each adjustment shall remain in effect
until a subsequent adjustment is required.
6. Fractional Shares
Notwithstanding an adjustment pursuant to Section 3 in the number of
Shares covered by this Warrant or any other provision of this Warrant,
the Company shall not be required to issue fractions of Shares upon
exercise of this Warrant or to distribute certificates that evidence
fractional Shares. In lieu of fractional Shares, the Company may make
payment to the Holder, at the time of exercise of this Warrant as
herein provided, of an amount in cash equal to such fraction multiplied
by the greater of the Fair Market Value on the Exercise Date and the
Purchase Price.
7. Notice of Proposed Actions
In case the Company shall propose at any time or from time to time (a)
to declare or pay any dividend to the holders of Shares or to make any
other distribution to the holders of Shares, (b) to offer to the
holders of Shares rights or warrants to subscribe for or to purchase
any additional Shares of any class or any other securities, rights or
options, (c) to effect any reorganization, reclassification or
modification of its Shares, (d) to effect any consolidation, merger,
sale or other conveyance of all or substantially all of the property,
assets or business of the Company which would, if consummated, adjust
the Purchase Price or the securities issuable upon exercise of this
Warrant, (e) to effect the liquidation, dissolution or winding up of
the Company, or (f) to take any other action that would require a vote
of the holders of the Company's Shares, then, in each such case, the
Company shall give to the Holder, in accordance with Section 14, a
written notice of such proposed action, which shall specify (i) the
record date for the purposes of such dividend, distribution of rights
or warrants or vote of the holders of the Company's Shares, or if a
record is not to be taken, the date as of which the holders of Shares
of record to be entitled to such dividend, distribution of rights or
warrants or vote is to be
11
determined, or (ii) the date on which such reorganization,
reclassification, modification, consolidation, merger, sale or other
conveyance, liquidation, dissolution or winding up or other action is
expected to become effective, and such notice shall be so given as
promptly as possible but in any event at least ten (10) Business Days
prior to the applicable record, determination or effective date
specified in such notice.
8. No Dilution or Impairment
The Company will not, by amendment of its governance documents or
through any reorganization, reclassification, modification, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities
or any other action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times
in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder of this Warrant against dilution
(for which an adjustment hereunder is not specifically provided and
which would have the same type of adverse financial effect on the
Holder as that for which an anti-dilution adjustment is specifically
provided hereunder) or other impairment. Without limiting the
generality of the foregoing, the Company (a) will at all times reserve
and keep available the maximum number of its authorized Shares, free
from all preemptive rights therein, which number of authorized Shares
will be sufficient to permit the full exercise of this Warrant, and (b)
will take all such action as may be necessary or appropriate in order
that all Shares as may be issued pursuant to the exercise of this
Warrant will, upon issuance, be duly and validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect
to the issue thereof. The Company will not amend its certificate of
incorporation in any manner which would affect the Shares into which
the Warrants are exercisable in a manner that is different than the
effect which such amendment would have on other Shares (and is adverse
in respect of the Shares).
9. Replacement of Warrants
On receipt by the Company of an affidavit of an authorized
representative of the Holder stating the circumstances of the loss,
theft, destruction or mutilation of this Warrant (and in the case of
any such mutilation, on surrender and cancellation of such Warrant),
the Company at its expense will promptly execute and deliver, in lieu
thereof, a new Warrant of like tenor which shall be exercisable for a
like number of Shares. If required by the Company, such Holder must
provide an agreement to indemnify the Company which, in the judgment of
the Company, is sufficient to protect the Company from any loss which
it may suffer if a lost, stolen or destroyed Warrant is replaced.
10. Restrictions on Transfer
(a) The term "HOLDER" as used herein shall also include any
transferee of this Warrant whose name has been recorded by the
Company in the Warrant Register (as hereinafter defined). Each
Holder of this Warrant or the Shares issuable upon the
exercise hereof acknowledges that this Warrant and the Shares
issuable upon the exercise hereof have
12
not been registered under the Securities Act or any state
securities or blue sky law and may be transferred only
pursuant to an effective registration under the Securities Act
or any applicable state securities or blue sky law or pursuant
to an applicable exemption from the registration requirements
of the Securities Act or any applicable state securities or
blue sky law, subject to the restrictions on transfer set
forth in this Section 10 and in Section 10.3 of the Purchase
Agreement.
(b) With respect to a transfer that should occur prior to the time
that the offer and sale of this Warrant or the Shares issuable
upon the exercise hereof is registered under the Securities
Act, such Holders, at their sole expense, shall request an
opinion of counsel addressed to the Company (which shall be
rendered by counsel reasonably acceptable to the Company and
which opinion shall be reasonably acceptable to the Company)
that the proposed transfer may be effected without
registration or qualification under any Federal or state
securities or blue sky law. Counsel shall, as promptly as
practicable, notify the Company and the Holder of such opinion
and of the terms and conditions, if any, to be observed in
such transfer, whereupon the Holder shall be entitled to
transfer this Warrant or such Shares (or portion thereof),
subject to such terms and conditions, any other provisions and
limitations of this Warrant.
(c) The Company shall maintain a register (the "WARRANT REGISTER")
at its principal office for the purpose of registering the
Warrant and any transfer hereof, which register shall reflect
and identify, at all times, the ownership of any interest in
the Warrant. Upon the issuance of this Warrant, the Company
shall record the name of the initial purchaser of this Warrant
in the Warrant Register as the first Holder. Upon surrender
for registration of transfer or exchange of this Warrant
together with a properly executed Form of Assignment attached
hereto as Exhibit B at the principal office of the Company,
the Company shall, at its expense, (except that the Holder
shall pay all applicable transfer taxes) execute and deliver
one or more new Warrants of like tenor which shall be
exercisable for a like aggregate number of Shares, registered
in the name of the Holder or a transferee or transferees.
(d) Subject to the foregoing, this Warrant may be transferred or
assigned by the Holder at any time.
11. No Rights or Liability as a Shareholder
This Warrant does not entitle the Holder hereof to any voting rights or
other rights as a holder of the Company's Shares. No provisions hereof,
in the absence of affirmative action by the Holder hereof to exercise
this Warrant for Shares, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of such
Holder as a holder of the Company's Shares.
12. Charges, Taxes and Expenses
13
Issuance of certificates for Shares to the Holder upon the exercise of
this Warrant shall be made without charge to the Holder hereof for any
issue or transfer tax, or other incidental expense, in respect of the
issuance or delivery of such certificates or the securities represented
thereby, all of which taxes and expenses shall be paid by the Company.
13. Amendment or Waiver
This Warrant and any term hereof may be amended, waived, discharged or
terminated only by and with the written consent of the Company, ▇▇▇▇▇▇
and the Holder.
14. Notices
Any notice or other communication (or delivery) required or permitted
hereunder shall be made in writing and shall be by registered mail,
return receipt requested, telecopier, courier service or personal
delivery to the Company at its principal office as specified in Section
10.2 of the Purchase Agreement and to the Holder at its address as it
appears in the Warrant Register. All such notices and communications
(and deliveries) shall be deemed to have been duly given: when
delivered by hand, if personally delivered; when delivered by courier,
if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and
when receipt is acknowledged, if telecopied.
15. ▇▇▇▇▇▇'▇ Obligation to Repurchase the Warrant
(a) The Holder shall have the right, exercisable at any time from
and after the earliest of (i) the fifth anniversary of the
Closing Date (as defined in the Purchase Agreement), (ii) the
later of (x) the repayment in full of the aggregate principal
amount (together with interest accrued thereon) outstanding
under the Notes and (y) the third anniversary of the Closing
Date (as defined in the Purchase Agreement), (iii) an
effective declaration by any holder of a Note that such Note
has become immediately due and payable or, if applicable, by
the required percentage of holders of Notes that such Notes
have become immediately due and payable, (iv) the occurrence
of a Change in Control or issuance by the Company pursuant to
a Note of notice of a Change in Control (conditional upon the
actual closing of such Change in Control transaction) and (v)
the occurrence of a sale of all or substantially all of the
assets of the Company (each of the events described in the
preceding clauses (i) through (v) a "REPURCHASE EVENT"), but
prior to the Expiration Date, to cause ▇▇▇▇▇▇ to purchase all
or any portion of this Warrant at the Warrant Repurchase Price
for the number of Warrant Shares (which must omit and ▇▇▇▇▇▇
shall have no obligation to purchase any portion of this
Warrant in respect of Excluded Warrant Shares) specified in
the Put Notice. Such right shall be exercisable by the Holder
by delivery of written notice (the "PUT NOTICE") to ▇▇▇▇▇▇
specifying the portion of this Warrant that shall be
repurchased (by reference to a specific number of Warrant
Shares issuable upon exercise of this Warrant) and the date on
which such repurchase shall occur, which date shall not be
less than thirty (30) days (or such lesser time as may remain
until the Business Day immediately prior to the
14
consummation of a transaction described in clauses (iv) or (v)
above), nor more than sixty (60) days after the date of the
Put Notice (the "PUT CLOSING DATE"). Except as provided below
in this Section 15, on the Put Closing Date, the Holder shall
surrender this Warrant to ▇▇▇▇▇▇ against (i) payment of the
Warrant Repurchase Price by wire transfer to an account
designated by the Holder and (ii) if the Holder has elected to
have only a portion of the Warrant repurchased, delivery of a
new warrant duly executed by ▇▇▇▇▇▇ on the same terms and
conditions as this Warrant, except that such warrant shall be
exercisable for the remaining number of the Warrant Shares.
(b) In the event that ▇▇▇▇▇▇, is unable to pay the Warrant
Repurchase Price or any portion thereof in cash in connection
with a put under Section 15(a) resulting from the occurrence
of any Repurchase Event described in clauses (i), (ii), (iv)
or (v) above, in any case, due to capital surplus or similar
restrictions under applicable corporate law, contractual
restrictions in the Senior Credit Agreement as in effect as of
the Closing Date (or the same restrictions in any refinancing
thereof permitted by the Subordination Agreement) or the
unavailability of cash on hand of, and/or the inability to
borrow on customary terms and conditions the amount of the
Warrant Repurchase Price ("PUT RESTRICTIONS"), the Holder will
accept, in lieu of that portion of the Warrant Repurchase
Price which cannot be paid or is so unavailable a promissory
note of ▇▇▇▇▇▇ (a "PUT NOTE") in the principal amount of such
portion of the Warrant Repurchase Price, on the same terms and
conditions as the Notes (including subordination on the same
terms, and to the same amount of Senior Debt as the Notes),
except that (i) the Put Note shall become due and payable in
full on the earlier to occur of the eighth anniversary of the
Closing Date and the date on which such Put Restrictions no
longer prevent such payment, (ii) the Put Note shall bear
interest, payable solely by addition of "PIK Amounts" (as
defined therein) to the "Accreted Principal Amount" (as
defined therein), at an annual rate of 18% per annum and (iii)
the Put Note shall have no financial covenants (that is,
covenants of the type contained in Section 8.3 of the Purchase
Agreement). ▇▇▇▇▇▇ shall use reasonable commercial efforts to
cause the Put Note to be repaid as soon as practicable,
subject to ▇▇▇▇▇▇'▇ reasonable business judgment.
