Exhibit 4.1
NOTE PURCHASE AGREEMENT
-----------------------
NOTE PURCHASE AGREEMENT, dated as of July 22, 1999, by and between
Mastech Corporation, a Pennsylvania corporation ("Company"), and GE Capital
Equity Investments, Inc., a Delaware corporation ("GE Capital" or "Purchaser").
W I T N E S S E T H :
-------------------
WHEREAS, Company has agreed to issue and sell to Purchaser, and
Purchaser has agreed to purchase from Company, upon the terms and conditions
hereinafter provided, a senior convertible promissory note in the principal
amount of $30,000,000, which is initially convertible into 1,386,322 shares of
Common Stock (as defined herein) of Company pursuant to the terms hereof (the
"Note");
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
1. DEFINITIONS.
------------
"Affiliate" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary
voting power in the election of directors of such Person, (ii) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person, (iii) each of such Person's officers, directors, joint
venturers and partners, (iv) any trust or beneficiary of a trust of which such
Person is the sole trustee or (v) any lineal descendants, ancestors, spouse or
former spouses (as part of a marital dissolution) of such Person (or any trust
for the benefit of such Person). For the purpose of this definition, "control"
of a Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Note Purchase Agreement including all
amendments, modifications and supplements hereto and any appendices, exhibits
and schedules hereto or thereto, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"Balance Sheet" shall have the meaning set forth in Section 4.7(a)
hereof.
"Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"Capital Lease" shall mean, with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease
on a balance sheet of such Person or otherwise be disclosed as a capital lease
in a note to such balance sheet, other than, in the case of Company or a
Subsidiary of Company, any such lease under which Company or such Subsidiary
is the lessor.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of such
Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Cash Equivalents" shall mean (i) marketable direct obligations issued
or unconditionally guaranteed by the United States of America or any agency
thereof maturing within one year from the date of acquisition thereof; (ii)
commercial paper maturing no more than one year from the date of creation
thereof and at the time of their acquisition having the highest rating
obtainable from either Standard & Poor's Corporation or Xxxxx'x Investors
Service, Inc.; and (iii) certificates of deposit, maturing not more than one
year from the date of creation thereof, issued by commercial banks incorporated
under the laws of the United States of America, each having combined capital,
surplus and undivided profits of not less than $200,000,000 and having a rating
of "A" or better by a nationally recognized rating agency.
"Change of Control" shall mean any of the following: (a) any person or
group of persons (within the meaning of the Exchange Act) (other than GE Capital
and its Affiliates and those existing shareholders of Company set forth on
Schedule 1(A) hereto) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the SEC under the Exchange Act) of 30% or
more of the issued and outstanding shares of Common Stock of Company; (b)
Company shall be a party to a merger or consolidation in which Company's
stockholders immediately prior thereto own less than a majority of the
outstanding voting stock of the survivor; or (c) Company shall have sold, leased
or otherwise transferred all or substantially all of its assets.
"Charges" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental (including, without limitation, PBGC) taxes
at the time due and payable, levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) Company's or any of its Subsidiaries'
employees, payroll, income or gross receipts, (ii) Company's or any of its
Subsidiaries' ownership or use of any of its assets, or (iii) any other aspect
of Company's or any of the Subsidiaries' business.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Closing Price" shall mean, in respect of any share of Common Stock on
any date herein specified which is a Business Day, (i) the last sale price on
such day on the principal stock exchange or NASDAQ National Market System
("NASDQ/NMS") on which such Common Stock is then listed or admitted to trading
or (ii) if no sale takes place on such day on such exchange or NASDAQ/NMS, the
average of the last reported
2
closing bid and asked prices on such day as officially quoted on any such
exchange or NASDAQ/NMS.
"COBRA" shall have the meaning set forth in Section 4.18(m) hereof.
"Common Stock" shall mean the common stock, $.01 par value per share,
of Company.
"Consolidated Cash" shall mean Company's and its Subsidiaries cash
consolidated in accordance with GAAP.
"Consolidated Cash Equivalents" shall mean Company's and its
Subsidiaries' Cash Equivalents consolidated in accordance with GAAP.
