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EFTC CORPORATION
$15,000,000
Floating Rate Subordinated Notes due 2002
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NOTE AGREEMENT
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Dated as of September 5, 1997
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1. THE NOTES..............................................................................................-1-
1a. Authorization of Issue of Notes...............................................................-1-
1b. Interest on the Notes.........................................................................-1-
2. SALE AND PURCHASE OF NOTES.............................................................................-3-
3. CLOSING................................................................................................-3-
3a. Closing, Closing Date.........................................................................-3-
4. CONDITIONS.............................................................................................-3-
4a. Opinions of Company Counsel...................................................................-3-
4b. Representations and Warranties; Etc...........................................................-3-
4c. Proceedings...................................................................................-3-
5. PREPAYMENT OF THE NOTES................................................................................-4-
5a. Optional and Mandatory Prepayments............................................................-4-
5b. Notice of Prepayment..........................................................................-4-
5c. Surrender of Notes; Notations Thereon.........................................................-4-
5d. Prohibition on Purchase of the Notes..........................................................-5-
6. AFFIRMATIVE COVENANTS..................................................................................-5-
6a. Financial Statements..........................................................................-5-
6b. Inspection of Property........................................................................-6-
6c. Financial Records.............................................................................-6-
6d. Corporate Existence; Etc......................................................................-6-
6e. Payment of Taxes and Claims...................................................................-7-
6f. Warrant.......................................................................................-7-
7. MERGER, CONSOLIDATION, SALE OR TRANSFER OF ASSETS......................................................-7-
8. SUBORDINATION..........................................................................................-8-
8a. Agreement That Notes Be Subordinate...........................................................-8-
8b. Limitation During Certain Defaults on Senior Indebtedness.....................................-8-
8c. Priority of Senior Indebtedness...............................................................-9-
8d. Payment to Holders of Senior Indebtedness of Certain Amounts Received by
Holders of Notes..............................................................................-9-
8e. Notice of Specified Events; Reliance on Certificate of Liquidating Agent
............................................................................................-10-
8f. Subrogation..................................................................................-10-
8g. Obligation to Pay Not Impaired...............................................................-11-
8h. Limitation During Event of Default Hereunder.................................................-11-
8i. Reliance by Senior Indebtedness on Subordination Provisions..................................-11-
8j. Certain Payments and Credits Permitted.......................................................-11-
8k. Subordination Not to Be Prejudiced by Certain Acts...........................................-11-
8l. Limitation on Securing Notes.................................................................-12-
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................-12-
9a. Organization and Qualification...............................................................-12-
9b. Actions Pending; Compliance with Law.........................................................-12-
9c. Use of Proceeds..............................................................................-13-
9d. Insurance....................................................................................-13-
9e. Governmental Consent, Etc....................................................................-13-
9f. Holding Company Act and Investment Company Act Status........................................-13-
9g. Taxes........................................................................................-13-
9h. No Default; Conflicting Agreement or Charter Provisions......................................-13-
9i. Financial Statements.........................................................................-14-
9j. Offering of Securities.......................................................................-14-
10. REPRESENTATIONS AND COVENANT OF THE PURCHASER.........................................................-15-
10a. Acquisition for Investment...................................................................-15-
10b. ERISA........................................................................................-15-
10c. Restriction on Sale, Other Disposition.......................................................-15-
11. DEFAULT...............................................................................................-15-
11a. Events of Default; Acceleration..............................................................-15-
11b. Other Remedies...............................................................................-17-
12. DEFINITIONS...........................................................................................-18-
13. Miscellaneous.........................................................................................-20-
13a. Home Office Payment..........................................................................-20-
13b. Expenses.....................................................................................-20-
13c. Consent to Amendments........................................................................-21-
13d. Registration, Transfer and Exchange of Notes.................................................-22-
13e. Lost, Etc., Notes............................................................................-22-
13f. Survival of Representations and Warranties; Entire Agreement.................................-22-
13g. Disclosure to Other Persons..................................................................-22-
13h. Successors and Assigns.......................................................................-23-
13i. Notices......................................................................................-23-
13j. Descriptive Headings.........................................................................-23-
13k. Governing Law................................................................................-23-
13l. Counterparts.................................................................................-23-
13m. Satisfaction Requirement.....................................................................-23-
13n. Severability.................................................................................-24-
Exhibit A - Form of Subordinated Note Exhibit B - Form of Opinion of Counsel to
the Company Exhibit C - Form of Warrant
EFTC Corporation
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
As of September 5, 1997
To the Purchaser Accepting
This Agreement on the Signature
Page Hereof
Ladies and Gentlemen:
EFTC CORPORATION (the "Company"), a Colorado corporation, hereby agrees
with you as follows:
1. THE NOTES.
1a. Authorization of Issue of Notes. The Company has duly authorized an
issue of $15,000,000 aggregate principal amount of floating rate subordinated
notes (the "Notes"), in the forms of Exhibit A. Each such Note shall bear
interest and be payable as provided herein and therein. As used herein, the term
"Notes" shall include all notes originally issued pursuant to this Agreement and
all notes delivered in substitution or exchange for any of said notes pursuant
to this Agreement and, where applicable, shall include the singular number as
well as the plural. The term "Note" means one of the Notes.
1b. Interest on the Notes. (i) Each Note shall bear interest at the
Applicable Interest Rate (LIBOR, as determined for each Interest Period, plus
2.0% per annum), and on any overdue payment as specified in Exhibit A. Not later
than 5:00 p.m. Denver, Colorado local time on the second Business Day next
following the Closing Date, you will notify the Company of LIBOR as determined
pursuant to (ii)(A), below, and the Company will determine the Applicable
Interest Rate for the Notes for the initial Interest Period commencing on the
Closing Date and will give notice thereof by facsimile transmission to you.
Promptly after the determination of LIBOR for each subsequent Interest Period,
the Company will give notice to each holder of a Note setting forth LIBOR as so
determined and the Applicable Interest Rate for the Notes for such Interest
Period.
(ii) For each Interest Period, the Company will calculate LIBOR for
such Interest Period as provided herein and each such calculation shall be
binding upon the holders of the Notes absent manifest error. As used herein,
"LIBOR" shall mean the interest rate determined in accordance with the following
provisions:
(A) Principal Method of Determination. If, for any Interest
Period, LIBOR is determined under the Xxxxxxx Loan Documents, LIBOR for
the purposes hereof shall be equal to the "Index" rate determined for
the same Interest Period in accordance with the Xxxxxxx Loan Documents.
As used herein, the term "Xxxxxxx Loan Documents" means, together, the
Business Loan Agreement, dated February
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5, 1997, between Xxxxxxx Cattle Company LLP and Bank One, Colorado,
N.A. and the related Promissory Note, dated February 5, 1997, issued by
Xxxxxxx Cattle Company LLP to Bank One Colorado, N.A.
(B) Alternative Method of Determination. If, for any Interest
Period, LIBOR is not determined under the Xxxxxxx Loan Documents, LIBOR
shall be determined as follows:
(I) On the Publication Day that is the first day of
each Interest Period, or if such first day is not a
Publication Day, the Publication day next preceding such first
day (a "LIBOR Interest Determination Date"), the Company will
determine LIBOR on the basis of the rates for deposits of not
less than U.S.$1,000,000 having a term comparable to such
Interest Period, commencing on the London Market Day that is
or, if such date is not a London Market Day, the London Market
Day that most nearly precedes, such LIBOR Interest
Determination Date, that are published in The Wall Street
Journal on such LIBOR Interest Determination Date; provided
that if such rate is not so published, LIBOR for such LIBOR
Interest Determination Date will be determined as described in
clause (II) below.
(II) If on any LIBOR Interest Determination Date no
LIBOR rate is so published having a term comparable to the
applicable Interest Period, LIBOR will be determined by the
banking institution with which the Company then has its
principal banking relationship on the basis of the rates on
such LIBOR Interest Determination Date at which deposits in
U.S. dollars having a term comparable to such Interest Period
are offered to prime banks in the London Interbank Market
commencing on the London Market Day that is or, if such date
is not a London Market Day, the London Market Day that most
nearly precedes, such LIBOR Interest Determination Date, and
in a principal amount equal to an amount of not less than U.S.
$1,000,000 that in such bank's judgment is representative for
a single transaction in such market at such time. The Company
will request such bank to provide a written quotation of such
rate. If such bank does not timely provide a proper quotation,
LIBOR for such LIBOR Interest Determination Date will be equal
to LIBOR for the immediately preceding Interest Period.