(c) Notwithstanding the obligation to pay the Warrant Repurchase
Price under Section 15(a) or Section 16(a), in the event of
the exercise by the Holder of its put option under Section
15(a) or Section 16(a), ▇▇▇▇▇▇ can elect (the "REGISTRATION
OPTION") by giving written notice to the Holder at least
twenty (20) Business Days prior to the scheduled Put Closing
Date or Issued Warrant Share Put Closing Date, as applicable,
to cause the Company to register all Warrant Shares that would
be issuable upon exercise of this Warrant (as of the effective
date of registration) or all Issued Warrant Shares subject to
such put exercise, as applicable, in any case, for sale by the
Holder under the Act. In the event of such election, if (A)
the Registration Statement relating to the Warrant Shares to
be issued to the Holder or such Issued Warrant Shares, as
applicable, shall be declared effective by the Commission
within six (6) months following the Put Closing
15
Date specified in the Put Notice; (B) such Warrant Shares or
such Issued Warrant Shares, as applicable, are approved for
listing or included for quotation, as the case may be, on the
principal securities exchange or market on which Shares then
trade; and (C) the prospectus contained in the Registration
Statement is current and available for use by the Holder in
reselling the Warrant Shares or such Issued Warrant Shares, as
applicable, then ▇▇▇▇▇▇'▇ obligation to pay the Warrant
Repurchase Price under Section 15(a) or Section 16(a), as
applicable, shall be satisfied if ▇▇▇▇▇▇ shall pay to the
Holder in cash on the first trading day immediately following
the satisfaction of each of the conditions listed in (A),(B)
and (C) above (the "FIRST TRADING DAY"), an amount equal to
the sum of (a) the amount, if any, by which the aggregate
Warrant Repurchase Price (for all Warrant Shares or such
Issued Warrant Shares, as applicable, so registered) exceeds
the product of (x) the average Closing Prices on NASDAQ (or
other exchange or market on which such shares are quoted or
traded) of such Shares for the twenty (20) consecutive trading
days ending on such First Trading Day times (y) the number of
Warrant Shares or such Issued Warrant Shares, as applicable,
so registered plus (b) 16% per annum on the amount of the
Warrant Repurchase Price (for all Warrant Shares or such
Issued Warrant Shares, as applicable, so registered) (without
regard to the interest component included in (ii) of the
proviso in the definition of "Formula Price", whether or not
the Formula Price is taken into account in calculating the
Warrant Repurchase Price) for the period from the date 90 days
following the Put Closing Date or Issued Warrant Share Put
Closing Date specified in the Put Notice or Issued Warrant
Share Put Notice to the date of payment of the Warrant
Repurchase Price (whether in cash, a Put Note or a combination
thereof). In the event that there are Put Restrictions that
would prevent such payment, ▇▇▇▇▇▇ shall issue a Put Note for
the amount payable under this paragraph that is prevented by
such Put Restrictions. In the case of proper election by
▇▇▇▇▇▇ of the Registration Option, no surrender of Warrant
Shares or Issued Warrant Shares shall take place on the Put
Closing Date or Issued Warrant Put Closing Date. In such
event, the Holder shall fulfill the obligations of a Holder of
Registerable Shares under the Registration Rights Agreement in
order to facilitate the registration.
16. ▇▇▇▇▇▇'▇ Obligation to Repurchase Issued Warrant Shares
(a) The Holder shall have the right exercisable at any time, and
from time to time, upon the occurrence of a Repurchase Event,
to cause ▇▇▇▇▇▇ to purchase all or any portion of the Warrant
Shares that have been issued upon the exercise of this Warrant
(the "ISSUED WARRANT Shares"), other than any Excluded Issued
Warrant Shares, at the Warrant Repurchase Price for such
Issued Warrant Shares. Such right shall be exercisable by the
Holder by delivery of written notice (the "ISSUED WARRANT
SHARES PUT NOTICE") to ▇▇▇▇▇▇, specifying the number of such
Issued Warrant Shares that shall be repurchased and the date
on which such repurchase shall occur, which date shall not be
less than thirty (30) days nor more than sixty (60) days after
the date of such Issued Warrant Put Notice (the "ISSUED
WARRANT SHARES PUT CLOSING DATE"). Except as provided below in
16
this Section 16 and in Section 15(c), on the Issued Warrant
Put Closing Date, the Holder shall surrender the Issued
Warrant Shares to be repurchased, against payment of the
Warrant Repurchase Price by wire transfer to an account
designated by the Holder.
(b) In the event that ▇▇▇▇▇▇, is unable to pay the Warrant
Repurchase Price or any portion thereof in cash in connection
with a put under Section 16(a) resulting from the occurrence
of any Repurchase Event described in clauses (i), (ii), (iv)
or (v) of Section 15, in any case, due to any Put
Restrictions, the Holder will accept, in lieu of that portion
of the Warrant Repurchase Price which cannot be paid or is so
unavailable a Put Note in the principal amount of such portion
of the Warrant Repurchase Price, on the same terms and
conditions as the Notes (including subordination on the same
terms, and to the same amount of Senior Debt as the Notes),
except that (i) the Put Note shall become due and payable in
full on the earlier to occur of the eighth anniversary of the
Closing Date and the date on which such Put Restrictions no
longer prevent such payment, (ii) the Put Note shall bear
interest, payable solely by addition of "PIK Amounts" (as
defined therein) to the "Accreted Principal Amount" (as
defined therein), at an annual rate of 18% per annum and (iii)
the Put Note shall have no financial covenants (that is,
covenants of the type contained in Section 8.3 of the Purchase
Agreement). ▇▇▇▇▇▇ shall use reasonable commercial efforts to
cause the Put Note to be repaid as soon as practicable,
subject to ▇▇▇▇▇▇'▇ reasonable business judgment.
(c) ▇▇▇▇▇▇'▇ obligation to pay the Warrant Repurchase Price under
Section 16 (a), in the event of the exercise by the Holder of
its put option under Section 16(a) is subject to the
Registration Option as provided in Section 15(c).
17. ▇▇▇▇▇▇'▇ Right to Repurchase Warrant and Issued Warrant Shares
(a) From time to time on or after the date falling at the end of
six (6) years after the Closing Date, and until the date
falling ten (10) years after the Closing Date (as defined in
the Purchase Agreement), ▇▇▇▇▇▇ shall have the right to
repurchase from such Holder, from any source of funds legally
available therefor this Warrant at the Warrant Repurchase
Price for all Warrant Shares issuable under this Warrant and
all Issued Warrant Shares (other than Excluded Issued Warrant
Shares) theretofore issued under this Warrant. Such right
shall be exercisable by ▇▇▇▇▇▇ by delivery of written notice
(the "CALL NOTICE") to the Holder of this Warrant, specifying
the date on which such repurchase shall occur, which date
shall not be less than thirty (30) days nor more than sixty
(60) days after the date of such Call Notice (the "CALL
CLOSING DATE"). On the Call Closing Date, the Holder shall
surrender the Warrant and all certificates for Issued Warrant
Shares (specified in the Call Notice), against payment of the
Warrant Repurchase Price by wire transfer to an account
designated by the Holder.
(b) In the event that ▇▇▇▇▇▇ makes a repurchase of this Warrant
and/or Issued Warrant Shares pursuant to Section 17(a) hereof
and at any time within one year following the
17
date of such repurchase the Company consummates a Liquidity
Event in which the proceeds realized by the Company and
distributed or distributable to holders of Common Stock of the
Company, after deducting all costs and expenses of such
Liquidity Event, exceed, on a per Share basis, the Warrant
Repurchase Price per Share, ▇▇▇▇▇▇ shall forthwith upon the
consummation of such public offering or Liquidity Event pay to
such Holder the amount of such excess multiplied by the number
of Warrant Shares subject to the Warrant and Issued Warrant
Shares repurchased as an additional amount of Warrant
Repurchase Price hereunder.
18. Certain Remedies
The Holder shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Warrant and to enforce specifically
the terms and provisions of this Warrant in any court of the United
States or any state thereof having jurisdiction, this being in addition
to any other remedy to which such Holder may be entitled at law or in
equity.
19. Governing Law
This Warrant shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the principles of
conflicts of law of such State, other than Section 5-1401 of the
General Obligations Law of the State of New York.
20. Headings
The headings in this Warrant are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
21. Survival
The provisions of Sections 15 and 16 hereof shall survive the complete
exercise of this Warrant and the issuance of all Issued Warrant Shares.
For purposes of Sections 15 and 16, "HOLDER" shall include any Person
owning any of the Issued Warrant Shares.
BRANDPARTNERS GROUP, INC. ▇▇▇▇▇▇ BROTHERS INC.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------- --------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President Title: President
18
EXHIBIT A TO COMMON
STOCK PURCHASE WARRANT
[FORM OF] ELECTION TO PURCHASE COMMON STOCK
The undersigned hereby irrevocably elects to exercise the Warrant to purchase
_______ shares of Class common stock ("Shares") of BRANDPARTNERS GROUP, INC.
(the "Company") and hereby [makes payment of US$_________ therefor] [or] [makes
payment therefor by assignment to the Company pursuant to Section 2(b)(ii) of
the Warrant of US$_______ aggregate principal amount of Notes (as defined in the
Purchase Agreement)] [or] [makes payment therefor by surrendering pursuant to
Section 2(b)(iii) Shares of the Company] [or] [makes payment therefor by
cancellation pursuant to Section 2(b)(iv) of a portion of the Warrant with
respect to Shares]. The undersigned hereby requests that certificates for such
units be issued and delivered as follows:
ISSUE TO:
----------------------------------------------------------------------
(NAME)
-------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
-------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
--------------------------------------------------------------------
(NAME)
-------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of Shares purchased hereby is less than the number of Shares
covered by the Warrant, the undersigned requests that a new Warrant representing
the number of Shares not purchased be issued and delivered as follows:
ISSUE TO:
----------------------------------------------------------------------
(NAME OF HOLDER(1))
-------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO:
--------------------------------------------------------------------
(NAME OF HOLDER)
-------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
Dated: [CORPORATE MEZZANINE II, L.P.(1)]
-----------------------------
By:
---------------------------------
Name:
Title:
(1) Name of Holder must conform in all respects to name of Holder as
specified on the face of the Warrant.
19
EXHIBIT B TO COMMON
STOCK PURCHASE WARRANT
[FORM OF] ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto
the Assignee named below all of the rights of the undersigned to purchase shares
of common stock ("Shares"), of BRANDPARTNERS GROUP, INC. represented by the
Warrant, with respect to the number of Shares set forth below:
Name of Assignee Address No. of Shares
and does hereby irrevocably constitute and appoint ________________________
Attorney to make such transfer on the books of BRANDPARTNERS GROUP, INC.,
maintained for that purpose, with full power of substitution in the premises.
Dated: [CORPORATE MEZZANINE II, L.P.(1)]
-----------------------------
By:
---------------------------------
Name:
Title:
(1) Name of Holder must conform in all respects to name of Holder as
specified on the face of the Warrant.
20
Execution
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of October 22, 2001,
between BRANDPARTNERS GROUP, INC., a Delaware corporation (the "Corporation"),
and the SECURITYHOLDERS (as defined below).
The Securityholders own or have the right to purchase or otherwise
acquire shares of the Common Stock (as defined below) of the Corporation. The
Corporation and the Securityholders deem it to be in their respective best
interests to enter into this Agreement to set forth the rights of the
Securityholders in connection with public offerings and sales of the Common
Stock.
NOW THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, the Corporation and the Securityholders
hereby agree as follows:
Section 1. Definitions. The following words and terms shall have the following
meanings, respectively, unless the context clearly requires otherwise:
"Board" means the Board of Directors of the Corporation.
"Business Day" means any day that is not a Saturday, Sunday or
a day on which banking institutions in New York, New York are required to be
closed.
"Commission" means the Securities and Exchange Commission or
any other governmental body or agency succeeding to the functions thereof.
"Common Stock" means the shares of the Corporation's Common
Stock, par value $.01 per share, or any other securities into which the Common
Stock may hereafter be converted or for which the Common Stock may be exchanged.
"Purchase Agreement" means the Subordinated Note and Warrant
Purchase Agreement, as amended, modified or supplemented from time to time,
dated as of October 22, 2001, by and among the Corporation, ▇▇▇▇▇▇ Brothers Inc.
and Corporate Mezzanine II, L.P.