"Consolidated Interest Expense" shall mean any Person's interest
expense, consolidated in accordance with GAAP.
"Consolidated Net Worth" shall mean stockholders' equity of any
Person consolidated in accordance with GAAP.
"Consolidated Receivables" shall mean Company's and its Subsidiaries'
receivables consolidated in accordance with GAAP.
"Consolidated Senior Indebtedness" shall mean Indebtedness of Company
and its Subsidiaries consolidated in accordance with GAAP, which Indebtedness by
its terms is not subordinated to the payment in full of the Note in a manner in
form and substance satisfactory to Purchaser.
"Consolidated Senior Indebtedness to EBITDA Ratio" shall mean, as of
any date of determination, the ratio of the Company's Consolidated Senior
Indebtedness as of the end of the Company's most recently completed Fiscal
Quarter to Company's EBITDA for Company's four most recently completed Fiscal
Quarters treated as a single accounting period.
"Conversion" shall have the meaning set forth in Section 7.1 hereof.
"Conversion Price" shall have the meaning set forth in Section 7.1
hereof.
"Credit Agreement" shall mean the Credit Agreement dated December 3,
1998 among Company, as borrower, the financial institutions party thereto, as
lenders, and PNC Bank, National Association, as Agent and L/C Issuer, and the
related ancillary documents thereto, as the same may be amended, modified or
supplemented from time to time, and including any successor or replacement
credit agreement.
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the average of the daily market prices for
30 consecutive Business Days commencing 45 days before such date. The daily
market
3
price for each such Business Day shall be (i) the last sale price on such
day on the principal stock exchange or NASDAQ National Market System ("NASDAQ-
NMS") on which such Common Stock is then listed or admitted to trading, (ii) if
no sale takes place on such day on any such exchange or NASDAQ-NMS, the average
of the last reported closing bid and asked prices on such day as officially
quoted on any such exchange or NASDAQ-NMS, (iii) if the Common Stock is not then
listed or admitted to trading on any stock exchange or NASDAQ-NMS, the average
of the last reported closing bid and asked prices on such day in the over-the-
counter market, as furnished by the National Association of Securities Dealers
Automatic Quotation System or the National Quotation Bureau, Inc., (iv) if
neither such corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in such business, or
(v) if there is no such firm, as furnished by any member of the National
Association of Securities Dealers ("NASD") selected mutually by the Required
Holders and Company or, if they cannot agree upon such selection, as selected by
two such members of the NASD, one of which shall be selected by the Required
Holders and one of which shall be selected by the Company.
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"DOJ" shall mean the Antitrust Division of the Department of Justice
of the United States.
"EBIT" shall mean the consolidated operating income (before
extraordinary items, interest, taxes) of such Person and its consolidated
Subsidiaries determined in accordance with GAAP.
"EBITDA" shall mean the consolidated operating income (before
extraordinary items, interest, taxes, depreciation and amortization) of such
Person and its consolidated Subsidiaries determined in accordance with GAAP.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect, and in each
case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including, without limitation, any
applicable judicial or administrative order, consent decree or judgment,
relative to the applicable Real Estate, relating to the regulation and
protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include but are not limited to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. (S) 9601 et seq.) ("CERCLA"); the Hazardous Material
-- ---
Transportation Act, as amended (49 U.S.C. (S) 1801 et seq.); the Federal
-- ---
Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. (S) 136 et
--
seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. (S)
---
6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as amended (15 U.S.C.
-- ---
(S) 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. (S) 740 et seq.);
-- --- -- ---
the
4
Federal Water Pollution Control Act, as amended (33 U.S.C. (S) 1251 et
--
seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. (S) 651 et
--- --
seq.) ("OSHA"); and the Safe Drinking Water Act, as amended (42 U.S.C. (S) 300f
---
et seq.), and any and all regulations promulgated thereunder, and all analogous
-- ---
state and local counterparts or equivalents and any transfer of ownership
notification or approval statutes.