For the purposes of this clause (ii), "Publication Day" means any day on which
The Wall Street Journal (or any alternate publication agreed upon by the Company
and the Required Holder(s) or any successor publication) is published for
general circulation and "London Market Day" means any day on which deposits in
U.S. dollars are transacted in the London interbank market. All percentages
resulting from any calculation of LIBOR pursuant to this clause (B) will be
rounded, if necessary, to the nearest one-hundred thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and 9.876544%
(or .09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts
used in or resulting from such calculations will be rounded to the nearest cent
(with one-half cent being rounded upwards).
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2. SALE AND PURCHASE OF NOTES. Upon the terms and subject to the
conditions herein set forth, the Company will issue and sell to you and you will
purchase from the Company Notes in the aggregate principal amount of
$15,000,000, at a purchase price of 100% of such principal amount.
3. CLOSING.
3a. Closing, Closing Date. The closing of the sale of Notes to you
shall take place at the offices of Holme Xxxxxxx & Xxxx LLC, 0000 Xxxxxxx
Xxxxxx, xxxxx 0000, Xxxxxx, XX 00000 on September 7, 1997 or such later date as
shall be mutually agreeable to you and the Company. The date of the closing is
hereinafter referred to as the "Closing Date." At the closing, the Company will
deliver to you one or more Notes to be purchased by you, registered in your name
or in the name of your nominee, in any denominations (multiples of $1,000,000)
and in the aggregate principal amount to be purchased by you, all as you may
specify by timely notice to the Company (or in the absence of such notice, one
Note registered in your name), duly executed and dated the Closing Date, against
payment of the purchase price therefor with funds immediately available to the
Company at its account no. 126000106 at Bank One, Colorado, N.A., Denver, CO,
ABA No. 000000000, for further credit to the Company's account at Bank One,
Colorado, N.A., Greeley, CO, Branch #504. If at the closing the Company shall
fail to tender to you any of the Notes to be purchased by you as provided above
in this Section, or any of the conditions specified in Section 4 shall not have
been satisfied or waived by you by the fifth Business Day after the date
intended for the closing to occur, you shall, at your election, be relieved of
all further obligations under this Agreement, without thereby waiving any other
rights you may have by reason of such failure or such non-fulfillment.
4. CONDITIONS. Your obligations to purchase and pay for the Notes at the
closing hereunder are subject to the fulfillment to your satisfaction, on or
before the Closing Date, of the following conditions:
4a. Opinions of Company Counsel. You shall have received from Holme Xxxxxxx
& Xxxx LLC, an opinion substantially in the form of Exhibit B, dated the Closing
Date.
4b. Representations and Warranties; Etc. The representations and
warranties in Section 9 shall be true on and as of the Closing Date with the
same effect as though such representations and warranties had been made on the
Closing Date, except to the extent of changes caused by the transactions
contemplated hereby; the Company shall have performed all agreements on its part
required to be performed under this Agreement on or prior to the Closing Date;
no Default or Event of Default shall exist; and you shall have received an
Officer's Certificate, dated the Closing Date, to the effect specified in this
Section 4b.
4c. Proceedings. All corporate and other proceedings to be taken by the
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in substance and
form to you and your counsel, and you and your counsel shall have received all
such counterpart originals or certified or other copies of such documents as you
or they may reasonably request.
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5. PREPAYMENT OF THE NOTES. The Notes may not be paid or prepaid prior to
their final maturity except as hereinafter provided.
5a. Optional and Mandatory Prepayments. (i) Upon notice given as
provided in Section 5b, the Company, at its option, may prepay the Notes as a
whole (or from time to time in part in integral multiples of $50,000), in each
case at the principal amount so to be prepaid, without premium, together with
interest accrued thereon to the date fixed for such prepayment. It is understood
that the Company intends to use a portion of the net proceeds of any issuance
and sale of equity securities to repay all or a portion of the Notes. It is
further understood that the Company's ability to make any such prepayment may be
limited or prohibited at any particular time by the terms of the Company's then
outstanding Senior Indebtedness.
(ii) On the first Interest Payment Date after the anniversary of the
Closing Date in 1998, 1999, 2000 and 2001, the Company shall prepay $50,000 in
principal amount of the Notes then outstanding, or the entire outstanding
principal amount of the Notes if less than $50,000 in principal amount of Notes
remains outstanding.
(iii) If, on or prior to October 15, 1997, the Company has not executed
and delivered to you the Warrant referred to in Section 6f, then on or before
October 20, 1997, the Company shall prepay the entire principal amount of the
Notes then outstanding.
(iv) Upon written request of the holders of 100% of the Notes at the
time outstanding, given not less than thirty (30) days prior to the dates
specified in such notice as the prepayment date, the Company shall prepay the
entire principal amount of the notes then outstanding; provided that such notice
shall be void and the Company shall have no such obligation to so prepay the
Notes unless (a) the Company has legally available funds to make such a
prepayment in accordance with Section 5b, and (b) the Company is permitted to
make such payment pursuant to the terms of all Senior Indebtedness at the time
outstanding.
(v) In the event the principal amount of any such prepayment is less
than the outstanding principal amount all of the Notes at the time outstanding,
the Company will allocate the principal amount so to be prepaid among all
outstanding Notes in proportion to the respective unpaid principal amounts
thereof.
5b. Notice of Prepayment. The Company shall give written notice of each
prepayment of Notes pursuant to Section 5a to each holder of such Notes, which
notice shall be given not less than 20 days (or, in the case ot a prepayment
pursuant to Section 5a(iii), not less than 2 days) or more than 60 days prior to
the date fixed for such prepayment, shall specify the amount so to be prepaid
and the date fixed for such prepayment. Without the consent of each holder of a
Note so to be prepaid, no such prepayment date specified with respect to any
optional prepayment of Notes shall be other than an Interest Payment Date.
Notice of prepayment having been so given, the aggregate principal amount of the
Notes so to be prepaid as specified in such notice, together with interest
accrued thereon to such date fixed for prepayment, shall become due and payable
on the specified prepayment date.
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5c. Surrender of Notes; Notations Thereon. Subject to the provisions of
Section 13a, as a condition of prepayment of all or any part of the principal of
and interest on any Note, the Company may require the holder to present such
Note for notation of such payment and, if such Note is paid in full, require the
surrender thereof.
5d. Prohibition on Purchase of the Notes. The Company will not, and
will not permit any Affiliate of the Company to, acquire directly or indirectly
by purchase or prepayment or otherwise any of the outstanding Notes except (a)
by way of payment or prepayment in accordance with the provisions of the Notes
and of this Agreement or (b) pursuant to an offer to purchase made by the
Company or any Affiliate of the Company to the holders of all Notes, which offer
shall require the Company or such Affiliate to purchase on the same terms and
conditions, pro rata among all Notes tendered, and shall remain open for a
period of at least 20 Business Days after notice has been mailed to the holders
of all Notes; provided that at the time of such offer and purchase no Default or
Event of Default shall exist and no waiver in respect of any previous Default or
Event of Default shall then be in effect. Any Notes purchased by the Company or
any Affiliate in accordance with the preceding sentence shall thereupon be
canceled and no Notes shall be issued in substitution therefor.