"Exchange Act" means the Securities Exchange Act of 1934 or
any successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Indemnified Person" shall have the meaning ascribed thereto
in Section 7.
"Majority of Registering Securityholders" means, at any time,
those Securityholders which or who hold at least a majority of the Registrable
Shares included or proposed to be included in a registration.
"Majority of Securityholders" means, at any time, those
Securityholders which or who hold at least a majority of the Registrable Shares
then held by all Securityholders.
"Person" shall be construed broadly and shall include, a
partnership, a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a governmental entity or any department, agency or political subdivision
thereof.
"Prospectus" means the prospectus included in a Registration
Statement, including any prospectus subject to completion, and any such
prospectus as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Shares and, in
each case, by all other amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all material incorporated
by reference therein.
"Public Offering" means the closing of a public offering of
Common Stock pursuant to a Registration Statement declared effective under the
Securities Act, except that a Public Offering shall not include an offering of
securities to be issued as consideration in connection with a business
acquisition or an offering of securities issuable pursuant to an employee
benefit plan.
"Registrable Shares" means (i) shares of Common Stock held by
any Securityholder or issuable or issued upon conversion of Warrants held by any
Securityholder and (ii) any other shares of Common Stock issued as (or issuable
upon the conversion or exercise of any warrant right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, the shares described in clause (i). As to any particular
Registrable Shares, such Registrable Shares shall cease to be Registrable Shares
when (A) they have been registered under the Securities Act, the Registration
Statement in connection therewith has been declared effective, (B) they are sold
or distributed pursuant to Rule 144 or may be sold or distributed by the holder
thereof pursuant to Rule 144(k), or (C) they have ceased to be outstanding.
"Registration Date" means the date upon which the Registration
Statement pursuant to which the Corporation shall have initially registered
shares of Common Stock under the Securities Act for sale in a Public Offering
shall have been declared effective by the Commission.
"Registration Statement" shall mean any registration statement
of the Corporation which covers any of the Registrable Shares and all amendments
and supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Rule 144" means Rule 144 promulgated under the Securities Act
or any successor rule thereto or any complementary rule thereto.
"Securities Act" means the Securities Act of 1933 or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Securityholders" means, collectively, each of the
Securityholders listed on the signature pages hereto, and includes any successor
to, or assignee or transferee of, any such Person who or which agrees in writing
to be treated as a Securityholder hereunder and to be bound by the terms and
comply with all applicable provisions hereof.
"Securityholders' Counsel" has the meaning ascribed thereto in
Section 4(a)(ii).
"Subsidiary" means, with respect to any Person, any other
Person of which the securities having a majority of the ordinary voting power in
electing the board of directors (or other governing body), at the time as of
which any determination is being made, are owned by such first Person either
directly or through one or more of its Subsidiaries.
Section 2. Piggyback Registration. If the Corporation at any time proposes for
any reason to register shares of Common Stock under the Securities Act (other
than on Form S-4 or Form S-8 promulgated under the Securities Act (or any
successor forms thereto)), it shall promptly give written notice to the
Securityholders of its intention to so register such shares not less than 15
Business Days before the Corporation makes such filing. Upon the written
request, delivered to the Corporation within
2
five Business Days after delivery of any such notice by the Corporation, of a
Securityholder to include in such registration Registrable Shares (which request
shall specify the number of Registrable Shares proposed to be included in such
registration), the Corporation shall use commercially reasonable efforts to
cause all such Registrable Shares to be included in such registration on the
same terms and conditions as the securities otherwise being sold in such
registration, subject to conflicting contractual rights of selling stockholders
who are not Securityholders; provided, however, that if, at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration the Corporation shall determine for any reason either not to
register or to delay registration of such securities, the Corporation may, at
its election, give written notice of such determination to each holder of
Registrable Shares and, thereupon, (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable Shares
in connection with such registration (but not from its obligation to pay the
registration expenses pursuant to Section 6 in connection therewith), and (ii)
in the case of a determination to delay registering any Registrable Shares,
shall be permitted to delay registering any Registrable Shares, for the same
period as the delay in registering such other securities; provided further,
however, that if the managing underwriter advises the Corporation that the
inclusion of all Registrable Shares requested to be included in such
registration would materially interfere with the successful marketing (including
pricing) of the Common Stock proposed to be registered by the Corporation, then
the number of shares of Common Stock proposed to be included in such
registration shall be included in the following order:
first, the Common Stock proposed to be registered by
the Corporation;
second, the Common Stock requested to be included in
such registration statement by selling stockholders
who are not Securityholders who have been granted
registration rights, prior to the date hereof, that
conflict with, or have any priority over, the
registration rights granted hereby
third, the Registrable Shares requested to be
included in such registration pro rata among the
holders thereof based upon the number of Registrable
Shares requested to be registered by each such
holder; and
fourth, the Common Stock held by selling stockholders
who are not Securityholders.
Notwithstanding anything to the contrary in this Agreement, in no event shall
the amount of Registrable Securities included in the offering be reduced below
one (1%) of the total amount of securities included in such offering. If any
Registrable Securities are to be excluded from the offering, the amount to be
excluded shall be apportioned among the selling Securityholders pro rata
according to the amount of Registrable Securities requested by each such
Securityholder to be included in the offering. For purposes of the preceding
sentence concerning apportionment, for any selling Securityholder of Registrable
Securities which is a partnership or corporation, the partners, retired partners
and stockholders of such Securityholder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing Persons shall be deemed to be a single "selling Securityholder,"
and any pro-rata reduction with respect to such "selling Securityholder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "selling Securityholder," as
defined in this sentence. Any Securityholder shall have the right to withdraw
its request for inclusion of its Registrable Securities in any registration
statement filed pursuant to this Section 2 by giving written notice to the
Corporation of its request to withdraw; provided, that (i) such request must be
made in writing prior to the earlier of the execution of the underwriting
agreement or the execution of the custody agreement with respect to such
registration and (ii) such withdrawal shall be irrevocable and, after making
such withdrawal, a Securityholder shall no longer have any right to include
Registrable Securities in the registration as to which such withdrawal was made.
3
Section 3. Holdback Agreement.
(a) If the Corporation at any time shall register shares of Common
Stock under the Securities Act (including any registration pursuant to Section
2) for sale to the public pursuant to a Public Offering, the Securityholders
shall not sell publicly, make any short sale of, grant any option for the
purchase of, or otherwise dispose publicly of, any Registrable Shares (other
than those shares of Common Stock included in such registration pursuant to
Section 2) without the prior written consent of the Corporation, for a period
designated by the Corporation in writing to the Securityholders, which period
shall, unless otherwise required by applicable law as expressed in an opinion of
counsel to the Corporation, not begin more than 10 days prior to the
effectiveness of the Registration Statement pursuant to which such Public
Offering shall be made and shall not last more than 90 days after the closing of
the sale of shares pursuant to such Registration Statement, whether or not such
Securityholder participates in such registration; provided, however, that (i)
all officers and directors of the Corporation, all ten-percent securityholders,
and all other Persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements and (ii) any waiver or termination of
the prohibition set forth in this Section 3(a) by the Corporation or any
underwriter shall apply to all Persons who are subject hereto or any similar
such obligation on a pro rata basis. Each holder of Registrable Securities
agrees that the Corporation may instruct its transfer agent to place stop
transfer notations in its records to enforce this Section 3(a).
(b) If the Corporation at any time pursuant to Section 2 of this
Agreement shall register under the Securities Act Registrable Shares held by
Securityholders for sale to the public pursuant to a Public Offering, the
Corporation shall not, without the prior written consent of a Majority of
Securityholders, effect any public sale or distribution of securities similar to
those being registered, or any securities convertible into or exercisable or
exchangeable for such securities, for such period as shall be determined by the
managing underwriters, which period shall not begin more than 10 days prior to
the effectiveness of the Registration Statement pursuant to which such Public
Offering shall be made and shall not last more than 90 days after the closing of
the sale of shares pursuant to such Registration Statement, except (i) as part
of such registration, (ii) pursuant to registrations of Forms S-4 or S-8 or any
successor or similar forms thereto, (iii) as otherwise permitted by the managing
underwriter of such offering (if any), or (iv) if such offering is not
underwritten, then such period shall last not more than 90 days after the
effective date of such registration statement, or the time all shares covered
thereby are sold, if earlier.
Section 4. Preparation and Filing.
(a) If and whenever the Corporation is under an obligation pursuant to
the provisions of this Agreement to use commercially reasonable efforts to
effect the registration of, and keep effective a Registration Statement for, any
Registrable Shares, subject to the first and second provisos of Section 2, the
Corporation shall, as expeditiously as practicable:
(i) If the Public Offering is not an underwritten public
offering, use its best efforts to cause a Registration Statement that registers
such Registrable Shares to remain effective for a period of 90 days (extended
for such period of time as the Securityholders whose Registrable Shares are
included therein are required to discontinue disposition of Registrable Shares
pursuant to Section 4(b)) or until all of such Registrable Shares have been
disposed of (if earlier);
(ii) furnish, at least five Business Days before filing a
Registration Statement that relates to the registration of such Registrable
Shares, a Prospectus relating thereto or any amendments or supplements relating
to such a Registration Statement or Prospectus, to one counsel (the
"Securityholders' Counsel") selected by a Majority of Registering
Securityholders, and copies of all such documents proposed to be filed (it being
understood that such five-Business-Day period need not apply to successive
drafts of the same document proposed to be filed so long as such successive
drafts are supplied to the
4
Securityholders' Counsel in advance of the proposed filing by a period of time
that is customary and reasonable under the circumstances);
(iii) notify the Securityholders whose Registrable Shares are
included therein of the effectiveness of such Registration Statement and prepare
and promptly file with the Commission such amendments and supplements to such
Registration Statement and the Prospectus used in connection therewith as may be
necessary to (A) keep such Registration Statement effective for at least a
period of 180 days (extended for such period of time as Securityholders whose
Registrable Shares are included therein are required to discontinue disposition
of Registrable Shares pursuant to Section 4(b)) or until all of such Registrable
Shares have been disposed of (if earlier), (B) correct any statements or
omissions if any event with respect to the Corporation shall have occurred as a
result of which any such Registration Statement or Prospectus as then in effect
would include an untrue statement of material fact or omit to state any material
fact necessary to make the statements therein not misleading, and (C) comply
with the provisions of the Securities Act with respect to the sale or other
disposition of such Registrable Shares;
(iv) notify in writing the Securityholders' Counsel and the
Securityholders whose Registrable Shares may be included in such Registration
Statement promptly of (A) the receipt by the Corporation of any notification
with respect to any comments by the Commission with respect to such Registration
Statement or Prospectus or any amendment or supplement thereto or any request by
the Commission for the amending or supplementing thereof or for additional
information with respect thereto, (B) the receipt by the Corporation of any
notification or written information with respect to the issuance or threatened
issuance by the Commission of any stop order suspending the effectiveness of
such Registration Statement or Prospectus or any amendment or supplement thereto
or the initiation or threatening of any proceeding for that purpose and (C) the
receipt by the Corporation of any notification with respect to the suspension of
the qualification of such Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purposes;
(v) use commercially reasonable efforts to register or qualify
such Registrable Shares under such other securities or blue sky laws of such
jurisdictions as the Securityholders holding such Registrable Shares reasonably
request, to keep such registrations or qualifications in effect for so long as
the registration statement covering such Registrable Shares remains in effect
and use commercially reasonable efforts to do any and all other acts and things
which may be reasonably necessary or advisable to enable such Securityholders to
consummate the disposition in such jurisdictions of the Registrable Shares owned
by such Securityholders; provided, however, that the Corporation will not be
required to qualify generally to do business or to file or general consent to
service of process in any jurisdiction where it would not otherwise be required
to do so but for this subclause (v);
(vi) furnish to the Securityholders holding such Registrable
Shares such number of copies of a summary Prospectus, if any, or other
Prospectus, including a preliminary Prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such
Securityholders may reasonably request in order to facilitate the sale or other
disposition of such Registrable Shares;
(vii) notify the Securityholders holding such Registrable
Shares on a timely basis at any time when a Prospectus relating to such
Registrable Shares is required to be delivered under the Securities Act within
the appropriate period mentioned in clause (i) of this Section 4(a), of the
happening of any event as a result of which the Prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and prepare and furnish to such
Securityholders a reasonable number of copies of, and file with the Commission,
a supplement to or an amendment of such Prospectus as may be necessary so that,
as thereafter delivered to the offerees of such shares, such Prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
5
(viii) use its best efforts to obtain from its independent
certified public accountants "cold comfort" letters in customary form and at
customary times and covering matters of the type customarily covered by cold
comfort letters;
(ix) use its best efforts to obtain from its counsel an
opinion or opinions in customary form naming the Securityholders holding such
Registrable Shares as additional addressees or parties who may rely thereon;
(x) provide a transfer agent and registrar (which may be the
same entity and which may be the Corporation) and a CUSIP number for such
Registrable Shares, in each case not later than the effective date of such
registration;
(xi) issue to any underwriter to which the Securityholders
holding such Registrable Shares may sell shares in such offering certificates
evidencing such Registrable Shares;
(xii) list such Registrable Shares on any national securities
exchange on which any shares of the Common Stock are listed or, if the Common
Stock is not listed on a national securities exchange, use commercially
reasonable efforts to qualify such Registrable Shares for inclusion on The
Nasdaq Stock Market or The Nasdaq SmallCap Market;
(xiii) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission and make available
to the Securityholders holding such Registrable Shares earnings statements
(which need not be audited) covering a period of 12 months, which earnings
statements shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the Securities
Act) no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Shares are sold
to underwriters in a firm commitment or best efforts Public Offering, and (ii)
if not sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter of the Corporation, after the effective date of a
Registration Statement, which statements shall cover said 12-month period ; and
(xiv) use commercially reasonable efforts to take all other
steps necessary to effect the registration of, and maintain an effective
Registration Statement with respect to, such Registrable Shares contemplated
hereby.