"Environmental Liabilities and Costs" shall mean all liabilities,
obligations, responsibilities, remedial actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including,
without limitation, all fees, disbursements and expenses of counsel, experts and
consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim, suit,
action or demand by any person or entity, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law (including, without limitation, any thereof arising under any
Environmental Law, permit, order or agreement with any Governmental Authority)
and which relate to any health or safety condition regulated under any
Environmental Law or in connection with any other environmental matter or Spill
or the presence of a Hazardous Substance or threatened Spill of any Hazardous
Substance.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to Company, any trade or
business (whether or not incorporated) under common control with Company and
which, together with Company, are treated as a single employer within the
meaning of Sections 414(b), (c), (m) or (o) of the IRC, excluding Purchaser and
each other person which would not be an ERISA Affiliate if Purchaser did not own
any issued and outstanding shares of Stock of Company.
"Event of Default" shall have the meaning set forth in Section 8.1
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
"Extraordinary Default Target Percentage Achieved" shall mean, with
respect to the occurrence of any Extraordinary Default, that percentage obtained
by dividing (i) the sum of (A) the Performance Revenues achieved for the period
commencing July 1, 1999 through close of the last full target year or years (as
contemplated in the definition of "Performance Revenue Targets"), if any, prior
to such Extraordinary Default plus (B) the product of (1) the Performance
Revenues achieved for the period after the most recently completed full target
year and through the date of such Extraordinary Default (the "Stub Period"),
multiplied by (2) a fraction, the denominator of which is the number of days
elapsed in such Stub Period and the numerator of which is 365, by (ii) the
cumulative Performance Revenue Targets for the period commencing
5
July 1, 1999 through the close of the full target year in which such
Extraordinary Default occurs.
"Extraordinary Default" shall mean any (i) Payment Default or (ii)
Change of Control.
"Financials" shall mean the financial statements referred to in
Section 4.7(a) hereof.
"Fiscal Quarter" shall mean each three month period of Company ending
on March 31, June 30, September 30, and December 31. Subsequent changes of the
fiscal year of Company shall not change the term "Fiscal Quarter," unless the
Required Holders shall consent in writing to such changes which consent shall
not be withheld if such changes do not materially affect the enforcement of the
financial covenants set forth in Section 5.2 in the reasonable credit judgment
of Purchaser.
"Fiscal Year" shall mean the twelve month period ending December 31.
Subsequent changes of the fiscal year of Company shall not change the term
"Fiscal Year," unless the Required Holders shall consent in writing to such
changes which consent shall not be withheld if such changes do not materially
affect the enforcement of the financial covenants set forth in Section 5.2 in
the reasonable credit judgment of Purchaser.
"FTC" shall mean the Federal Trade Commission of the United States.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time, except that for
purposes of the financial covenants contained in Section 5.1(b) hereof, GAAP
shall be as in effect on the date of the most recent Financials and shall be
applied in a manner consistent therewith.
"GE Capital" shall have the meaning set forth in the first paragraph
of this Agreement.
"GE Equity Companies" shall mean GE Capital, General Electric Company
or its Subsidiaries and any other entity from time to time in which General
Electric Capital Corporation or GE Capital has a minority equity investment
which is referred to Company using substantially the Referral Form attached
hereto as Exhibit D and is consented to the Company (which consent shall not be
unreasonably withheld).
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation
of such Person guaranteeing any Indebtedness, lease, dividend, or other
obligation
6
("primary obligations") of any other Person (the "primary obligor") in any
manner including, without limitation, any obligation or arrangement of such
Person (a) to purchase or repurchase any such primary obligation, (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet condition of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation, or (d) to indemnify the owner of such primary
obligation against loss in respect thereof.
"Hazardous Substance" shall have the meaning set forth in Section 4.10
hereof.
"Holder" shall mean Purchaser and any other holder of the Note.
"HRS Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act
of 1974, as amended.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (including, without limitation, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers' acceptances,
whether or not matured, but not including obligations to trade creditors
incurred in the ordinary course of business), (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (iv) all Capital Lease Obligations,
(v) all Guaranteed Indebtedness, (vi) all Indebtedness referred to in clause
(i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness and (vii) all liabilities
under Title IV of ERISA.
"Interest Payment Date" shall have the meaning assigned to such term
in Section 2.6(a) hereof.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"IT Services" shall mean those information technology services
provided by Company from time to time, including applications design development
and
7
maintenance, enterprise resource package implementation, offshore software
design, development and maintenance, customer relationship management package
implementation, and e-commerce strategy and implementation.