6. AFFIRMATIVE COVENANTS. The Company covenants and agrees that
so long as any Note shall be outstanding:
6a. Financial Statements. The Company will deliver to each
Significant Holder in duplicate:
(i) as soon as practicable and in any event within 50 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year, consolidated statements of operations, cash flows and changes in
consolidated common stockholders' equity position of the Company and its
Subsidiaries for the period from the beginning of the current fiscal year to the
end of such quarterly period, and a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such quarterly period, which in each case
shall set forth in comparative form figures for the corresponding period in the
preceding fiscal year, all in reasonable detail and certified by an authorized
financial officer of the Company to present fairly and in accordance with GAAP,
the information contained therein (subject to changes resulting from year-end
adjustments); provided that, for so long as the Company is subject to the
periodic reporting requirements of the Exchange Act, the timely delivery of the
Company's Quarterly Report on Form 10-Q shall be deemed to satisfy the Company's
obligations under this Clause (i);
(ii) as soon as practicable and in any event within 100 days after the
end of each fiscal year, consolidated statements of operations, cash flows and
changes in consolidated common stockholders' equity position of the Company and
its Subsidiaries for such year, and a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such year, which in each case shall set
forth in comparative form corresponding consolidated figures from the preceding
annual audit, all in reasonable detail, in accordance with GAAP (except as
permitted by Section 6c), and accompanied by a report thereon of independent
public accountants of recognized national standing selected by the Company;
provided that, for so long as the Company is subject to the periodic reporting
requirements of the Exchange Act, the timely delivery of the Company's Annual
Report to Shareholders, if any, for such fiscal year, the Company's Proxy
Statement with respect to the
-5-
Company's Annual Meeting next following such fiscal year and the Company's
Annual Report on Form 10-K for such fiscal year shall be deemed to satisfy the
Company's obligations under this Clause (ii);
(iii) concurrently with the financial statements for each quarterly
accounting period and for each fiscal year of the Company, furnished pursuant to
clauses (i) and (ii) above, a certificate signed by the Chief Executive Officer,
the Chief Financial Officer or the Treasurer of the Company stating that, based
upon such examination or investigation and review of this Agreement as in the
opinion of the signer is necessary to enable the signer to express an informed
opinion with respect thereto, no Default or Event of Default has occurred during
such period, or, if any Default or Event of Default shall have occurred,
specifying all such Defaults and Events of Default, the nature and period of
existence thereof and what action the Company has taken, is taking or proposes
to take with respect thereto;
(iv) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as the Company or any
Subsidiary shall send to any holders of its securities that are registered under
the Exchange Act and copies of all registration statements (without exhibits),
other than on Form S-8 or any similar successor form, and all reports relating
to securities of the Company that the Company or any Subsidiary files with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission); and
(v) promptly after the Company becomes aware of the existence of a
Default or Event of Default, an Officer's Certificate specifying the nature and
period of existence of such Default or Event of Default and what action the
Company has taken, is taking or proposes to take with respect thereto.
6b. Inspection of Property. The Company will, upon reasonable notice
and subject to applicable law, permit any Person designated in writing by any
Significant Holder (without limitation of any other rights which such
Significant Holder may have as a creditor of the Company) to visit and inspect
at such Significant Holder's expense such of the offices and properties (and,
during the existence of an Event of Default, to examine all corporate books and
financial records) of the Company and its Subsidiaries as such Significant
Holder may reasonably request and to discuss the affairs, finances and accounts
of any thereof with the principal officers of the Company (and, during the
existence of an Event of Default, its independent public accountants), all at
such reasonable times and as often as such, Significant Holder may reasonably
request.
6c. Financial Records. The Company will, and will cause each of its
consolidated Subsidiaries to, maintain financial records (including, but not
limited to, journals and ledgers) so as to reflect accurately its financial
condition in all material respects in accordance with GAAP or, in the case of
any Subsidiary that is not organized under the laws of the United States of
America, any State thereof or the District of Columbia, in accordance with any
prescribed system of accounts applicable from time to time to such Person.
6d. Corporate Existence; Etc. Subject to Section 7, the Company
will do or cause to be done all things necessary to preserve and maintain its
existence, rights and privileges; provided,
-6-
however, that the Company shall not be required to preserve any such right or
privilege if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the holders of the Notes.
6e. Payment of Taxes and Claims. The Company will pay or discharge, or
cause to be paid or discharged before the same shall become delinquent, (i) all
taxes, assessments and governmental charges imposed upon the Company or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (ii) all lawful material claims for labor, materials and
supplies that, if unpaid, might by law become a lien upon the property of the
Company or any Subsidiary; provided that the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
6f. Warrant. Not later than October 15, 1997, the Company shall have
execute and deliver to you a Warrant to purchase 500,000 shares of the Company's
Common Stock, par value $.01 per share (the "Common Stock"), substantially in
the form of Exhibit C. The Company shall use its best efforts to execute and
deliver such Warrant as promptly as practicable, which efforts shall include, if
necessary, submitting the issuance of such Warrant to the special meeting of the
Company's share holders next following the Date hereof. As used herein, the term
"Warrants" shall include the warrant originally issued pursuant to this
Agreement and all warrants delivered in substitution or exchange for any of said
warrants pursuant to this Agreement and, where applicable, shall include the
singular number as well as the plural. The term "Warrant" means one of the
Warrants.
7. MERGER, CONSOLIDATION, SALE OR TRANSFER OF ASSETS. The Company
covenants and agrees that so long as any Note shall be outstanding, the Company
will not consolidate with or merge into any other Person or convey, transfer or
lease its properties and assets substantially as an entirety to any Person
unless:
(i) the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as an entirety
shall either (a) expressly assume in writing, by documentation satisfactory to
the Required Holder(s), the due and punctual payment of the principal of and
interest on all the Notes and the performance or observance of every covenant
and obligation in this Agreement and the Notes on the part of the Company to be
performed or observed or (b) cause a wholly owned Subsidiary of such Person to
assume in writing, and such Person shall unconditionally guarantee such
Subsidiary's obligations in respect of, in each case by documentation
satisfactory to the Required Holder(s), the due and punctual payment of the
principal of and interest on all the Notes and the performance or observance of
every covenant and obligation in this Agreement and the Notes on the part of the
Company to be performed or observed;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall exist;
-7-
(iii) such Person shall be organized and validly existing under the
laws of the United States of America, any State thereof or the District of
Columbia;
(iv) the Company has delivered to each holder of a Note an Officer's
Certificate and an opinion of legal counsel, each stating that such
consolidation, merger, conveyance, transfer or lease complies with this Section
7 and that all conditions precedent herein provided for relating to such
transaction have been complied with; and
(v) such merger or consolidation will not otherwise materially
adversely affect the ability of the Company (or any other obligator with respect
to the Notes and the Warrants) to perform its or their obligations under this
Agreement, the Notes or the Warrants.
The Company will give each holder of Notes written notice of any proposed
transaction permitted by this Section 7 not less than 30 days prior to the date
of consummation thereof. Upon any consolidation or merger of the Company into
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with the
provisions of this Section 7, the successor Person formed by such consolidation
or into which the Company is merged or to which such conveyance, transfer or
lease is made (or such wholly owned Subsidiary that assumes the Company's
obligations pursuant to this Section 7) shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Agreement
and the Notes with the same effect as if such successor Person or Subsidiary, as
the case may be, had been named as the Company herein, and thereafter, except in
the case of a lease to another Person, the predecessor Person shall be relieved
of all obligations and covenants under this Agreement and the Notes.
8. SUBORDINATION.
8a. Agreement That Notes Be Subordinate. The Company covenants and
agrees, and you, and each other holder of Notes issued hereunder by the
acceptance thereof likewise covenants and agrees, that all Notes shall be issued
subject to the provisions of this Section 8; and each Person holding any Note,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions. All Notes shall, for all purposes and in
all respects without limitation, including those hereinafter in this Section 8
set forth, be subordinated and subject in right of payment to the prior payment
in full in cash or money's worth of the principal of and interest on all Senior
Indebtedness; provided, however, that payments on account of principal of and
interest on the Notes may be made from time to time, subject to the specific
limitations set forth in this Section 8.
8b. Limitation During Certain Defaults on Senior Indebtedness. If there
shall have occurred a default in the payment of the principal of or any premium
or interest on any Senior Indebtedness, or if there shall have occurred an event
of default with respect to any Senior Indebtedness permitting the holders
thereof to accelerate the maturity thereof, or if such payment would itself
constitute such an event of default, then, unless and until such default or
event of default shall have been cured or waived or shall have ceased to exist,
no payment shall be made by the Company on account of principal of or any
premium or interest on the Notes or on account of the purchase or other
acquisition of Notes.
-8-
8c. Priority of Senior Indebtedness. Upon any distribution of all or
substantially all of the assets of the Company, or upon any dissolution, winding
up or liquidation of the Company, whether voluntary or involuntary, or upon any
reorganization, readjustment, arrangement or similar proceeding relating to the
Company or its property, whether or not the Company is a party thereto, and
whether in bankruptcy, insolvency or receivership proceedings or otherwise, or
upon any assignment by the Company for the benefit of creditors, or upon any
other marshaling of the assets and liabilities of the Company:
(i) the principal of and any premium and interest on all the
Senior Indebtedness and any and all other amount dues thereunder shall
first be paid in full in cash or money's worth, or provisions made for
such payment, before any payment is made on account of the principal of
or interest on the Notes; and
(ii) any distribution of assets of the Company or payment by
or on behalf of the Company of any kind or character, whether in cash,
property or securities, to which the holders of the Notes would be
entitled except for the provisions of this Section 8, shall be paid or
delivered by the liquidating trustee or agent or other Person making
such distribution or payment, whether a trustee in bankruptcy,
receiver, assignee for benefit of creditors, liquidating trustee, or
otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing any of such
Senior Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior
Indebtedness held or represented by each, to the extent necessary to
make payment in full in cash or money's worth of the principal of and
any premium and interest on all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent distribution or payment, or
provision therefor, to the holders of such Senior Indebtedness.