(b) Each holder of the Registrable Shares, upon receipt of any notice
from the Corporation of any event of the kind described in Section 4(a)(vii) or,
shall forthwith discontinue disposition of the Registrable Shares pursuant to
the Registration Statement covering such Registrable Shares until such holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 4(a)(viii), and, if so directed by the Corporation, such holder shall
deliver to the Corporation all copies, other than permanent file copies then in
such holder's possession, of the most recent Prospectus covering such
Registrable Shares at the time of receipt of such notice.
Section 5. Expenses. All expenses (other than underwriting discounts and
commissions relating to the Registrable Shares, as provided in the last sentence
of this Section 6) incurred by the Corporation in complying with Section 4,
including, without limitation, all registration and filing fees (including all
expenses incident to filings with the National Association of Securities
Dealers, Inc.), fees and expenses of complying with securities and blue sky
laws, printing expenses, fees and expenses of the Corporation's counsel and
accountants and the reasonable fees and expenses of the Securityholders'
Counsel, shall be paid by the Corporation; provided, however, that all
underwriting discounts and selling commissions applicable to the Registrable
Shares shall be borne by the holders selling such Registrable Shares and in
proportion to the number of Registrable Shares sold by each such holder.
6
Section 6. Indemnification. (a) In connection with any registration of any
Registrable Shares under the Securities Act pursuant to this Agreement, the
Corporation shall indemnify and hold harmless, to the fullest extent permitted
by law, each Securityholder, each underwriter, broker or any other Person acting
on behalf of the holders of Registrable Shares and each other Person, if any,
who controls any of the foregoing Persons within the meaning of the Securities
Act (each such indemnified Person being referred to herein as an "Indemnified
Person") against any losses, claims, damages or liabilities, joint or several
(or actions in respect thereof), to which any of the foregoing Persons may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or allegedly untrue statement of a material
fact contained in or incorporated by reference in the Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary Prospectus or final Prospectus contained therein or otherwise
filed with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or any violation or alleged violation by the Corporation
of the Securities Act, the Exchange Act or state securities or blue sky laws and
shall promptly reimburse the Indemnified Persons for any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Corporation shall not be liable in any such case to any such Indemnified Person
to the extent that any such loss, claim, damage, liability or action (including
any legal or other expenses incurred) arises out of or is based upon an untrue
statement or allegedly untrue statement or omission or alleged omission made in
said Registration Statement, preliminary Prospectus, final Prospectus,
amendment, supplement or document incident to registration or qualification of
any Registrable Shares in reliance upon and in conformity with written
information furnished to the Corporation by or on behalf of such Indemnified
Person specifically for use in the preparation thereof;
(b) In connection with any registration of Registrable Shares under the
Securities Act pursuant to this Agreement, each holder of Registrable Shares or
being registered shall, severally and not jointly, to the fullest extent
permitted by law, indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 6(a)) the Corporation, each director of the
Corporation, each officer of the Corporation who shall have signed such
Registration Statement, each agent, underwriter, broker or other Person acting
on behalf of the Corporation, each other holder of Registrable Shares and each
Person who controls any of the foregoing Persons within the meaning of the
Securities Act with respect to any statement or omission from such Registration
Statement, any preliminary Prospectus or final Prospectus contained therein or
otherwise filed with the Commission, any amendment or supplement thereto or any
document incident to registration or qualification of any Registrable Shares, if
such statement or omission was made in reliance upon and in conformity with
written information furnished to the Corporation or such underwriter by or on
behalf of such holder specifically for use in connection with the preparation of
such Registration Statement, preliminary Prospectus, final Prospectus,
amendment, supplement or document; provided, however, that the maximum amount of
liability in respect of such indemnification shall be limited, in the case of
each holder of Registrable Shares, to an amount equal to the net proceeds
actually received by such holder from the sale of Registrable Shares effected
pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in Section 7(a) or
Section 7(b), such indemnified party will, if a claim in respect thereof is made
against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the indemnified party's
failure to give such notice shall not release, relieve or in any way affect the
indemnifying party's obligation hereunder to indemnify the indemnified party
unless and to the extent that the rights of the indemnifying party are
prejudiced thereby. In case any such action is brought against an indemnified
party, the indemnifying party will be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party
7
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be responsible for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof; provided, however, that if any indemnified party shall have
reasonably concluded (based on the written advice of counsel) that there may be
one or more legal or equitable defenses available to such indemnified party
which are additional to or conflict with those available to the indemnifying
party, or that such claim or litigation involves or could have an effect upon
matters beyond the scope of the indemnity agreement provided in this Section 7,
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party and such indemnifying party shall
reimburse such indemnified party and any Person controlling such indemnified
party for that portion of the reasonable fees and expenses of any counsel
retained by the indemnified party which is reasonably related to the matters
covered by the indemnity agreement provided in this Section 7.
(d) (i) If the indemnification provided for in this Section 7 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, claim, damage, liability or action referred to herein
(other than as a result of the applicability of the two provisos in Section
7(a)), then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amounts paid or payable by such
indemnified party as a result of such loss, claim, damage, liability or action
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions which resulted in such loss, claim,
damage, liability or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(ii) The Corporation and the holders of Registrable Securities
agree that it would not be just and equitable if contribution pursuant to this
subdivision (d) were determined by pro rata allocation (even if the holders and
any underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph and subdivision (c) of this
Section 7. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Section 7. Underwriting Agreement. (a) Notwithstanding the provisions of Section
3, Section 4, Section 6 and Section 7, to the extent that the Corporation and at
least the Majority of Registering Securityholders shall enter into an
underwriting or similar agreement that contains provisions which conflict with
any provision of any such Sections, the provisions contained in such agreement
shall control.
(b) The Corporation shall be entitled to receive indemnities from lead
institutions, underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as provided above with respect to information so furnished in writing by
such Persons specifically for inclusion in any Prospectus or Registration
Statement and to the extent customarily given their role in such distribution.
(c) No Securityholder may participate in any registration hereunder
that is underwritten unless such Securityholder agrees to (i) sell such
Securityholder's Registrable Shares proposed to be included therein on the basis
provided in any underwriting arrangements approved by the Corporation and
8
the Majority of Registering Securityholders (which approval shall not be
unreasonably withheld by such Securityholders) and (ii) as expeditiously as
possible, notify the Corporation of the occurrence of any event concerning such
Securityholder as a result of which the Prospectus relating to such registration
contains an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Section 8. Information by Holder. The Securityholders shall furnish to the
Corporation such written information regarding the Securityholders and the
distribution proposed by the Securityholders as the Corporation may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
Section 9. Exchange Act Compliance. From the Registration Date or such earlier
date as a Registration Statement filed by the Corporation pursuant to the
Exchange Act relating to any class of the Corporation's securities shall have
become effective, the Corporation shall comply with all of the reporting
requirements of the Exchange Act applicable to it and shall comply with all
other public information reporting requirements of the Commission which are
conditions to the availability of Rule 144 for the sale of the Common Stock. The
Corporation shall cooperate with the Securityholders in supplying such
information as may be necessary for the Securityholders to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of Rule 144.
Section 10. Mergers, Etc. The Corporation shall not, directly or indirectly,
enter into any merger, consolidation or reorganization in which the Corporation
shall not be the surviving corporation unless the surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Corporation under this Agreement.
Section 11. New Certificates. As expeditiously as possible after the
effectiveness of any Registration Statement filed pursuant to this Agreement,
the Corporation will deliver in exchange for any legended certificate evidencing
Registrable Shares so registered, new stock certificates not bearing any
restrictive legends, provided that in the event less than all of the Registrable
Shares evidenced by such legended certificate are registered, the holder thereof
agrees that a new certificate evidencing such unregistered shares will be issued
bearing the appropriate restrictive legend.
Section 12. No Conflict of Rights; Selection of Underwriter. The Corporation
shall not, at any time after the date hereof, grant any registration rights that
conflict with, or have any priority over, the registration rights granted
hereby. In any Public Offering, the managing underwriter shall be a nationally
recognized investment banking firm chosen by the Board.
Section 13. Termination. This Agreement shall terminate and be of no further
force or effect when there shall no longer be any Registrable Shares
outstanding.
Section 14. Miscellaneous.
(a) Successors and Assigns. This Agreement shall bind and inure to the
benefit of the Corporation and the Securityholders and, subject to Section
15(b), the respective successors and assigns of the Corporation and the
Securityholders. This Agreement is not intended to create any third party
beneficiaries,
(b) Assignment. Each Securityholder may assign its rights hereunder to
any purchaser or transferee of Registrable Shares; provided, however, that such
purchaser or transferee shall, as a condition to the effectiveness of such
assignment, be required to execute a counterpart to this Agreement agreeing to
be treated as an Securityholder, whereupon such purchaser or transferee shall
have the benefits of and
9
shall be subject to the restrictions contained in this Agreement as if such
purchaser or transferee was originally included in the definition of a
Securityholder and had originally been a party hereto.
(c) Severability. It is the desire and intent of the parties hereto
that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
(d) Entire Agreement. This Agreement and the other writings referred to
herein or delivered pursuant hereto contain the entire agreement among the
parties with respect to the subject matter hereof and thereof and supersede all
prior and contemporaneous arrangements or understandings with respect hereto and
thereto.
(e) Notices. All communications hereunder to any party shall be 'deemed
to be sufficient if contained in a written instrument delivered in person or
sent by telecopy, nationally-recognized overnight courier guaranteeing next day
delivery or first class registered or certified mail, return receipt requested,
postage prepaid, addressed to such party at its address below or such other
address as such party may hereafter designate in writing:
if to the Corporation, to:
BrandPartners Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Executive Vice President
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
and
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
if to any Securityholder, to such Securityholder at the
address indicated on Schedule I hereto.