"Joint Venture" shall mean a joint venture between General Electric
Capital Corporation and Company for the performance of IT Services and business
process outsourcing services.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, preemptive right, assignment, deposit arrangement, lien, charge,
claim, security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest as to assets owned by the relevant Person under
the Uniform Commercial Code or comparable law of any jurisdiction).
"Loan Documents" shall mean this Agreement, the other Transaction
Documents and all other agreements, instruments, documents and certificates,
including pledges, powers of attorney, consents, assignments, contracts,
financial statements, notices, and all other written matter whether heretofore,
now or hereafter executed by or on behalf of Company, and delivered to
Purchaser, in its capacity as a purchaser of the Note hereunder, in connection
with this Agreement and the other Transaction Documents or the transactions
contemplated hereby or thereby.
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business, assets, operations, or financial condition or results of
operations of Company and its Subsidiaries, if any, taken as a whole or (ii)
Company's ability to pay the principal amount of the Note in accordance with the
terms hereof.
"Material Contracts" means (i) all of Company's and its Subsidiaries'
material contracts that would be required to be filed with the SEC pursuant to
item 601(b)(10) of Regulation S-K of the Securities Act, (ii) all agreements,
leases or other instruments to which Company or any of its Subsidiaries is a
party or by which Company, its Subsidiaries or its properties are bound, which
involve payments by or to Company or its Subsidiaries of more than $5,000,000,
(iii) all of Company's and its Subsidiaries' loan agreements, bank lines of
credit agreements, indentures, mortgages, deeds of trust, pledge and security
agreements, factoring agreements, conditional sales contracts, letters of
credit, guarantees or other debt instruments involving commitments of more than
$5,000,000, (iv) all non-competition and similar agreements to which Company is
a party which restrict Company's ability to engage in certain businesses, (v)
all contracts for the employment of any executive officer of Company or its
Subsidiaries, and (vi) all collective bargaining, union and similar labor
contracts of Company or its Subsidiaries.
8
"Maximum Lawful Rate" shall have the meaning set forth in Section
2.6(e) hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which Company, any of its Subsidiaries or
any ERISA Affiliate is making, is obligated to make, has made or been obligated
to make, contributions on behalf of participants who are or were employed by any
of them.
"Note" shall mean the convertible promissory note of Company in the
principal amount of $30,000,000 to be issued to Purchaser hereunder,
substantially in the form of Exhibit A hereto.
"Obligations" shall mean all amounts owing by Company to Purchaser and
any of its assignees pursuant hereto or the Note, including, without limitation,
all principal, interest, fees, expenses, attorneys' fees and any other sum
chargeable to Company under any of the Loan Documents.
"Payment Default" shall mean a default under Section 8.1(a) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" shall have the meaning set forth in Section 4.18(a)
hereof.
"Performance Revenues" shall mean the cumulative revenues of Company
and its Subsidiaries, on a consolidated basis, determined in accordance with
GAAP, relating to IT Services performed for any GE Equity Companies, plus 37.5%
----
of any such revenues of Company and its Subsidiaries which are generated by the
Joint Venture relating to IT Services performed for any GE Equity Companies, in
each case, within the three year period commencing on July 1, 1999 and ending on
the date such Performance Revenues are to be measured in accordance with this
Agreement.