8d. Payment to Holders of Senior Indebtedness of Certain Amounts
Received by Holders of Notes. In the event that, notwithstanding the provisions
of Sections 8b and 8c, any distribution of assets of the Company or payment by
or on behalf of the Company of any kind or character, whether in cash, property
or securities, to which the holders of the Notes would be entitled but for the
provisions of this Section 8, shall be received by the holders of the Notes
before the principal of and any premium and interest on all Senior Indebtedness
is paid in full in cash or money's worth, or provision made for its payment,
such distribution or payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of such Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably as aforesaid, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay the principal of and any premium and interest on all such Senior
Indebtedness in full in cash or money's worth, after giving effect to any
concurrent distribution or payment, or provision therefor, to the holders of
such Senior Indebtedness.
8e. Notice of Specified Events; Reliance on Certificate of
Liquidating Agent. (i) The Company shall give prompt written notice to the
holders of the Notes of any dissolution, winding up, liquidation,
reorganization, readjustment, arrangement or similar proceeding, assignment for
the
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benefit of creditors, or any marshaling of assets and liabilities, in respect of
the Company, within the meaning of Section 8c, and shall also give prompt
written notice to the holders of the Notes of any event which pursuant to
Section 8b would prevent payment by the Company on account of the principal of
or interest on the Notes or on account of the purchase of the Notes. The holders
of the Notes shall be entitled to assume that no such event has occurred unless
the Company has given such notice.
(ii) Upon any distribution of assets of the Company or payment by or on
behalf of the Company referred to in this Section 8, the holders of the Notes
shall be entitled to rely upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 8c
are pending, and the holders of such Notes shall be entitled to rely upon a
certificate of the liquidating trustee or agent or other Person making any
distribution to the holders of such Notes for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the 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 8. In the event that any holder of
Notes determines, in good faith, that further evidence is required with respect
to the right of any Person as a holder of Senior Indebtedness to participate in
any payment or distribution pursuant to this Section 8, such holder of Notes may
request such Person to furnish evidence to the reasonable satisfaction of such
holder of Notes as to the amount of Senior Indebtedness held by such Person, as
to the extent to which such Person is entitled to participate in such payment or
distribution, and as to other facts pertinent to the rights of such Person under
this Section 8, and if such evidence is not furnished, such holder of Notes may
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment.
8f. Subrogation. Subject to the payment in full of the principal of and
any premium and interest on all Senior Indebtedness and of any and all other
amounts due thereunder, the holders of the Notes (together with the holders of
any other indebtedness of the Company which is subordinate in right of payment
to the payment of other indebtedness of the Company, but is not subordinate in
right of payment to the Notes and by its terms grants such right of subrogation
to the holders thereof) shall be subrogated to the rights of the holders of
Senior Indebtedness to receive distributions of assets of the Company or
payments by or on behalf of the Company, made on the Senior Indebtedness, until
the principal of and interest on the Notes shall be paid in full; and, for the
purposes of such subrogation, no distributions or payments to the holders of
Senior Indebtedness of any cash, property or securities to which the holders of
the Notes would be entitled except for the provisions of this Section 8, and no
payment over pursuant to the provisions of this Section 8 to the holders of
Senior Indebtedness by the holders of the Notes, shall, as between the Company,
its creditors other than the holders of Senior Indebtedness and the holders of
Notes, be deemed to be a payment by the Company to or on account of Senior
Indebtedness, it being understood that the provisions of this Section 8 are, and
are intended, solely for the purpose of defining the relative rights of the
holders of the Notes, on the one hand, and the holders of Senior Indebtedness,
on the other hand.
8g. Obligation to Pay Not Impaired. Nothing contained in this Section 8 or
elsewhere in this Agreement, or in the Notes, is intended to or shall alter or
impair, as between the Company, its creditors other than the holders of Senior
Indebtedness, and the holders of the Notes, the
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obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Notes the principal of and interest on the Notes at the time and
place and at the rate prescribed, or to affect the relative rights of the
holders of the Notes and creditors of the Company other than the holders of
Senior Indebtedness, nor shall anything herein or therein prevent the holder of
any Notes from exercising all remedies otherwise permitted by applicable law
upon any Default or Event of Default under this Agreement, subject to the
rights, if any, under this Section 8 of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
8h. Limitation During Event of Default Hereunder. Subject to Section
8b, if there shall have occurred any Event of Default specified in Section 11a,
other than of the nature referred to in Section 8c, then and unless and until
either such Event of Default shall have been cured or waived or shall have
ceased to exist or the principal of and interest on all Senior Indebtedness
shall have been paid in full in cash or money's worth, no payment shall be made
by the Company on account of the principal of or interest on, the Notes, or on
account of the purchase or other acquisition of Notes, except (i) payments at
the maturity of Notes (subject to Section 8c), (ii) current interest payments,
and (iii) payments for the purpose of curing any such Event of Xxxxxxx.
0x. Reliance by Senior Indebtedness on Subordination Provisions. Each
holder of any Note by the acceptance thereof acknowledges and agrees that the
subordination provisions set forth in this Section 8 are, and are intended to
be, an inducement and a consideration to each holder of any Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the Notes, to acquire and continue to hold, or to continue to hold,
such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold such Senior Indebtedness.
8j. Certain Payments and Credits Permitted. Nothing contained in this
Section 8 or elsewhere in this Agreement, or in any of the Notes, shall prevent
(i) the Company from making payment of the principal of or interest on the
Notes, at any time except under the conditions described in Sections 8b, 8c and
8h or (ii) the application by the holder of any Notes of any moneys under this
Agreement to the payment of or on account of the principal of or interest on the
Notes at any time except under the conditions described in Section 8d.
8k. Subordination Not to Be Prejudiced by Certain Acts. No right of any
present or future holder of any Senior Indebtedness of the Company 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 the Company or by any act
or failure to act, in good faith, by any such holder, or by any non-compliance
by the 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.
8l. Limitation on Securing Notes. The Company will not give, and the
holders of the Notes will not take or receive, any security interest for the
payment of the principal of or interest on the Notes, other than cash required
or permitted to be paid to such holders hereunder.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants as hereinafter set forth.
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9a. Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, each of the Company's Subsidiaries is duly organized and existing in
good standing under the laws of the jurisdiction in which it is incorporated,
and the Company and each such Subsidiary has the corporate power to own its
respective property and to carry on its respective business as now being
conducted, and the Company and each Subsidiary is duly qualified as a foreign
corporation to do business and in good standing in every jurisdiction in which
the nature of the respective business conducted or property owned by it makes
such qualification necessary and where the failure so to qualify would have a
material adverse effect on the business or financial position of the Company or
the Company and its Subsidiaries taken as a whole. The Company and its
Subsidiaries possess all rights, licenses and permits reasonably required for
the maintenance and operation of their respective properties and the conduct of
their respective businesses as now being maintained and operated and conducted.
The issuance and sale of the Notes and, when executed and delivered by the
Company in accordance with the terms hereof, the Warrants by the Company and the
execution and delivery of this Agreement and the Warrants by the Company and
compliance by the Company with all of the provisions of this Agreement, the
Warrants (when executed and delivered by the Company in accordance with the
terms hereof) and the Notes (i) are within the corporate powers and authority of
the Company, (ii) do not (and in the case of the Warrants, will not) require the
approval or consent of any stockholders of the Company and (iii) have (and in
the case of the Warrants, will have) been authorized by all requisite corporate
proceedings on the part of the Company.