10
All such notices, requests, consents and other communications shall be
deemed to have been given and received (i) in the case of personal delivery or
delivery by telecopy, on the date of such delivery, (ii) in the case of dispatch
by nationally-recognized overnight courier, on the next Business Day following
such dispatch and (iii) in the case of mailing, on the third Business Day after
the posting thereof.
(f) Modifications; Amendments; Waivers. The terms and provisions of
this Agreement may not be modified or amended, nor may any provision be waived,
except pursuant to a writing signed by the Corporation and the Majority of
Securityholders; provided, however, that no such modification, amendment or
waiver that would treat any Securityholder in a non-ratable, discriminatory
manner shall be made without the prior written consent of such Securityholder.
The failure of any party to enforce any of the provisions of this Agreement
shall in no way be construed as a waiver of such provisions and shall not affect
the right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms. The Securityholders, to the fullest
extent permitted by applicable laws, release the members of the Board from any
and all claims for breach of fiduciary duty arising out of the application of
this Section 15(f).
(g) Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(h) Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
(i) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE
STATE OF NEW YORK OR ANY OTHER JURISDICTION), THAT WOULD CAUSE THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK TO BE APPLIED.
(j) Jurisdiction and Venue.
(i) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself or himself and its or his property, to the
nonexclusive jurisdiction of any New York State court sitting in the Borough of
Manhattan, the City of New York, or any federal court of the United States of
America sitting in the Southern District of New York, and any appellate court
from any court thereof, in any action or proceeding arising out of or relating
to this Agreement or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in any
such New York court or, to the extent permitted by law, in such federal court.
Each of the parties hereto irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(ii) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it or he may legally and
effectively do so, any objection that it or he may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
the Agreement in any New York State court sitting in the Borough of Manhattan,
the City of New York, or federal court sitting in the Southern District of New
York. Each of the parties hereto irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
11
(iii) The parties further agree that the mailing by certified
or registered mail, return receipt requested to both (i) the other party and
(ii) counsel for the other party (or such substitute counsel as such party may
have given written notice of prior to the date of such mailing), of any process
required by any such court shall constitute valid and lawful service of process
against them, without the necessity for service by any other means provided by
law. Notwithstanding the foregoing, if and to the extent that a court holds such
means to be unenforceable, each of the parties' respective counsel (as referred
to above) shall be deemed to have been designated agent for service of process
on behalf of its respective client, and any service upon such respective counsel
effected in a manner which is permitted by New York law shall constitute valid
and lawful service of process against the applicable party.
(k) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(l) Nouns and Pronouns. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural and
vice-versa.
(m) Construction. Where specific language is used to clarify by example
a general statement contained herein, such specific language shall not be deemed
to modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
* * * * *
12
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement on the date first written above.
BRANDPARTNERS GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
CORPORATE MEZZANINE II, L.P.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Attorney-in-Fact
SCHEDULE I
Securityholders
Corporate Mezzanine II, L.P.
c/o Canaan Partners
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
EXECUTION
SUBORDINATION AND INTERCREDITOR AGREEMENT (this "AGREEMENT"), dated as of
October 22, 2001,
BY AND AMONG
▇▇▇▇▇▇ BROTHERS INC., a New Hampshire corporation ("▇▇▇▇▇▇"),
CORPORATE MEZZANINE II, L.P., a British Virgin Island limited partnership
("CMII"); and
FLEET CAPITAL CORPORATION, a Rhode Island corporation, as the Lender under the
Bank Original Documents (defined below) or any successor or assignee thereof
(together with each agent or similar representative for the lenders under any
Bank Refinancing Documents (as defined below), "BANK").
WITNESSETH:
WHEREAS, ▇▇▇▇▇▇, CMII and the Bank are entering into this Agreement with each
other to set forth fully the provisions by which the Subordinated Indebtedness
is subordinate and junior in right of payment to all Bank Indebtedness.
WHEREAS, in order to induce the Bank to continue to extend credit under the Loan
and Security Agreement, dated as of January 11, 2001 (as amended by the
Amendment and Waiver Agreement, dated as of May 21, 2001, by the Second
Amendment and Waiver dated as of the date hereof and as further amended,
modified, restated or supplemented from time to time in accordance with its
terms (but excluding any amendments, modifications, restatements or supplements
(or portions thereof) effected in contravention of the terms of this Agreement),
the "CREDIT AGREEMENT"), among ▇▇▇▇▇▇ and the Bank and the other documents,
instruments and/or agreements executed and/or delivered in connection therewith
(collectively, as amended, modified, restated, extended, renewed or supplemented
from time to time in accordance with their respective terms (but excluding any
amendments, modifications or supplements (or portions thereof) effected in
contravention of the terms of this Agreement), the "BANK ORIGINAL DOCUMENTS"),
▇▇▇▇▇▇ and CMII have agreed to subordinate, pursuant to the terms hereof, the
Subordinated Indebtedness to the Bank Indebtedness.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, and in
consideration of the transactions contemplated herein and under the CMII
Documents and the Bank Documents, do hereby agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms
have the following meanings:
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. For
the purposes of this definition, "Person" shall mean any individual,
corporation, partnership, limited liability company, joint venture, trust,
unincorporated organization or government or any agency or political subdivision
thereof. A Person shall be deemed to control another Person if such Person owns
10% or more of the voting power for the election of the Board of Directors or
similar management group of such other Person. For purposes of this definition,
none of CMII, the Bank, or any Affiliate of any thereof shall be deemed to be an
Affiliate of any Company.
"BANK" shall have the meaning assigned to such term in the preamble hereto. In
the event that the Bank ceases to be a party to the Bank Documents and there is
no agent or similar representative under the Bank Documents, "Bank" shall mean
any and all banks thereunder. In any such circumstance, any reference herein to
the "Bank" shall be deemed to be a reference to any and all "Holders of Bank
Indebtedness", and any consent, direction, waiver, amendment or other action to
be taken by the Bank hereunder shall be effective if taken by the Holders of a
majority in interest of the Bank Indebtedness. If there is an agent or
representative for the lenders under the Bank Documents, then "Bank" shall mean
such agent or representative.
"BANK DEFAULT NOTICE" is defined in Section 2.4.2 hereof.
"BANK DOCUMENTS" means the Bank Original Documents and the Bank Refinancing
Documents.
"BANK INDEBTEDNESS" means all indebtedness, liabilities and obligations of the
Companies or any Affiliate of any Company to the Bank under or pursuant to the
Bank Documents , whether direct or indirect, absolute or contingent, secured or
unsecured, now existing or hereafter arising and whether with respect to
principal, interest, reimbursement obligations, premiums, fees, expenses,
post-bankruptcy interest, letters of credit, interest rate swaps, interest rate
caps or otherwise, together with, subject to Section 3.4.2, all amendments,
refinancings and refundings thereof in whole or in part (including with another
bank or financial institution) in an amount not exceeding (a) $16,100,000 less
(b) the sum of (i) all payments of term loans constituting Bank Indebtedness
made after the date hereof (excluding any Bank Refinancing Payments) plus (ii)
the aggregate amount of all permanent reductions of revolving or similar loan
commitments made after the date hereof (excluding Bank Refinancing Payments)
(the "BANK INDEBTEDNESS CAP"); provided, further, that the foregoing limitation
shall apply only to principal (and letter of credit reimbursement) amounts and
not to interest, premium, expenses, charges, indemnities, fees or to any
advances made for the purpose of protecting the value of the Collateral.
Principal and letter of credit reimbursement amounts in excess of the Bank
Indebtedness Cap shall not constitute "Bank Indebtedness." Notwithstanding the
foregoing, Bank Indebtedness held by any Company or any Affiliate of any Company
(whether as a result of subrogation or otherwise) or in which any Company or any
Affiliate of any Company holds a participation or other interest or by any
person who has acquired (whether as a result of subrogation or otherwise) Bank
Indebtedness, directly or indirectly, which has been held by any Company or any
Affiliate of any Company (or in which any Company or any Affiliate of any
Company held or holds a participation or other interest), shall not constitute
"BANK INDEBTEDNESS" under this Agreement (other than under this sentence), and
no such Holder shall acquire any rights hereunder by virtue of holding such Bank
Indebtedness.
"BANK INDEBTEDNESS CAP" is defined in the definition of Bank Indebtedness.
2
"BANK NONMONETARY DEFAULT" is defined in Section 2.4.2 hereof.
"BANK NOTE" means any of the promissory notes evidencing Bank Indebtedness.
"BANK ORIGINAL DOCUMENTS" is defined in the preamble hereto.
"BANK PAYMENT DEFAULT" is defined in Section 2.4.1 hereof.
"BANK REFINANCING DOCUMENTS" means any document evidencing a replacement,
refinancing, renewal, extension, amendment or refunding of Bank Indebtedness and
replacing any Bank Document, excluding, however, any terms thereof which would
violate Section 3.4.2 hereof if contained in an amendment to any Bank Original
Document.
"BANK REFINANCING PAYMENTS" means payments of Bank Indebtedness from the
proceeds of loans or advances made pursuant to Bank Refinancing Documents, which
permanently reduce Bank Indebtedness.
"BANKRUPTCY CODE" means Title II of the United States Code, as amended from time
to time.
"BORROWER" means ▇▇▇▇▇▇.
"BPG" shall mean Brandpartners Group, Inc., a Delaware corporation.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day on
which commercial banks in the State of New York or Commonwealth of Massachusetts
are authorized or required by law or executive order to close.
"CMII" shall have the meaning assigned to such term in the preamble hereto.
"CMII DOCUMENTS" means the CMII Original Documents and the CMII Refinancing
Documents.
"CMII NOTE" means any of the promissory notes issued pursuant to the CMII
Documents.
"CMII WARRANT" means any of the warrants issued under the CMII Documents.
"CMII ORIGINAL DOCUMENTS" means the Subordinated Note and Warrant Purchase
Agreement, dated as of the date hereof (as amended, modified, restated or
supplemented from time to time in accordance with its terms), among ▇▇▇▇▇▇, BPG
and CMII, and the Transaction Documents (as defined in the Subordinated Note and
Warrant Purchase Agreement) (as amended, modified, restated or supplemented from
time to time in accordance with their respective terms).
"CMII PAYMENT BLOCKAGE PERIOD" is defined in Section 2.4.2 hereof.
"CMII REFINANCING DOCUMENTS" means documents evidencing a replacement,
refinancing or refunding of Subordinated Indebtedness.
"CMII REFINANCING PAYMENTS" means payments from the proceeds of note purchases,
loans or advances
3
made pursuant to CMII Refinancing Documents, so long as any such CMII
Refinancing Documents do not contain any terms which would violate Section 3.4.1
hereof if contained in any amendment of any CMII Original Documents.
"COLLATERAL" means all of the property and interests in property, tangible, real
or personal, now owned or hereafter acquired by any Company, in or upon which
any Company has granted a Lien, and including, without limitation, all proceeds
and products of such property and interests in property.
"COMPANY" shall mean ▇▇▇▇▇▇ and each Subsidiary thereof that shall have
guaranteed or may (subject to the terms of this Agreement) hereafter guarantee
payment or performance of any Subordinated Indebtedness or Bank Indebtedness.
"HOLDER" means a person who holds of record Bank Indebtedness or Subordinated
Indebtedness, as the context dictates. No Person shall be entitled or required
to receive notice as a Holder under this Agreement unless such Person (i) is a
signatory to (or has assumed in writing the obligations of a Holder under) this
Agreement in a manner reasonably acceptable to CMII and the Companies, and (ii)
notice of the acquisition by such Person of Bank Indebtedness or Subordinated
Indebtedness has been given to each party to this Agreement in the manner
provided in this Agreement. Notwithstanding the foregoing, neither any Company
nor any Affiliate thereof, shall constitute a Holder and no such person shall
acquire any rights hereunder.