9
"Performance Revenue Targets" shall mean the following Performance
Revenue targets:
Year Ended Target
---------- ------
June 30, 2000 $29,000,000
-------------
June 30, 2001 $42,000,000
-------------
June 30, 2002 $51,000,000
-------------
Cumulative
Three-Year
Target $122,000,000
----------
"Permitted Liens" shall mean the following: (i) Liens for taxes or
assessments or other governmental charges or levies, either not yet due and
payable or to the extent that nonpayment thereof is permitted by the terms of
this Agreement; (ii) pledges or deposits securing obligations under workmen's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (iii) pledges or deposits securing bids, tenders,
contracts (other than contracts for the payment of money) or leases to which
Company or any of its Subsidiaries is a party as lessee made in the ordinary
course of business; (iv) Liens arising solely by virtue of any statutory or
common law provision relating to bankers' liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; (v) workers, mechanics, suppliers, carriers,
warehousemen's or other similar liens arising in the ordinary course of business
and securing indebtedness, not yet due and payable; (vi) deposits securing or in
lieu of surety, appeal or customs bonds in proceedings to which Company or any
of its Subsidiaries is a party; (vii) Liens arising in the ordinary course of
business in connection with obligations that are not overdue or which are being
contested in good faith and by appropriate proceedings, including, but not
limited to, Liens under bid, performance and other surety bonds, supersedeas and
appeal bonds, landlord Liens arising under leases of real property, Liens on
advance or progress payments received from customers under contracts for the
sale, lease or license of goods, software or services and upon the products
being sold or licensed, in each case securing performance of the underlying
contract or the repayment of such advances in the event final acceptance of
performance under such contracts does not occur, and Liens upon funds collected
temporarily from others pending payment or remittance on their behalf; (viii)
zoning restrictions, easements, licenses, or other restrictions on the use of
real property or other minor irregularities in title (including leasehold title)
thereto, so long as the same do not materially impair the use, value, or
marketability of such real property, leases or leasehold estates; and (ix) Liens
or pledges arising from or created pursuant to the Credit Agreement.
10
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, any instrumentality, division, agency, body or department thereof).
"Plan" shall have the meaning set forth in Section 4.19(a) hereof.
"Prohibited Transaction" shall mean any prohibited transaction as
defined in Section 4975 of the IRC or Section 406 of ERISA for which neither an
individual nor a class exemption has been issued by the United States Department
of Labor.
"Purchaser" shall have the meaning set forth in the first paragraph of
this Agreement.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement by and between Company and Purchaser, substantially in the form
attached hereto as Exhibit C, as such agreement may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
"Reportable Event" shall mean a reportable event described in Section
4043 of ERISA and regulations thereunder with respect to a Plan or Multiemployer
Plan.
"Required Holders" shall mean Persons who hold at least a majority of
the outstanding principal amount of the Note.
"SEC" shall mean the U.S. Securities and Exchange Commission, or any
successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and all rules and regulations promulgated thereunder.
"Spill" shall have the meaning set forth in Section 4.10 hereof.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the SEC under the Exchange
Act).
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time,
11
directly or indirectly, owned legally or beneficially by such Person and/or
one or more Subsidiaries of such Person, and (b) any partnership or other
entity in which such Person and/or one or more Subsidiaries of such Person
shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50%.
"Target Percentage Achieved" shall mean that percentage obtained by
dividing (i) the cumulative Performance Revenues achieved for the period
commencing July 1, 1999 through the relevant date, by (ii) $122,000,000.
"Target Percentage Shortfall" shall mean that percentage which is
obtained by dividing (i) the difference of $122,000,000 less the cumulative
Performance Revenues achieved for the period commencing July 1, 1999 through
June 30, 2002, by (ii) $122,000,000.
"Taxes" shall have the meaning set forth in Section 2.12(a) hereof.
"Transaction Documents" shall mean this Agreement, the Note and the
Registration Rights Agreement.
"Welfare Plan" shall mean any welfare plan, as defined in Section 3(1)
of ERISA, which is maintained or contributed to by Company, any of its
Subsidiaries or any ERISA Affiliate.
"Withdrawal Liability" means, at any time, the aggregate amount of the
liabilities, if any, pursuant to Section 4201 of ERISA, and any increase in
contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
"Year 2000 Compliant" shall have the meaning set forth in Section 4.24
hereof.
References to this "Agreement" shall mean this Purchase Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly
modified by the phrase "in accordance with GAAP" shall in no way be construed to
limit the foregoing. The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole, including the
Exhibits and Schedules hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or
clause contained in this Agreement. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and the plural,
12
and pronouns stated in the masculine, feminine or neuter gender shall include
the masculine, the feminine and the neuter. The words "includes" or
"including" and other words of similar import shall mean "including, without
limitation," unless the context expressly otherwise requires.