9b. Actions Pending; Compliance with Law. There is no action, suit,
investigation or proceeding pending, or to the knowledge of the Company
threatened, against the Company or any of its Subsidiaries or any of their
respective properties or assets by or before any court, arbitrator or
governmental body, department, commission, board, bureau, agency or
instrumentality, which questions the validity of this Agreement, the Warrants or
the Notes or any action taken or to be taken pursuant hereto or thereto, or
which, in the opinion of senior management of the Company after consultation
with counsel, are reasonably likely to result in any material adverse change in
the business or financial condition of the Company and its Subsidiaries taken as
a whole. Neither the Company nor any of its Subsidiaries is in default in any
material respect with respect to any judgment, order, writ, injunction, decree,
or award, and, the business of the Company and its Subsidiaries is presently
being conducted so as to comply in all material respects with applicable
federal, state and local governmental laws and regulations, including without
limitation laws and regulations relating to environmental requirements (such as
requirements in respect of air, water and noise pollution) and to employment
practices (such as practices in respect of discrimination, health and safety),
all to the extent necessary to avoid any material adverse effect on the
business, properties or condition (financial or other) of the Company or the
Company and its Subsidiaries taken as a whole.
9c. Use of Proceeds. The Company will use the proceeds of the
sale of the Notes for general corporate purposes.
9d. Insurance. The Company and its Subsidiaries maintain
insurance in such amounts, including self-insurance, retainage and deductible
arrangements, and of such a character as is usually maintained by or required
for companies engaged in the same or similar business.
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9e. Governmental Consent, Etc. The Company is not required to obtain
any consent, approval or authorization of, or to make any declaration or filing
with, any governmental authority as a condition to or in connection with the
execution, delivery or performance of this Agreement, the Notes or, when issued
in accordance with the terms hereof, the Warrants or the valid offer, issue,
sale or delivery of the Notes or, when issued in accordance with the terms
hereof, the Warrants, or the performance by the Company of its obligations in
respect thereof.
9f. Holding Company Act and Investment Company Act Status. The Company
is not a "holding company" or a "public utility company" as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended. The
Company is not an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
9g. Taxes. The Company and its Subsidiaries have filed or caused to be
filed all federal and state income tax returns which are required to be filed
and have paid or caused to be paid all taxes as shown on said returns and on all
assessments received by it to the extent that such taxes have become due, except
taxes (i) the validity or amount of which is being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
set aside and (ii) which, in the aggregate, are in an amount that is not
material to the Company and its Subsidiaries taken as a whole. The Company and
its Subsidiaries have paid or caused to be paid, or have established reserves
adequate in all material respects, for all federal income tax liabilities and
state income tax liabilities applicable to the Company and its Subsidiaries for
all fiscal years which have not been examined and reported on by the taxing
authorities (or closed by applicable statutes).
9h. No Default; Conflicting Agreement or Charter Provisions. Neither
the Company nor any of its Subsidiaries is a party to any contract or agreement
or subject to any charter or other corporate restriction which materially and
adversely affects the business, property or assets or financial condition of the
Company and its Subsidiaries taken as a whole. Neither the issuance and sale of
the Notes and, when issued in accordance with the terms hereof, the Warrants nor
fulfillment of nor compliance with the terms and provisions hereof or of the
Notes and, when issued in accordance with the terms hereof, the Warrants, will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in any violation of, the Certificate of
Incorporation or by-laws of the Company or any material mortgage, agreement,
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company or its property is subject. The Company has reserved for issuance,
upon exercise of the Warrants, 500,000 shares of the Common Stock. The Company
is not in default under any outstanding indenture or other debt instrument or
with respect to the payment of principal of or interest on any outstanding
obligations for borrowed money, and there exists no default by the Company under
any material contracts or agreements, or under any instrument by which the
Company is bound, which would materially and adversely affect the Company's
ability to perform its obligations hereunder or under the Notes or the Warrants
or which would materially and adversely affect its business, operations or
financial condition.
9i. Financial Statements. The Company has provided you copies of
consolidated balance sheets of the Company and its consolidated Subsidiaries as
of December 31, 1996 and December 31, 1995 and the related consolidated
statements of operations, cash flows and changes
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in consolidated common stockholders' equity position of the Company and such
Subsidiaries for the fiscal years ended on said dates, all with reports thereon
of KPMG Peat Marwick, independent public accountants. The Company has also
provided to you copies of a consolidated balance sheet of the Company and its
consolidated Subsidiaries as of June 30, 1997 and the related consolidated
statements of operations, cash flows and changes in consolidated common
stockholders' equity position of the Company and such Subsidiaries for the
fiscal quarter then ended. All of such financial statements (including the
related schedules and notes) fairly present the consolidated financial position
of the Company and such Subsidiaries as of the respective dates of said balance
sheets and the consolidated results of their operations for the fiscal periods
ended on said dates, and have been prepared in accordance with GAAP consistently
maintained by the Company and such Subsidiaries throughout such periods, except
as set forth in the notes thereto. There are no material liabilities, contingent
or otherwise, of the Company or any such Subsidiary as of December 31, 1996 that
are not reflected in said consolidated balance sheet (or the notes thereto as
required by GAAP) as of said date. Since December 31, 1996, there has been no
change in the business, financial condition, properties or prospects of the
Company and its Subsidiaries taken as a whole that could materially and
adversely affect the Company's ability to perform its obligations hereunder or
under the Notes or the Warrants.
9j. Offering of Securities. Neither the Company nor any agent acting on
its behalf has offered the Notes or the Warrants or any similar securities of
the Company for sale to, or solicited any offers to buy the Notes or the
Warrants or any similar securities of the Company from, or otherwise approached
or negotiated with respect thereof with, any Person other than you, and the
Company has offered the Notes and the Warrants to you for purposes of investment
and not for distribution. Neither the Company nor any agent acting on its behalf
has offered or will offer the Notes or any part thereof or any similar
securities for issue or sale to, or solicit any offer to acquire any of the same
from, anyone so as to bring the issuance and sale of the Notes within the
provisions of Section 5 of the Securities Act.
9k. Disclosure. None of this Agreement, the Warrants or any certificate
or written disclosure statement furnished to you on or prior to the Closing Date
by or on behalf of the Company in connection with the transactions contemplated
hereby and by the Warrants, when taken together as a whole, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances in which they were made, not misleading.
10. REPRESENTATIONS AND COVENANT OF THE PURCHASER.
10a. Acquisition for Investment. You represent, and in making this sale
to you it is specifically understood and agreed, that you are not acquiring the
Notes or the Warrants (and upon exercise thereof, the shares of Common Stock
underlying the Warrants) to be purchased by you hereunder with a view to, or for
sale in connection with, any distribution of any part thereof within the meaning
of the Securities Act, and that you have no present intention or plan to effect
any distribution of any of the Notes, the Warrants or such shares of Common
Stock.
10b. ERISA. You represent that your purchase of Notes hereunder is
not being made for or on behalf of any pension or welfare plan, as defined in
Section 3 of ERISA.
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10c. Restriction on Sale, Other Disposition. You agree that, without
the prior consent of the Company, you will not, directly or indirectly, sell,
transfer, pledge, encumber or otherwise dispose of (a "Transfer") any Notes or
the Warrants or any interest therein. Without limiting the foregoing, any
Permitted Transferee shall, by a written agreement reasonably satisfactory to
the Company, expressly assume your obligations, duties and covenants under this
Agreement as to the Notes so Transferred and under the Warrants and make a
representation to the Company to the same or similar effect as is contained in
Section 10b or provide other information reasonably satisfactory to the Company
to enable the Company to determine that the Transfer of such Note to such
Transferee will not constitute a non-exempt prohibited transaction under Section
406 of ERISA.