"LIEN" means any lien, collateral assignment, mortgage, pledge or security
interest on the Collateral.
"PERIOD" is defined in Section 2.4.2 hereof.
"PROCEEDING" is defined in Section 2.3.1 hereof.
"SENIOR LIENS" means all Liens previously or hereafter granted by any Company to
or for the benefit of the Bank and its successors, assigns and participants,
securing in whole or in part any of the Bank Indebtedness.
"SUBORDINATED INDEBTEDNESS" means all present and future obligations,
liabilities and indebtedness of the Companies of every type and nature,
currently or hereafter due, incurred or created, arising under or in connection
with the CMII Documents, including, without limitation: (i) all Obligations (as
defined in the CMII Original Documents) or similar term contained in the CMII
Refinancing Documents, (ii) all interest provided for in the CMII Original
Documents or CMII Refinancing Documents (including, without limitation, interest
arising prior to and after the commencement of any Proceeding in which any
Company is the debtor, whether or not such interest is an allowed claim in such
Proceeding) at the rates specified in the CMII Original Documents or CMII
Refinancing Documents; and (iii) all fees, charges, expenses, indemnities and
other amounts payable under or incidental to the CMII Original Documents or CMII
Refinancing Documents.
"SUBORDINATED INDEBTEDNESS CAP" is defined in Section 3.4.1.
"SUBORDINATED LIENS" is defined in Section 2.3.1 hereof.
4
"SUBORDINATED PARTIES" is defined in Section 2.1 hereof.
"SUBORDINATED PAYMENT" is defined in Section 2.3.1 hereof.
"SUBORDINATION TERMINATION DATE" means the first date on which all amounts due
or to become due on or in respect of Bank Indebtedness have been paid in full in
cash and all commitments under the Bank Documents have been irrevocably
terminated.
If the definition contained in this Agreement of any document or agreement shall
exclude any amendment, modification or supplement (or any portion thereof), then
such definition shall be deemed to mean such document or agreement and all
amendments, modifications and supplements (or portions thereof) not so excluded.
2. SUBORDINATION OF SUBORDINATED INDEBTEDNESS
2.1 SUBORDINATION. Each Company covenants and agrees, and CMII and, by its
acceptance of a CMII Note, each other Holder of Subordinated Indebtedness (CMII
and each such Holder, a "SUBORDINATED PARTY"), likewise covenants and agrees,
that all rights of each present and future Holder of Subordinated Indebtedness
and their representatives to payments or distributions of any kind or character
under or in respect of Subordinated Indebtedness are hereby expressly
subordinated and junior in right of payment, to the extent and in the manner set
forth in this Section 2, to the prior payment in full in cash of all Bank
Indebtedness in accordance with the terms of the Bank Documents.
"SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT" means that no part of the
Subordinated Indebtedness shall have any claim to the assets of the Companies on
a parity with or prior to the claim of the Bank in respect of Bank Indebtedness.
Unless and until the Bank Indebtedness shall have been fully and paid and
satisfied, except as permitted by the terms of this Agreement: (i) the
Subordinated Parties shall not take, demand or receive from the Companies and
the Companies shall not make, give or permit, directly or indirectly, by setoff,
offset, redemption, purchase or in any other manner, any payment or security for
the whole or any part of the Subordinated Indebtedness and (ii) the Subordinated
Parties shall not accelerate the scheduled maturity of any amount owing under
any Subordinated Indebtedness.
2.1.1 The Companies may make, and the Subordinated Parties may receive,
payments of principal and scheduled payments of interest under the CMII
Documents in the amounts and at the rates per annum specified therein, and
payments of indemnities, fees, expenses and other amounts (excluding amounts in
respect of the repurchase of any CMII Warrant), in each case, in accordance with
the CMII Documents and subject to the provisions of Section 2.4 hereof;
provided, however, that the Companies may make and the Subordinated Parties may
receive, without regard to the provisions of Section 2.4 hereof, payments of
indemnities, fees and expenses in an amount not exceeding $50,000 in any
calendar year, of which not more than $25,000 shall be in respect of fees and
expenses (excluding expenses relating to indemnification in respect of a third
party claim).
2.1.2 From and after the payment and satisfaction in full of the Bank
Indebtedness, the Companies may make and the Subordinated Parties may receive
payments in respect of Subordinated Indebtedness and the Subordinated Parties
may exercise rights and remedies in respect of the Subordinated Indebtedness
free of the restrictions of this Agreement (except for Section 2.10 hereof).
5
Notwithstanding the foregoing, no failure for any reason to give written notice
to the Subordinated Parties of the occurrence of any Default or Event of Default
shall affect the subordination of the Subordinated Indebtedness to the Bank
Indebtedness pursuant to the terms hereof (including, without limitation, the
obligation of the Subordinated Lenders to turn over any payment received by them
upon, or in respect of, any Subordinated Indebtedness if any Event of Default
under the Bank Documents shall have occurred and is then continuing or if any
such payment would cause an Event of Default under the Bank Documents to occur
or be continuing), or any rights or remedies of the Bank under this Agreement or
under applicable law; provided, however, that no Subordinated Party shall have
any obligation or be subject to any restriction arising from a Bank Non-Monetary
Default unless such Subordinated Party has received a Bank Default Notice in
respect thereof.
2.2 CONSENTS OF HOLDERS OF SUBORDINATED INDEBTEDNESS. Notwithstanding any of
the terms of the CMII Documents, each Subordinated Party does hereby acknowledge
the existence of the Bank Indebtedness and the Senior Liens; provided, however,
that the foregoing provisions are intended solely for the benefit of the Bank
and the Holders of Bank Indebtedness, and shall not constitute in any manner a
waiver by any Holder of Subordinated Indebtedness of any default under any of
the CMII Documents that may result from the performance by any Company under the
Bank Documents.
2.3 LIQUIDATION, ETC.
2.3.1 Upon any payment or distribution of any assets of any Company of any
kind or character, whether in cash, property or securities (including, without
limitation, payments or distributions payable to the Holders of Subordinated
Indebtedness by virtue of the terms of any indebtedness which is subordinated in
right of payment to Subordinated Indebtedness, including, without limitation,
proceeds of subordinated liens ("SUBORDINATED LIENS") payable to the Holders of
Subordinated Indebtedness by virtue of any subordination agreement in which CMII
is a senior creditor (such payment or distribution being hereinafter referred to
as a "SUBORDINATED PAYMENT")), by set-off or otherwise, to creditors in any
liquidation or other winding-up of such Company or in the event of any
receivership, insolvency, reorganization or bankruptcy proceeding, assignment
for the benefit of creditors or any proceeding by or against such Company for
any relief under any bankruptcy, reorganization or insolvency law or laws,
Federal or state, or any law, Federal or state, relating to the relief of
debtors, readjustment of indebtedness, reorganization, composition or extension
of indebtedness (each, a "PROCEEDING"), the Bank shall first be entitled to
receive payment in full in cash, in accordance with the terms of the Bank
Documents and of this Agreement, of all amounts payable under or in respect of
such Bank Indebtedness, before any payment or distribution (including, without
limitation, Subordinated Payments and any proceeds of any Subordinated Lien) is
made on, or in respect of, any Subordinated Indebtedness; and, in any such
Proceeding, any distribution or payment, to which the Bank would be entitled
except for the provisions hereof (including, without limitation, Subordinated
Payments and any proceeds of any Subordinated Lien), shall be paid by such
Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution directly to the Bank to the
extent necessary to pay all such Bank Indebtedness in full in cash, after giving
effect to any concurrent payment or distribution to the Bank.
6
2.3.2 In the event that, notwithstanding the foregoing, in any such
Proceeding any payment or distribution of any assets of any Company, of any kind
or character, whether in cash, property or securities, by set-off or otherwise,
shall be received by any Holder of Subordinated Indebtedness (including, without
limitation, Subordinated Payments and any proceeds of any Subordinated Lien)
before all Bank Indebtedness is paid in full in cash, such payment or
distribution shall be received (whether or not such payment or distribution
shall have been made in accordance with a plan of reorganization or arrangement
approved in bankruptcy or other proceedings) in trust on behalf of the Bank and
shall be paid over to the Bank for application to the payment of all Bank
Indebtedness remaining unpaid until such Bank Indebtedness shall have been paid
in full in cash, after giving effect to any concurrent payment or distribution
to the Bank. In the event of the failure of any Holder of Subordinated
Indebtedness to endorse or assign to the Bank any such payment or distribution,
the Bank is hereby irrevocably authorized to endorse or assign the same on
behalf of any Holder of Subordinated Indebtedness.
2.3.3 For purposes of this Section 2.3 only, the words "any payment or
distribution of any assets of any Company of any kind or character, whether in
cash, property or securities" shall be deemed not to include a payment or
distribution of stock or securities (including, without limitation, Subordinated
Payments and proceeds of any Subordinated Lien) of such Company provided for by
a plan of reorganization or readjustment authorized by an order or decree of a
court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy law [or of any other corporation provided for by such plan
of reorganization or readjustment] authorized by an order or decree of a court
of competent jurisdiction which stock or securities are subordinate in right of
payment to all then outstanding Bank Indebtedness at least to the same extent as
the Subordinated Indebtedness is so subordinate as provided in this Agreement.
2.4 DEFAULT.
2.4.1 In the event that any Bank Payment Default (as defined below) shall
have occurred and be continuing, then no payment or distribution of any kind,
whether in cash, property or securities (including, without limitation, any
Subordinated Payment and proceeds of any Subordinated Lien), by set-off or
otherwise, shall be made on, or in respect of, any Subordinated Indebtedness or
for the acquisition, retirement, repurchase, redemption or defeasance thereof,
and no Holder of Subordinated Indebtedness shall receive or accept any of the
foregoing, unless and until the Holders of Subordinated Indebtedness have
received written confirmation from the Bank that all amounts then due and
payable in respect of the Bank Indebtedness shall have been paid in full in cash
or cash equivalents; provided, however, that the foregoing limitation on
payments and distributions in respect of Subordinated Indebtedness on account of
such Bank Payment Default shall end upon the earliest to occur of (i) the 366th
day after the occurrence of such Bank Payment Default and (ii) the date upon
which such Bank Payment Default shall be cured or waived in accordance with the
terms of the Bank Documents. "BANK PAYMENT DEFAULT" means any default in the
payment when due of any Bank Indebtedness, whether at the stated maturity of any
such payment or by declaration of acceleration or otherwise (any period during
which the restriction under this Section 2.4.1 is continuing, a "SUBORDINATED
PAYMENT BLOCKAGE Period"). The Bank shall provide prompt written notification to
the Subordinated Parties of such Bank
7
Payment Default within twenty (20) Business Days following the occurrence
thereof, specifying the amount in default and the date of such default and shall
provide written confirmation that all amounts due and payable in respect of the
Bank Indebtedness shall have been paid in full within twenty (20) Business Days
following the occurrence thereof.