2. PURCHASE OF NOTE
----------------
2.1 Purchase of Note. Subject to the terms and conditions set forth
----------------
in this Agreement, Purchaser agrees to purchase from Company, and Company
agrees to issue and sell to Purchaser, on the Closing Date, the Note for an
aggregate purchase price of $30,000,000, containing the terms set forth herein
and in Exhibit A hereto. The principal amount of the Note shall be
$30,000,000, and the maturity date thereof shall be July 22, 2004.
2.2 Closing. The closing of the purchase and sale of the Note (the
-------
"Closing") took place on the date hereof (the "Closing Date") at the offices
of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx.
Xx the Closing Date, Company delivered to Purchaser the Note payable
to Purchaser against delivery by Purchaser of the purchase price therefor by
wire transfer of funds to the account of Company.
2.3 Optional Prepayment. At any time and from time to time, following
-------------------
the third anniversary of the Closing Date, if the Performance Revenues do not
equal or exceed $122,000,000 at June 30, 2002, Company shall have the right,
without premium or penalty, and on thirty (30) days' prior written notice to
Purchaser, to voluntarily prepay at a price equal to 100% of the face amount
thereof, that portion (in multiples of not less than $500,000 or the amount
outstanding on the Note) of the outstanding principal amount of the Note which
equals the Target Percentage Shortfall. Each prepayment shall be accompanied
by the payment of accrued and unpaid interest on the amount being prepaid,
through the date of prepayment. Company shall not have any other right to
prepay the Note.
2.4 Mandatory Redemption. Upon the occurrence of a Change of Control,
--------------------
the Purchaser shall have the right to require the Company (or any successor) to
redeem all or a portion of the Note not otherwise converted pursuant to Section
7.1 for a price equal to 100% of the face amount thereof, together with a
payment of all accrued and unpaid interest on the amount being prepaid through
the date of prepayment. Company shall give Purchaser written notice of the
occurrence of a Change of Control within ten (10) days after the occurrence
thereof. Purchaser shall exercise the foregoing right at any time within 90
days of a Change of Control by delivery to Company of written notice thereof
indicating the amount of the Note which Purchaser requires to be redeemed by
Company. Company shall deliver the proceeds of such redemption by wire transfer
to Purchaser together with a new Note representing the unredeemed portion of the
Note, if any, within 10 days of receipt of Purchaser's notice described in the
preceding sentence.
13
2.5 Use of Proceeds. Company shall use the proceeds of the purchase
---------------
price hereunder for working capital and general corporate purposes.
2.6 Interest on Note. (a) Company shall pay interest to Purchaser,
----------------
semi-annually in arrears on the last day of each July and January, commencing on
January 31, 2000 (each, an "Interest Payment Date"), at a rate equal to 6.30%
per annum, based on a year of 360 days for the actual number of days elapsed,
and based on the amounts outstanding from time to time under the Note.
(b) If any payment on the Note becomes due and payable on a day other than
a Business Day, the maturity thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such extension.
(c) So long as any Event of Default shall be continuing, the interest rate
applicable to the Note shall be increased by 2% per annum above the rate
otherwise applicable.
(d) Notwithstanding anything to the contrary set forth in this Section 2.6,
if at any time until payment in full of the Note, the interest rate payable
thereon exceeds the highest rate of interest permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem
applicable hereto (the "Maximum Lawful Rate"), then in such event and so long
as the Maximum Lawful Rate would be so exceeded, the rate of interest payable
on the Note shall be equal to the Maximum Lawful Rate; provided, however, that
-------- -------
if at any time thereafter the interest rate payable thereon is less than the
Maximum Lawful Rate, Company shall continue to pay interest thereunder at the
Maximum Lawful Rate until such time as the total interest received by Purchaser
is equal to the total interest which it would have received had the interest
rate on the Note been (but for the operation of this paragraph) the interest
rate payable since the Closing Date. Thereafter, the interest rate payable
shall be the stated interest rate unless and until such rate again exceeds the
Maximum Lawful Rate, in which event this paragraph shall again apply. In no
event shall the total interest received by Purchaser pursuant to the terms
hereof exceed the amount which it could lawfully have received had the interest
due hereunder been calculated for the full term hereof at the Maximum Lawful
Rate. In the event the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made. In the event that a court of competent jurisdiction,
notwithstanding the provisions of this Section 2.6(d), shall make a final
determination that Purchaser has received interest hereunder or under any of
the Loan Documents in excess of the Maximum Lawful Rate, Purchaser shall, to
the extent permitted by applicable law, promptly apply such excess first to any
interest due and not yet paid under the Note, then to the outstanding principal
of the Note, then to other unpaid Obligations and thereafter shall refund any
excess to Company or as a court of competent jurisdiction may otherwise order.