11. DEFAULT.
11a. Events of Default; Acceleration. (i) "Event of Default", wherever
used herein with respect to Notes, means any one of the following events
(whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of Section 8 or be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(A) default in the due and punctual payment of all or any part
of the principal on any Note (whether at the stated maturity or by
declaration of acceleration, by notice of prepayment at the option of
the Company or otherwise); or
(B) default in the due and punctual payment of any interest on
any Note and such default shall have continued for a period of 10 days;
or
(C) default in the performance or observance of any other
covenant of the Company in this Agreement or the Warrants and such
default shall have continued for a period of 30 days after the Company
first becomes aware thereof; or
(D) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company or any
Subsidiary or under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or a Subsidiary, whether
such indebtedness now exists or shall hereafter be created, which
default shall constitute a failure to pay an aggregate principal amount
of such indebtedness exceeding $1,000,000 when due and payable after
the expiration of any applicable grace period with respect thereto or
shall have resulted in such indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise have become
due and payable in an aggregate principal amount exceeding $1,000,000,
without such indebtedness having been discharged, or such acceleration
having been rescinded or annulled, within a period of 10 days after the
occurrence thereof; or
(E) any representation or warranty of the Company in this
Agreement, in the Warrants or in any certificate or other instrument
delivered hereunder or pursuant
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hereto shall prove to be false or incorrect in any material respect on
the date as of which it was made; or
(F) the entry by a court having jurisdiction in the premises
of (1) a decree or order for relief in respect of the Company or a
Subsidiary in an involuntary case or proceeding under any applicable
United States federal or state bankruptcy, insolvency, reorganization
or other similar law of any applicable jurisdiction or (2) a decree or
order adjudging the Company or a Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable United States federal or state law or the
applicable law of any other jurisdiction or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or a Subsidiary or of any substantial part of
its property, or ordering the winding up or liquidation of its affairs,
and the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60
consecutive days; or
(G) the commencement by the Company or any Subsidiary of a
voluntary case or proceeding under any applicable United States federal
or state bankruptcy, insolvency, reorganization or other similar law of
any applicable jurisdiction or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company or any
Subsidiary in an involuntary case or proceeding under any applicable
United States federal or state bankruptcy, insolvency, reorganization
or other similar law of any applicable jurisdiction or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable United States Federal or
state law or the applicable law of any other jurisdiction, or the
consent of the Company or a Subsidiary to the filing of such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official
of the Company or any Subsidiary or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company or a Principal Subsidiary in furtherance of any
such action;
then (x) upon the occurrence of any Event of Default described in the foregoing
clause (F) or (G) with respect to the Company or a Subsidiary the unpaid
principal amount of all Notes, together with the interest accrued thereon, shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Company, or (y) upon the occurrence of any other Event of Default,
the holder or holders of at least 25% of the outstanding principal amount of the
Notes may, by written notice to the Company, declare the unpaid principal amount
of all Notes to be, and the same shall forthwith become, due and payable,
together with the interest accrued thereon, all without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived; provided that, during the existence of an Event of Default described in
the foregoing clause (A) or
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clause (B) with respect to any Note, the holder of such Note may, by written
notice to the Company declare such Note to be, and the same shall forthwith
become, due and payable, together with the interest accrued thereon, all without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived. If any holder of any Note shall exercise the option
specified in the proviso to the-preceding sentence, the Company will forthwith
give written notice thereof to the holders of all other outstanding Notes and
each such holder may (whether or not such notice is given or received), by
written notice to the Company, declare the principal of all Notes held by it to
be, and the same shall forthwith become, due and payable, together with the
interest accrued thereon.
(ii) The provisions of this Section 11a are subject, however, to the
condition that if, at any time after any Note shall have so become due and
payable, the Company shall pay all arrears of interest on the Notes and all
payments on account of the principal of the Notes which shall have become due
otherwise than by acceleration (with interest on such principal and, to the
extent permitted by law, on overdue payments of interest, at the rate specified
in the Notes) and all Events of Default (other than nonpayment of principal of
and accrued interest on Notes due and payable solely by virtue of acceleration)
shall be remedied or waived pursuant to Section 13c, then, and in every such
case, the holder or holders of at least a majority of the outstanding principal
amount of the Notes, by written notice to the Company, may rescind and annul any
such acceleration and its consequences, but no such action shall affect any
subsequent Default or Event of Default or impair any right consequent thereon.
11b. Other Remedies. (i) If any Event of Default shall exist, subject
to the provisions of Section 8, the holder of any Note may proceed to protect
and enforce its rights, either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant or obligation contained in
this Agreement or in the Notes or in aid of the exercise of any power granted in
this Agreement, or the holder of any Note may proceed to enforce the payment of
all sums due upon such Note or to enforce any other legal or equitable right of
the holder of such Note.
(ii) The Company covenants that, if it shall default in the making of
any payment due under any Note or in the performance or observance of any
covenant or obligation contained in this Agreement or in the Notes, it will pay
to the holder thereof such further amounts, to the extent lawful, as shall be
sufficient to pay the costs and expenses of collection or of otherwise enforcing
such holder's rights, including reasonable legal or other professional fees.
(iii) No remedy herein conferred upon you or the holder of any Note is
intended to be exclusive of any other remedy 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.
(iv) No course of dealing between the Company and you or any other
holder of a Note, and no delay or failure in exercising any rights hereunder or
under any Note, shall operate as a waiver of any rights you or any such holder
of a Note may have.
12. DEFINITIONS. For the purpose of this Agreement the following
terms shall have the meanings specified with respect thereto below:
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"Affiliate" means, with respect to a specified Person, any other Person
that controls, is controlled by, or is under common control with such specified
Person. For the purposes of this definition, the term "control" (including, with
correlative meanings, the terms "controlling," "controlled by" or "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Applicable Interest Rate" means the rate of interest borne by the
Floating Rate Notes from time to time, which rate is equal to LIBOR (as computed
for each Interest Period) in effect from time to time plus 2.0% per annum.
"Bank One" means Bank One, Colorado, N.A.
"Business Day" means any day other than a Saturday, Sunday, or a day on
which banking institutions in the State of Colorado are authorized or obligated
by law or executive order to close.
"Closing Date" shall have the meaning specified in Section 3a.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning specified in the introduction to this
Agreement.
"Default" means any event which, with notice or the lapse of time or
both, would constitute an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles as in effect in
the United States at the time of application to the provisions thereof.
"Interest Payment Date" means, with respect to any Interest Period, the
first day of the month next following the month in which such Interest Period
commenced.
"Interest Period" means the period commencing on the later of the date
of such Note and the most recent Interest Payment Date, if any, with respect to
such Note (or any Note in exchange or substitution for which such Note was
issued) to which interest on such Note has been paid and ending on, but
excluding, the next succeeding Interest Payment Date.
"LIBOR" shall have the meaning provided in Section 1b.
"Xxxxxxx Loan Documents" shall have the meaning provided in Section 1b.
"Notes" shall have the meaning specified in Section 1a.
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"Officer's Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, if any, the Chief Executive Officer,
the Chief Financial Officer, the President or a Vice President of the Company or
any officers of the Company performing the same duties from time to time.
"Permitted Transferee" means a Person to whom Notes are permitted to be
Transferred pursuant to Section 10c.
"Person" means and include an individual, a partnership, a limited
liability company, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Required Holder(s)" means the holder or holders of at least 51% of the
outstanding principal amount of the Notes at the time.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means (i) the Business Loan Agreement between the
Company (then named Electronic Fab Technology Corporation) and Bank One, dated
as of February 24, 1997 and the related promissory notes delivered by the
Company to Bank One, Colorado, N.A., and any extensions or renewals, and any
substitute, refinancing or replacements thereof, (ii) the senior secured credit
facility that is anticipated to be entered into between the Company and Bank
One, as agent, and related promissory notes issued thereunder, (iii) all other
indebtedness of the Company for borrowed money that is duly created in
accordance with the terms of a contemporaneous writing expressly providing for
such indebtedness to be senior in right of payment to the Notes, and (iv) all
debts, liabilities, obligations, covenants and duties of the Company arising
under either of the foregoing.
"Significant Holder" means (i) you, so long as you shall hold (or be
committed under this Agreement to purchase) any Notes, (ii) any Affiliate of
yours, or (iii) any other holder of at least 25% of the outstanding principal
amount of the Notes from time to time.
"Subsidiary" means (i) any Person of which or in which the Company
and/or its other Subsidiaries own directly or indirectly more than 50% of (a)
all classes of Voting Stock of such Person, if it is a corporation, (b) the
capital interest or profits interest of such Person, if it is a partnership,
limited liability company, joint venture of similar entity or (c) the beneficial
interest of such Person, if it is a trust, association or other unincorporated
organization; provided that, in the case of each Person specified in the
foregoing clauses (a) through (c), such Person is accounted for as a
consolidated Subsidiary on the balance sheet of the Company in accordance with
GAAP, and (ii) any other Person that is accounted for as a consolidated
subsidiary of the Company in accordance with GAAP. Except as otherwise expressly
indicated herein, references to Subsidiaries shall refer to Subsidiaries of the
Company.
"Transfer" shall have the meaning specified in Section 10c.