2.4.2 In the event any Bank Nonmonetary Default (as defined below) shall
have occurred and be continuing, then, upon the receipt of the Holders of
Subordinated Indebtedness of written notice of such Bank Nonmonetary Default
from the Bank (a "BANK DEFAULT NOTICE"), no payment or distribution of any kind,
whether in cash, property or securities (including, without limitation,
Subordinated Payments and proceeds of any Subordinated Lien), by set-off or
otherwise, shall be made on, or in respect of, any Subordinated Indebtedness or
for the acquisition, retirement, repurchase, redemption or defeasance thereof,
and no Holder of Subordinated Indebtedness shall accept or receive any of the
foregoing, during the period (the "SUBORDINATED NON-MONETARY PAYMENT BLOCKAGE
Period", and together with a Subordinated Payment Blockage Period, each a
"PERIOD") commencing on the date such Bank Default Notice is given to the
Holders of Subordinated Indebtedness and ending on the earlier of (i) the date
on which the Bank provides written notice to the Holders of Subordinated
Indebtedness that such Bank Nonmonetary Default has been cured or waived in
accordance with the terms of the Bank Indebtedness or has been rescinded or
annulled or the Bank Indebtedness to which such Bank Nonmonetary Default relates
has been fully discharged in a manner satisfactory to the Bank, which notice the
Bank agrees to provide promptly, or (ii) the 181st day after the date such Bank
Default Notice is given to the Holders of Subordinated Indebtedness. "BANK
NONMONETARY DEFAULT" means the occurrence or existence and continuance of any
event of default permitting Bank or one or more Holders of Bank Indebtedness to
declare such Bank Indebtedness due and payable prior to the date on which it
would otherwise become due and payable, other than a Bank Payment Default. No
Bank Default Notice shall be effective under this Section 2.4.2 if (i) such Bank
Default Notice shall be based upon or refer to any Bank Nonmonetary Default
which shall have been in existence at the time of issuance of any previous Bank
Default Notice unless such Bank Nonmonetary Default shall have ceased to exist
for a period of at least 60 consecutive days prior to the date of such Bank
Default Notice or (ii) such Bank Default Notice shall be based on or refer to
any event of default existing at the time that any other Bank Default Notice was
sent by Bank or such other agent. Notwithstanding the foregoing portions of this
Section 2.4.2, nothing contained in this Section 2.4.2 shall prohibit any
Company from making, or any one or more Holders of Subordinated Indebtedness
from receiving and retaining, payments in respect of the Subordinated
Indebtedness for more than 180 days in any period of 365 consecutive days.
2.4.3 During the period commencing on the earlier of the first day of any
Period and ending on the earliest to occur of (i) the date on which such Period
ends, (ii) the date 180 days after such first day; and (iii) the date that the
Bank Indebtedness shall have become immediately due and payable, without the
prior written consent of the Bank, no Holder of Subordinated Indebtedness will
take any action to enforce payment of any Subordinated Indebtedness (including,
without limitation, giving any notice of acceleration, making demand for any
payment, instituting any suit, commencing any legal proceeding or enforcement
action or joining in a petition instituting a Proceeding in which any Company is
a debtor or affecting any assets of such Company).
8
2.4.4 In the event that notwithstanding the foregoing, any Holder of
Subordinated Indebtedness shall receive any payment or distribution of any
assets of any Company of any kind or character, whether in cash, property or
securities (including, without limitation, any Subordinated Payment and proceeds
of any Subordinated Lien), by set-off or otherwise, in violation of this Section
2.4, such cash, property or securities shall be held in trust by the recipient
thereof on behalf of the Bank and shall be paid over to the Bank for application
to the payment of all Bank Indebtedness until all Bank Indebtedness shall have
been paid in full in cash or cash equivalents, after giving effect to any
concurrent payment or distribution to the Holders of such Bank Indebtedness. In
the event of the failure of any Holder of any Subordinated Indebtedness to
endorse or assign to the Bank any such payment or distribution, the Bank is
hereby irrevocably authorized to endorse or assign the same on behalf of any
Holder of Subordinated Indebtedness.
2.4.5 Nothing contained in this Agreement shall prevent the addition of
"PIK Amounts" (as such term is defined in the CMII Note) to the "Accreted
Principal Amount" (as such term is defined in the CMII Note).
2.5 RESUMPTION OF PAYMENTS; NO DEFAULT, ETC. From and after the date on which
any Period ends (and until the commencement of any other Period) each Company
may pay and each Holder of Subordinated Indebtedness may receive and retain any
payments otherwise permitted under Section 2.1 which shall have accrued and
become due and payable through such time. Whether or not Section 2.3 or Section
2.4 prevents any payment or distribution in respect of Subordinated
Indebtedness, the failure of any Company to make any payment in respect of the
Subordinated Indebtedness as required by the CMII Documents shall nonetheless
constitute a default thereunder.
2.6 SUBROGATION TO RIGHTS OF THE BANK. Upon the payment in full in cash of all
amounts due or to become due on or in respect of Bank Indebtedness and the
irrevocable termination of all commitments under the Bank Documents, to the
extent cash, property or securities otherwise payable or deliverable to the
Holders of Subordinated Indebtedness shall have been applied to the payment of
Bank Indebtedness pursuant to this Agreement, then the Holders of Subordinated
Indebtedness shall be subrogated to the rights of the Bank to receive such
payments and distributions of cash, property and securities applicable to the
Bank Indebtedness until the principal of and any interest on the Subordinated
Indebtedness and all other amounts payable in respect of Subordinated
Indebtedness shall be paid in full in cash. For purposes of such subrogation, no
payments or distributions to the Bank of any cash, property or securities to
which the Holders of Subordinated Indebtedness would be entitled except for the
provisions of this Agreement, and no payment over pursuant to the provisions of
this Agreement to the Bank by the Holders of Subordinated Indebtedness, shall,
as among each Company and its creditors (other than the applicable Holders of
Bank Indebtedness and Holders of Subordinated Indebtedness), be deemed to be a
payment or distribution by such Company to or on account of any Bank
Indebtedness. At such time as the Holders of Subordinated Indebtedness become
subrogated to the rights of the Bank to receive payments and distributions of
cash, property and securities applicable to Bank Indebtedness as set forth in
this Section 2.6, the Bank shall (at the cost and expense of the Holders of
Subordinated Indebtedness) execute and deliver to the Holders of the
Subordinated Indebtedness such assignments of the Bank Documents (without
recourse and without representation or warranty of any kind, other than the
authority of the Bank
9
to execute and deliver such assignments) to the Holders of Subordinated
Indebtedness, as such Holders may reasonably request, such assignments to be in
form, scope and substance satisfactory to such Holders of Subordinated
Indebtedness and the Bank.
2.7 CERTAIN RIGHTS. Each Subordinated Party, agrees to execute and deliver to
the Bank such assignments or other instruments as may be reasonably requested by
the Bank in order to enable the Bank to enforce its rights hereunder and to
collect, to the extent entitled thereto under this Agreement, any and all
dividends or other payments or disbursements which may be made at any time on
account of all or any of the Subordinated Indebtedness so long as any Bank
Indebtedness is outstanding.
2.8 BENEFIT OF SUBORDINATION PROVISIONS. Each Subordinated Party, agrees that
the Bank shall not be liable for any action or failure to act under or in
connection with any of the Bank Documents, it being understood that the
decisions as to whether or not to act and the manner of proceeding under such
instruments and documents are within the sole discretion of the Bank, and shall
not be affected in any manner by the existence of the Subordinated Indebtedness.
It is further agreed that such obligations as may be imposed under the Bank
Documents or under the Uniform Commercial Code or other applicable law shall run
exclusively to the benefit of the Bank and may be enforced or waived only by the
Bank.
2.9 NO PAYMENTS IN VIOLATION OF THIS AGREEMENT. Each Company and each
Subordinated Party agrees that no payments or distributions, by set-off or
otherwise, will be made by or on behalf of such Company, and no payments or
distributions will be received by or on behalf of any Subordinated Party in
violation of the terms of this Agreement.
2.10 RETURNED PAYMENTS. Without limiting any other provision of this Agreement,
Bank Indebtedness shall not be deemed to have been paid in full for purposes of
this Agreement if any payment in respect thereof shall have been restored or
returned to the payor or its trustee in accordance with the order of any court
of competent jurisdiction in any insolvency, bankruptcy, dissolution,
liquidation or reorganization of the payor (or a settlement of any claim or
potential claim made in connection with any such proceeding), or as required or
agreed upon or as a result of the appointment of a custodian, receiver, trustee
or other officer with respect to the payor or any substantial part of its
property or otherwise, and this Agreement shall be reinstated as to any Bank
Indebtedness as to which any such restoration or return shall have occurred.
2.11 NOTICE OF DEFAULT. Each Subordinated Party agrees to notify each Holder of
Bank Indebtedness (or any representative thereof), in writing, at least seven
(7) Business Days prior to taking any action to accelerate any Subordinated
Indebtedness or to otherwise commence the exercise of its rights in respect of
any default under the CMII Documents, in each case as is permitted by this
Agreement.
2.12 CERTAIN POWERS OF THE BANK. Each Subordinated Party agrees that, subject
to Section 3.4.2 hereof, without notice to or consent by it, (a) the liability
of any Company in respect of the Bank Indebtedness may, in whole or in part, be
renewed, extended, modified, restated, released, replaced, refinanced or
refunded by the Bank and the Bank Documents may be amended or supplemented, as
the Bank may deem advisable, (b) any Collateral and/or security interests in
respect of Bank Indebtedness may, from time to time, in whole or in part, be
exchanged, released, continued, not perfected, not timely
10
perfected, sold or surrendered by the Bank, (c) the amount of the Bank
Indebtedness may, from time to time, be increased through further loans, or
otherwise, (d) any deposit balance or balances to the credit of any Company may,
from time to time, in whole or in part, be surrendered or released by the Bank,
and (e) any of the provisions hereof may be waived partially or entirely by the
Bank as to some Subordinated Indebtedness but not other Subordinated
Indebtedness, all without impairing or in any way affecting the subordination of
the Subordinated Indebtedness contained in this Agreement; nor shall the
subordination of the Subordinated Indebtedness herein contained be impaired or
affected in any way by any other action, inaction or omission in respect of the
Bank Indebtedness or the Senior Liens or this Agreement.
2.13 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT. Upon any
payment or distribution of assets of any Company, the Holders of the
Subordinated Indebtedness shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other person
making such payment or distribution, delivered to the Holders for the purpose of
ascertaining the persons entitled to participate in such payment or
distribution, the Bank and other indebtedness of such Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Section 2, in each case, so
long as such order or decree is consistent with this Agreement.
2.14 POWER OF ATTORNEY; AGREEMENT TO COOPERATE. Each Subordinated Party agrees
that in the event that as of the time thirty (30) days prior to the bar date in
any Proceeding, no proof of claim shall have been filed in such Proceeding in
respect of Subordinated Indebtedness, then, and in any such event, the Bank is
irrevocably authorized and empowered to file, for and on behalf of the Holders
of Subordinated Indebtedness, a proof of claim in respect of Subordinated
Indebtedness in such Proceeding and following the time of such filing of such a
proof of claim in accordance with the terms of this Section 2.14 by the Bank and
until any Holder of Subordinated Indebtedness shall, in writing, provide notice
to the Bank terminating the authority granted in this Section 2.14 (which notice
may be given by any Holder of Subordinated Indebtedness at any time) to the
Bank, the Bank is authorized for and on behalf of the Holders of Subordinated
Indebtedness to demand, ▇▇▇ for, collect and receive every payment or
distribution in respect of Subordinated Indebtedness (to which CMII and each
other Holder of Subordinated Indebtedness would, but for the subordination
provisions contained herein, be entitled), and to give acquittance therefor and
to take such other actions (including, without limitation, voting for or against
plans of reorganization, seeking or opposing adequate protection, seeking or
opposing relief from the automatic stay, supporting or opposing applications of
any Company or other parties and taking or refraining from taking any other
action which CMII or such other Holder of Subordinated Indebtedness is entitled
to take or refrain from taking in any such Proceeding), as the Bank may deem
necessary or advisable for the enforcement of the provisions of this Agreement.
Notwithstanding any such termination of authority by such Holder, the Bank is
authorized to vote claims in respect of Subordinated Indebtedness on behalf of
such Holder of Subordinated Indebtedness if such Holder of Subordinated
Indebtedness shall not have voted such claim within ten (10) days before the
expiration of the time to vote any such claim (unless there is less than thirty
(30) days in total for voting on the matter at issue).