14
2.7 Receipt of Payments. Company shall make each payment under the
-------------------
Note not later than 2:00 P.M. (New York City time) on the day when due in
lawful money of the United States of America in immediately available funds to
Purchaser's depository bank in the United States as designated by Purchaser
from time to time for deposit in Purchaser's depositary account. For purposes
only of computing interest under the Note, all payments shall be applied by
Purchaser to the Note on the day payment has been credited by Purchaser's
depository bank to Purchaser's account in immediately available funds.
2.8 Application of Payments. Company irrevocably waives the right to
-----------------------
direct the application of any and all payments at any time or times hereafter
received by Purchaser from or on behalf of Company pursuant to the terms of
this Agreement, and Company irrevocably agrees that Purchaser shall have the
continuing exclusive right to apply any and all such payments against the then
due and payable Obligations of Company and in repayment of the Note as it may
deem advisable. In the absence of a specific determination by Purchaser with
respect thereto, the same shall be applied in the following order: (i) then
due and payable fees and expenses; (ii) then due and payable interest payments
on the Note; and (iii) then due and payable principal payments on the Note.
2.9 Sharing of Payments. If any holder of the Note or a portion
-------------------
thereof shall obtain any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) on account of the Note held by
it in excess of its ratable share of payments on account of the Notes held by
all holders thereof, such holder shall forthwith purchase from each other
holder such participations in the Note held by it as shall be necessary to
cause such purchasing holder to share the excess payment ratably with each
other holder; provided, however, that if all or any portion of such excess
-------- -------
payment is thereafter recovered from such purchasing holder, such purchase
shall be rescinded and such holder shall repay to the purchasing holder the
purchase price to the extent of such recovery together with an amount equal to
such holder's ratable share (according to the proportion of (i) the amount of
such holder's required repayment to (ii) the total amount so recovered from the
purchasing holder) of any interest or other amount paid or payable by the
purchasing holder in respect of the total amount so recovered. Company agrees
that any holder so purchasing a participation from another holder pursuant to
this Section 2.9 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such holder were the direct creditor of Company in
the amount of such participation. Company further agrees to make all payments
on the Note to all holders thereof on a pro rata basis, based on the principal
amount of the Note held by each.
2.10 Indemnity. Company shall indemnify and hold Purchaser and each
---------
of its officers, directors and Affiliates harmless from and against any and all
suits, actions, proceedings, claims, damages, losses, liabilities and expenses
(including reasonable attorneys' fees and disbursements, including those
incurred upon any appeal) which may be instituted or asserted against or
incurred by Purchaser or such other indemnified person as the result of
Purchaser having entered into this Agreement or any
15
of the other Loan Documents or purchased the Note hereunder or relating to or
arising out of any untrue representation, breach of warranty or failure to
perform any covenants or agreement by Company contained herein or in any
Transaction Document, including arising out of any Environmental Law applicable
to Company or its Subsidiaries or otherwise relating to or arising out of the
transactions contemplated hereby; provided, however, that Company shall not be
-------- -------
liable for such indemnification to such indemnified Person to the extent that
any such suit, action, proceeding, claim, damage, loss, liability or expense
results from such indemnified Person's gross negligence or willful misconduct.