-19-
"Voting Stock" means, with respect to a corporation, all classes of
capital stock of such corporation that have voting power under ordinary
circumstances to elect the directors of such corporation, whether at all times
or only so long as no senior class of capital stock of such corporation has such
voting power as the result of the occurrence of any contingency; and without
limiting the foregoing, any such class of capital stock which is redeemable or
which has a preference upon redemption or upon payment of dividends over any
other class of capital stock of such corporation shall not, irrespective of
voting power, be deemed to be Voting Stock.
"Warrant" and "Warrants" shall have the meanings specified in Section
10c.
13. Miscellaneous.
13a. Home Office Payment. The Company agrees that, as long as you shall
hold any Notes, all payments to be made on, or in connection with the payment or
prepayment of, such Notes will be made at such place and in such manner you may
designate in writing, without any requirement for the presentation or surrender
of such Notes. You agree that (i) prior to any delivery upon the sale or other
disposition of any Note held by you, you will promptly make or cause to be made
a notation on such Note of any such payment on account thereof, (ii) if such
Note shall be paid in full you will promptly surrender such Note to the Company
for cancellation, and (iii) prior to any delivery upon the sale or other
disposition of any Note held by you, you will surrender such Note to the Company
in exchange for a new Note or Notes in the same aggregate principal amount being
sold or disposed of and the aggregate unpaid principal amount of Notes to be
held by you after such sale or disposition. The Company agrees to afford the
benefits of this Section 13a to any Permitted Transferee which shall have made
the same agreement as you have made in this Section 13a.
13b. Expenses. You and the Company agree to be responsible for and to
pay your and the Company's respective costs, fees and expenses incurred in
connection with the negotiation, execution and delivery of this Agreement, the
Notes and the Warrants and the funding of the purchase price of the Notes and
the funding of the exercise price of the Warrants.
13c. Consent to Amendments. (i) This Agreement may be amended with the
consent of the Company and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the consent to such amendment or waiver with respect
to such action or omission to act, by one or more substantially concurrent
written instruments signed by the Required Holder(s); provided, however, that
(A) no such amendment or waiver shall
(1) change the rate or extend the time of payment of
interest on any of the Notes, without the consent of the
holder of each Note so affected, or
(2) modify any of the provisions of this Agreement or
of the Notes with respect to the payment or prepayment
thereof, or reduce the percentage of the principal amount of
the Notes the holders of which are required to approve any
such amendment or effectuate any
-20-
such waiver, without the consent of the holders of all the
Notes then outstanding, and
(B) no such waiver shall extend to or affect any obligation
not expressly waived or impair any right consequent thereon.
(ii) Any amendment or waiver pursuant to clause (i) above shall apply
equally to all the holders of the Notes and shall be binding upon them, upon
each future holder of any Note and upon the Company, in each case whether or not
a notation thereof shall have been placed on any Note.
(iii) the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each holder of a Note (regardless of the principal
amount of Notes then held by it) shall be informed thereof by the Company and
shall be afforded the opportunity of considering the same and shall be supplied
by the Company with sufficient information to enable it to make an informed
decision with respect thereto. The Company will not, directly or indirectly, pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, to any holder of a Note as consideration
for or as an inducement to the entering into by such holder of any such
amendment or waiver unless such remuneration is concurrently paid, on the same
terms, ratably to the holders of all of the Notes then outstanding. The Company
shall promptly send copies of any amendment, waiver (and any request for any
such amendment, consent or waiver) relating to this Agreement to you and, to the
extent practicable, shall consult with you in connection with each such
amendment, consent and waiver.
(iv) For the purpose of determining whether the holders of the
requisite outstanding principal amount of Notes have taken any action or given
any consent or approval under this Agreement, any Notes held by the Company or
any of its Affiliates shall not be deemed outstanding.
13d. Registration, Transfer and Exchange of Notes. The Company will
keep at its principal executive office a note register in which, subject to such
reasonable regulations as it may prescribe, but at its expense (other than
transfer taxes, if any), it will provide for the registration and transfer of
Notes.
The holder of any Note may, at such holder's option, surrender the same
for transfer or exchange at said office, or at the place of payment named in
such Note, accompanied in the case of a transfer by a written instrument of
transfer duly executed by the holder thereof or by such holder's attorney duly
authorized in writing. In case any holder shall so request transfer or exchange
of any Note, the Company at its expense (other than transfer taxes, if any, or
similar governmental charges) will deliver in exchange therefor one or more new
Notes (in minimum denominations of $1,000,000, except to evidence the entire
unpaid principal amount of the Note so surrendered), as requested by such
holder, in the same aggregate principal amount as the Note so surrendered, each
dated the later of the date of, or the date to which interest has been paid on,
the Note so surrendered.
The Company and any agent of the Company may treat the Person in whose
name any Note is registered as the owner of such Note for the purpose of
receiving payment of the principal of and interest on, such Note and for all
other purposes whatsoever, whether or not such Note be overdue,
-21-
and prior to due presentment for registration of transfer, the Company shall not
be affected by notice to the contrary. If any Note shall have been transferred
to another holder pursuant to this Section and such holder shall have designated
in writing the address to which communications with respect to such Note shall
be mailed, all notices, certificates, requests, statements and other documents
required or permitted to be delivered to any holder of a Note by any provision
hereof shall be delivered to such holder.
13e. Lost, Etc., Notes. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
any Note, and (in case of loss, theft or destruction) of indemnity satisfactory
to it, or (in the case of mutilation) upon surrender and cancellation of such
Note, the Company will make and deliver in lieu of such Note a new Note of like
tenor and for the same unpaid principal amount, dated the later of the date of,
or the date to which interest has been paid on, the Note in lieu of which such
new Note is made and delivered.
13f. Survival of Representations and Warranties; Entire Agreement. All
representations and warranties contained herein or made in writing by the
Company in connection herewith shall survive the execution and delivery of this
Agreement, the sale and purchase of the Notes and the Warrants. Subject to the
preceding sentence, this Agreement embodies the entire agreement and
understanding between you and the Company and supersedes all prior agreements
and understandings relating to the subject matter hereof.
13g. Disclosure to Other Persons. The Company acknowledges that the
holder of any Notes may deliver copies of any financial statements and other
documents delivered to such holder, and disclose any other information disclosed
to such holder, by or on behalf of the Company or any Subsidiary of the Company
in connection with or pursuant to this Agreement to (i) such holder's directors,
officers, employees, agents and professional consultants (who shall be made
aware of the requirements of this Section 13g and the need to comply herewith),
(ii) any federal or state regulatory authority having jurisdiction over such
holder, (iii) any Person expressly identified in a prior written consent of the
Company or (iv) any other Person to whom such delivery or disclosure may be
necessary or appropriate (a) in compliance with any law, rule, regulation or
order applicable to such holder or (b) in response to any subpoena or other
legal process; provided that you agree not to disclose to any Person specified
in clause (iii) above any information delivered to you pursuant to Section 6a or
any other provisions of this Agreement that the Company has conspicuously
identified as non-public, confidential or proprietary in nature and subject to
the provisions hereof unless such Person shall have executed and delivered to
the Company an agreement substantially in the form of Exhibit D hereto.
13h. Successors and Assigns. All covenants and agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the Company's successors and assigns and your
successors and assigns, including any Permitted Transferees.
13i. Notices. All communications provided for hereunder shall be sent
by facsimile transmission, with written confirmation of receipt, or a nationwide
overnight delivery service, with receipt of delivery requested, and (i) if to
you, addressed to you at the address set forth by you for such communications on
the signature page hereof, or to such other address as you may have designated
to the Company in writing, (ii) if to any other holder of the Notes, addressed
to such
-22-
holder at the address of such holder in the note register of the Company,
and (iii) if to the Company, addressed to it at, EFTC Corporation 0000 Xxxxx
Xxxxxx, Xxxxx 000, Xxxxxx, XX 00000, Attention: Chief Financial Officer (Tel:
(000) 000-0000; Fax: (000) 000-0000), with a copy to the attention of Xxxxxxx X.
Xxxxxxx, Esq. at Xxxxx Xxxxxxx & Xxxx XXX, Xxxxx 0000, 0000 Xxxxxxx Xxxxxx,
Xxxxxx, XX 00000 (tel: (000) 000-0000; Fax: (000) 000-0000), or to such other
address or addresses as the Company may have designated in writing to you and
each other holder of any of the Notes at the time outstanding.