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
11
3.1 INDEBTEDNESS. Each Company jointly and severally represents, and CMII, to
the best of its knowledge, represents, to the Bank that there are at present no
documents or instruments evidencing, creating or convertible into or
exchangeable for any Subordinated Indebtedness other than the documents listed
on Schedule 3.1 hereto. CMII hereby represents to the Bank that it owns the CMII
Notes for its own account. CMII hereby further represents to the Bank that no
Company has granted to CMII or any Affiliate of CMII a lien, mortgage or
security interest of any type or nature in respect of the Subordinated
Indebtedness in any of such Company's assets.
3.2 EXISTENCE AND AUTHORITY. CMII represents to the Bank that:
3.2.1 it is a limited partnership duly formed, validly existing and in
good standing under the laws of the British Virgin Island; and
3.2.2 its execution, delivery and performance of this Agreement are within
its company power, have been authorized by all necessary company actions and are
not in contravention of its limited partnership agreement or any law binding on
it.
3.3 NO CONFLICT. CMII represents to the Bank that CMII's execution, delivery
and performance of this Agreement will not conflict with or result in the breach
or termination of, constitute a default under, or accelerate any performance
required under, any other agreement to which CMII is party.
3.4 CERTAIN COVENANTS.
3.4.1 COVENANTS OF CMII. Until the Subordination Termination Date and
notwithstanding anything contained in the CMII Documents or the Bank Documents
to the contrary, CMII shall not and by its acceptance of a CMII Note and/or CMII
Warrant, each other Holder of Subordinated Indebtedness agrees that it shall not
without the prior written consent of Bank (which consent shall not be
unreasonably withheld), agree to any amendment, modification or supplement to
the CMII Original Documents or CMII Refinancing Documents, the effect of which
is to (i) increase the maximum principal amount of the Subordinated Indebtedness
above at any time, the sum of (x) $5,000,000 and interest added to principal of
the CMII Notes, minus (y) the sum of all payments of principal constituting
Subordinated Indebtedness made after the date hereof and through such time
(excluding CMII Refinancing Payments) or increase the rate of interest on any of
the Subordinated Indebtedness (which shall not include the imposition of any
default rate of interest contemplated by the CMII Documents), (ii) change to an
earlier date the dates upon which any payment of principal or interest on the
Subordinated Indebtedness is due, (iii) change (in a manner adverse to a Company
or to any Holder of Bank Indebtedness) or add any event of default or any
covenant with respect to the Subordinated Indebtedness, (iv) change the
redemption, repurchase, put or prepayment provisions of the Subordinated
Indebtedness to require earlier redemption, repurchase or prepayment or permit
an earlier put, (v) alter the subordination provisions with respect to the
Subordinated Indebtedness, including, without limitation, subordinating the
Subordinated Indebtedness to any other debt, (vi) change the maturity date or
the date when payable of any of the Subordinated Indebtedness to an earlier date
or otherwise to alter the repayment terms of the Subordinated Indebtedness to
require earlier repayment, (vii) take any Liens in any assets of any Company or
(viii) change or amend any other term of the CMII Original Documents or CMII
Refinancing Documents if such change or
12
amendment would increase the obligations of any Company (or any other Note
Party, as defined in the CMII Original Documents as in effect on the date
hereof) in any material manner or confer additional material rights on CMII or
any other Holder of Subordinated Indebtedness or otherwise have a Material
Adverse Effect (as defined in the Bank Documents) on the Bank. In the event of a
replacement, refinancing or refunding of the Bank Indebtedness pursuant to Bank
Refinancing Documents, CMII shall, upon request of the Bank, execute a
confirmation (in a form reasonably acceptable to CMII) that the Bank is entitled
to the benefits of this Agreement.
3.4.2 COVENANTS OF THE BANK. Until the Subordination Termination Date and
notwithstanding anything contained in the Bank Documents to the contrary, the
Bank agrees that it shall not without the prior written consent of the Holders
of a majority in principal amount of the Subordinated Indebtedness (which
consent shall not be unreasonably withheld) (i) increase the Bank Indebtedness
above the Bank Indebtedness Cap, (ii) increase the interest rate with respect to
the Bank Indebtedness by more than 200 basis points, except in connection with
the imposition of a default rate under subsection 2.1.2 of the Credit Agreement
(as in effect on the date hereof) (or a comparable provision under any Bank
Refinancing Document), or (c) extend the final maturity of the Bank Indebtedness
(including without limitation through automatic renewals under subsection 4.1 of
the Credit Agreement) until a date later than September 22, 2008.
3.4.3 COVENANTS OF THE COMPANIES. Each Company agrees and covenants that
it will not take or omit to take any action if the effect of such action or
omission would be contrary to or would result in a violation of any of the
provisions of this Agreement.
4. PRIORITY OF LIENS; NO CONTEST. CMII and, by its acceptance of a CMII Note
and/or CMII Warrant, each other Holder of Subordinated Indebtedness, agrees that
it will not contest the validity, perfection, priority or enforceability of the
Senior Liens and that as between CMII or any such other Holder of a CMII Note or
CMII Warrant on the one hand and the Bank on the other hand, the terms of this
Agreement shall govern even if all or part of the Bank Indebtedness or the
Senior Liens are avoided, disallowed, set aside or otherwise invalidated in any
judicial proceeding or otherwise; provided, however, that the terms, provisions
and restrictions of this Section 4 shall be void and of no further force and
effect upon the payment in full in cash of all Bank Indebtedness and the
irrevocable termination of all commitments under the Bank Documents.
5. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of this
Agreement are and are intended solely for the purpose of defining the relative
rights of the Holders of Subordinated Indebtedness, on the one hand, and the
Bank, on the other hand. [Nothing contained in this Agreement is intended to or
shall (a) impair, as between any Company and its creditors (other than the Bank
and the Holders of Subordinated Indebtedness), the obligation of such Company,
which is absolute and unconditional (and which, subject to the rights under this
Agreement of the Bank and the Holders of Subordinated Indebtedness, except as
expressly set forth in the CMII Documents and herein, is intended to rank
equally with all other general obligations of such Company), to pay to the
Holders of Subordinated Indebtedness the principal of and interest on the
Subordinated Indebtedness and all other amounts payable thereunder in accordance
with the terms of the Subordinated Indebtedness; (b) affect the
13
relative rights against such Company of the Holders of Subordinated Indebtedness
on the one hand and the creditors of such Company other than the Bank on the
other hand; or (c) except as provided in Sections 2, 3 and 4 hereof, prevent any
Holders of Subordinated Indebtedness from exercising all remedies otherwise
permitted by applicable law and under the CMII Documents upon default, subject
to the rights, under this Agreement of the Bank.
6. LEGEND Until such time as all amounts due or to become due on or in
respect of Bank Indebtedness have been paid in full in cash and the Bank
Documents have been irrevocably terminated, the CMII Notes shall at all times
contain in a conspicuous manner a legend substantially similar to the following:
"This Note and the indebtedness evidenced hereby are subordinate in the
manner and to the extent set forth in that certain Subordination and
Intercreditor Agreement (as amended, modified or supplemented from time to
time, the "SUBORDINATION AGREEMENT") dated as of October 22, 2001; by and
among ▇▇▇▇▇▇ Brothers Inc.; Corporate Mezzanine II, L.P.; and Fleet
Capital Corporation ("BANK"); and each of their respective successors and
assigns, to the "Bank Indebtedness" as defined therein; and each holder of
this Note, by its acceptance hereof, shall be bound by the provisions of
the Subordination Agreement."
7. MISCELLANEOUS.
7.1 NOTICE TO HOLDERS. Each Company shall give prompt written notice to the
Holders of any fact known to such Company which would prohibit the making of any
payment or distribution by such Company in respect of Subordinated Indebtedness.
7.2 NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present or future
Holder of any Bank Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of any Company or by any act or failure to act, in good faith,
by any such Holder, or by any noncompliance by any Company with the terms,
provisions and covenants of this Agreement, regardless of any knowledge thereof
any such Holder may have or be otherwise charged with.
7.3 BINDING NATURE. Except as provided in Section 7.15 hereof, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns.
7.4 CONFLICT. As between the Holders of Bank Indebtedness, on the one hand,
and the Holders of Subordinated Indebtedness, on the other hand, in the event of
any conflict between any term, covenant or condition of this Agreement and any
term, covenant or condition of any of the CMII Documents or Bank Documents, the
provisions of this Agreement shall control and govern.
7.5 INTENTIONALLY OMITTED.
14
7.6 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall constitute an original Agreement but all of which together
shall constitute one and the same instrument.
7.7 HEADINGS. The descriptive headings herein are for convenience only and
shall not affect the meaning or construction of any of the provisions hereof.
Words used herein, regardless of the number and gender specifically used shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires.
7.8 NOTICES. All notices, requests, consents, demands, approvals and other
communications hereunder shall be deemed to have been duly given, made or served
if in writing and when delivered personally (including without limitation by
means of telecopier before 4:00 p.m. (New York time)), or the day following
delivery to a nationally recognized, reputable overnight courier service which
guarantees delivery within twenty-four hours, charges prepaid, to the respective
parties to this Agreement as follows:
7.8.1 if to any Company:
▇▇▇▇▇▇ Brothers, Inc
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, President
Facsimile No.:
With copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
15
7.8.2 If to CMII:
c/o Canaan Partners
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ Mix
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
7.8.3 If to the Bank:
Fleet Capital Corporation
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration Manager
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
The designation of the person to be so notified or the address of such person
for the purposes of such notice may be changed from time to time by similar
notice in writing, except that any communication with respect to a change of
address shall be deemed to be given and made when received by the party to whom
such communication was sent. Unless the Bank otherwise specifies in writing in
the manner provided herein, all notices which must be provided to Holders of
Bank Indebtedness may be sent to the Bank.
7.9 SEVERABILITY. In the event that any provision of this Agreement is deemed
to be invalid, illegal or unenforceable by reason of the operation of any law or
by reason of the interpretation placed thereon by any court or governmental
authority, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not in any way be affected or impaired thereby, and the
affected provision shall
16
be modified to the minimum extent permitted by law so as most fully to achieve
the intention of this Agreement.
7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE OTHER THAN SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK.
7.11 WAIVER OF JURY TRIAL AND SET OFF; CONSENT TO JURISDICTION.
7.11.1 EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO,
IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE VALIDITY,
PROTECTION, INTERPRETATION, OR ENFORCEMENT HEREOF. EACH OF SUCH PARTIES HEREBY
IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK LOCATED IN THE CITY OF NEW YORK AND, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW
YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE VALIDITY, PROTECTION INTERPRETATION OR ENFORCEMENT HEREOF.
7.11.2 In any litigation hereunder each of the parties hereto waives, to
the fullest extent it may effectively do so, personal service of any summons,
compliant or other process and agrees that the service thereof may be made by
certified or registered mail directed to any such party at its address set forth
in Section 7.8 hereof or as set forth in the next sentence.
7.12 ENTIRE AGREEMENT. This Agreement represents the entire agreement among the
parties hereto with respect to the subject matter hereof and, except as
expressly provided herein, shall not be affected by reference to any other
document. Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but such may be accomplished only by an
instrument in writing signed by all parties hereto.
7.13 AMENDMENT. No provision of this Agreement may be amended, modified or
waived except by a writing signed by each of the parties hereto.
7.14 TERMINATION. This Agreement shall terminate on the Subordination
Termination Date.
7.15 NO BENEFIT TO COMPANIES. No Company is a beneficiary of any portion of
this Agreement or shall have any rights arising under this Agreement or any
right to enforce any provision hereof.
7.16 OBLIGATIONS JOINT AND SEVERAL. All obligations of the Companies under this
Agreement are joint and several.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date fist above written.
▇▇▇▇▇▇ BROTHERS INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
CORPORATE MEZZANINE II, L.P.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Attorney-in-Fact
FLEET CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