13j. Descriptive Headings. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
13k. Governing Law. This Agreement, the Notes and the Warrants shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Colorado (without regard to conflicts
of laws provisions thereof).
13l. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
13m. Satisfaction Requirement. If any agreement, certificate or other
writing, or any action taken or to be taken, or any other thing, is by the terms
of this Agreement required to be satisfactory to you or to the Required
Holder(s), the determination of such satisfaction shall be made by you or the
Required Holder(s), as the case may be, in the sole and exclusive judgment
(exercised in good faith) of the Person or Persons making such determination.
13n. Severability. In case any one or more of the provisions contained
in this Agreement or in any instrument contemplated hereby, or any application
thereof, shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein, and any other application thereof, shall not in any way be
affected or impaired thereby.
-23-
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding agreement between you
and the undersigned.
Very truly yours,
EFTC CORPORATION
By /s/
Title:
The foregoing Agreement is hereby accepted and agreed as of the date first above
written:
/s/
Xxxxxxx X. Xxxxxxx
Address: 0000 Xxxxxx Xxxxx, Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax Number: (000) 000-0000
-24-
EXHIBIT A
[FORM OF NOTE]
EFTC CORPORATION
Floating Rate Subordinated Note due 2002
No. R-_______ Denver, Colorado
$__________ ____________, 0000
XXXX CORPORATION, a Colorado corporation (the "Company"), for value
received, hereby promises to pay to or registered assigns, the principal sum of
DOLLARS (or so much thereof as shall have not been prepaid) on December 31, 2002
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the unpaid principal hereof from the date hereof at the Applicable
Interest Rate (as such term and other terms used in this Section are below
defined) for each Interest Period, payable in arrears on each Interest Payment
Date for the immediately preceding Interest Period (unless any such Interest
Payment Date is a Saturday, a Sunday or a day on which banking institutions in
Denver, Colorado, or New York, New York are authorized or obligated by law or
executive order to close (an "Excluded Day"), in which case the interest payment
due on such Interest Payment Date will be made the next day thereafter that is
not an Excluded Day), until such principal sum shall have become due and payable
(whether at maturity, upon acceleration, upon notice of prepayment or otherwise)
and to pay on demand interest (so computed) on any overdue principal and, to the
extent permitted by applicable law, on any overdue interest, from the due date
thereof at a rate per annum equal to the greater of (i) 1% over the Applicable
Interest Rate for this Note from time to time in effect pursuant to the Note
Agreement and (ii) 1% above the prime commercial lending rate of interest
announced from time to time by Bank One, Colorado, N.A. at its principal office
in Denver, Colorado (or, if said bank shall no longer be in existence, by the
domestic commercial bank which at the time has the largest capital and surplus
of all domestic commercial banks), until the obligation of the Company with
respect to the payment thereof shall be discharged. Payments of principal and
interest shall be made in lawful money of the United States of America upon the
presentation hereof (subject to the provisions of Section 13a of the Note
Agreement with respect to payments to certain holders) at said principal office
of the Company.
This Note is one of the Floating Rate Subordinated Notes due 2002 of
the Company issued pursuant to the Note Agreement dated as of September 5, 1997
(as at any time amended, the "Note Agreement") entered into by the Company with
the initial purchaser, and the duly registered holder of this Note is entitled
to the benefits thereof. Capitalized terms used herein without definition have
the meanings ascribed thereto in the Note Agreement.
As used herein: the term "Applicable Interest Rate" means a rate of
interest for each Interest Period equal to LIBOR, as computed pursuant to the
Note Agreement, plus 2.0% per annum; the term "LIBOR" means the rate of interest
determined pursuant to the terms of the Note Agreement
A-1
for each Interest Period on the applicable LIBOR Interest Determination Date;
the term "Interest Payment Date" means, with respect to any Interest Period, the
first day of the month next following the month in which such Interest Period
commenced; and the term "Interest Period" means the period commencing on the
later of the date hereof or the most recent Interest Payment Date, if any, with
respect to this Note (or any Note issued in exchange or substitution for which
this Note was issued) to which interest has been paid and ending on, but
excluding, the next succeeding Interest Payment Date.
The Company may at its election prepay this Note, in whole or in part,
and the maturity hereof may be accelerated following an Event of Default, all as
provided in the Note Agreement, to which reference is made for the terms and
conditions of such provisions as to prepayment and acceleration. The Notes
outstanding under the Note Agreement, including this Note, are subject to
mandatory prepayments on the anniversary of the Closing Date in 1998, 1999, 2000
and 2001, each in the amount of $50,000. If any such prepayment is less than the
then outstanding principal amount of the Notes, the amount so prepaid shall be
allocated to the outstanding Notes pro rata.
Upon surrender of this Note for registration of transfer or exchange,
duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note of the same series and for a like principal amount will be
issued to, and, at the option of the holder, registered in the name of, the
transferee. The Company and any agent of the Company may deem and treat the
Person in-whose name this Note is registered as the owner hereof for the purpose
of receiving payments of the principal hereof and interest hereon and for all
other purposes whatsoever whether or not this Note is overdue, and the Company
shall not be affected by any notice to the contrary.
Payments of principal and interest in respect of this Note are
subordinate, to the extent and upon the terms set forth in the Note Agreement,
to all payments on or in respect of "Senior Indebtedness". The holder of this
Note, by acceptance hereof, is deemed to accept the terms and conditions of said
Note Agreement providing for such subordination.
As provided in the Note Agreement, this Note shall be governed by and
construed in accordance with the laws of the State of Colorado.
EFTC CORPORATION
By
Title:
A-2
EXHIBIT B
[FORM OF OPINION OF HRO]
[TO COME.]
B-1
EXHIBIT C
[FORM OF WARRANT]
C-1
EXHIBIT D
[FORM OF CONFIDENTIALITY AGREEMENT]
[Date]
EFTC Corporation
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Ladies and Gentlemen:
In connection with the Note Agreement, dated as of September 5, 1997 (the
"Agreement"), between EFTC Corporation (the "Company") and the initial purchaser
of the notes specified therein, the Company may furnish us with certain
information that is non-public, confidential or proprietary in nature.
As used herein, "Confidential Information" means information about the Company
furnished to us by the Company (or by a holder of Notes issued under the
Agreement who received such information as provided in the Agreement) pursuant
to Section 6a thereof (or any other information delivered to us pursuant to the
Agreement) if the Company or such holder has conspicuously identified such
information as non-public, confidential or proprietary in nature and subject to
the provisions of the Agreements or this letter, but does not include
information (i) which was publicly known, or otherwise known to me, at the time
of disclosure, (ii) which subsequently becomes publicly known through no act or
omission by me or (iii) which otherwise becomes known to me, other than through
disclosure by the Company.
I agree that I will (1) hold in confidence the Confidential Information and (2)
not disclose or permit disclosure of the Confidential Information, except as
permitted in Section 13g of the Agreement, a copy of which is attached hereto as
Annex I. Notwithstanding the foregoing, I will be free, after notice to the
Company, to correct any false or misleading information which may become public
concerning our relationship to the Company.
Please confirm your agreement with the foregoing by signing and returning to me
the enclosed copy of this letter.
Very truly yours,
Print Name:
Accepted and agreed to:
EFTC CORPORATION
By
Title:
D-1
ANNEX I
To Confidentiality Agreement
13g. Disclosure to Other Persons. The Company acknowledges that the holder
of any Notes may deliver copies of any financial statements and other documents
delivered to such holder, and disclose any other information disclosed to such
holder, by or on behalf of the Company or any Subsidiary of the Company in
connection with or pursuant to this Agreement to (i) such holder's directors,
officers, employees, agents and professional consultants (who shall be made
aware of the requirements of this Section 13g and the need to comply herewith),
(ii) any federal or state regulatory authority having jurisdiction over such
holder, (iii) any Person expressly identified in a prior written consent of the
Company or (iv) any other Person to whom such delivery or disclosure may be
necessary or appropriate (a) in compliance with any law, rule, regulation or
order applicable to such holder or (b) in response to any subpoena or other
legal process; provided that you agree not to disclose to any Person specified
in clause (iii) above any information delivered to you pursuant to Section 6a or
any other provisions of this Agreement that the Company has conspicuously
identified as non-public, confidential or proprietary in nature and subject to
the provisions hereof unless such Person shall have executed and delivered to
the Company an agreement substantially in the form of Exhibit D hereto.
D-2