2.11 Access. Upon the occurrence of an Event of Default, an event of
------
default under the Credit Agreement or facts or circumstances which reasonably
could be expected to have a Material Adverse Effect, Purchaser and any of its
officers, employees and/or agents shall have the right, exercisable as
frequently as it determines to be appropriate, during normal business hours, to
visit and inspect the properties and facilities of Company and its Subsidiaries
and to inspect, audit and make extracts from all of Company's and its
Subsidiaries' records, files, corporate books and books of account and to
discuss the affairs, finances and accounts of Company and its Subsidiaries with
the principal officers of Company, all at such reasonable times, upon
reasonable notice and as often as Purchaser may reasonably request. Company
shall deliver any document or instrument reasonably necessary for Purchaser, as
it may request, to obtain records from any service bureau maintaining records
for Company or its Subsidiaries. Company shall instruct its and its
Subsidiaries' banking and other financial institutions to make available to
Purchaser such information and records as it may reasonably request.
2.12 Taxes. (a) Any and all payments by Company hereunder or under
-----
the Note shall be made, in accordance with this Section 2.12, free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on or measured by the net income (including gains
taxes) of Purchaser, by the jurisdiction under the laws of which it is
organized or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If Company shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under the
Note to Purchaser, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable
to additional sums payable under this Section 2.12) Purchaser receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) Company shall make such deductions, and (iii) Company shall pay the
full amount deducted to the relevant taxing or other authority in accordance
with applicable law.
(b) In addition, Company agrees to pay any present or future stamp or
documentary taxes or any other sales, transfer, excise, mortgage recording or
property taxes, charges or similar levies that arise from any payment made
hereunder or under the Note or from the execution, sale, transfer, delivery or
registration of, or otherwise with respect to, any of the Transaction Documents
(hereinafter referred to as "Other Taxes").
16
(c) Company shall indemnify Purchaser for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.12) paid by Purchaser and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be made within 30 days from the date
Purchaser makes written demand therefor, which demand shall include an
identification of the relevant taxing authority and the amount of payment
giving rise to the claim for indemnification.
(d) Within 30 days after the date of any payment of Taxes, Company shall
furnish to Purchaser the original or a certified copy of a receipt evidencing
payment thereof.
(e) Without prejudice to the survival of any other agreement of Company
hereunder, the agreements and obligations of Company contained in this Section
2.12 shall survive the payment in full of the Note.
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES
------------------------------------------
Purchaser makes the following representations and warranties to
Company, each and all of which shall survive the execution and delivery of this
Agreement and the Closing hereunder:
3.1 Investment Intention. Purchaser is purchasing the Note for its own
--------------------
account, for investment purposes and not with a view to the distribution
thereof. Purchaser will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of the Note (or solicit any
offers to buy, purchase, or otherwise acquire any of the Note), except in
compliance with the Securities Act.
3.2 Accredited Investor. Purchaser is an "accredited investor" (as
-------------------
that term is defined in Rule 501 of Regulation D under the Securities Act) and
by reason of its business and financial experience, it has such knowledge,
sophistication and experience in business and financial matters as to be
capable of evaluating the merits and risks of the prospective investment, is
able to bear the economic risk of such investment and is able to afford a
complete loss of such investment.
3.3 Corporate Existence. Purchaser is a corporation duly organized,
-------------------
validly existing and in good standing under the laws of the State of New York.
3.4 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by Purchaser of this Agreement and the
other Transaction Documents to be executed by it: (i) are within Purchaser's
corporate power; (ii) have been duly authorized by all necessary corporate
action; (iii) are not in contravention of any provision of Purchaser's
certificate of incorporation or by-laws; and (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality
binding on Purchaser. This Agreement and the other Transaction Documents to
which Purchaser is a party have each been duly executed and
17
delivered by Purchaser and constitute the legal, valid and binding obligations
of Purchaser, enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
4. COMPANY'S REPRESENTATIONS AND WARRANTIES
----------------------------------------
Company makes the following representations and warranties to
Purchaser, each and all of which shall survive the execution and delivery of
this Agreement and the Closing hereunder:
4.1 Authorized and Outstanding Shares of Capital Stock. As of June 30,
--------------------------------------------------
1999, the authorized capital stock of Company consisted of 100,000,000 shares of
Common Stock, $.01 par value per share, of which 50,435,989 shares were issued
and outstanding, and 20,000,000 shares of Class A Preferred Stock, no par value
per share, of which 1 share was issued and outstanding. All of such issued and
outstanding shares are validly issued, fully paid and non-assessable. Except as
set forth on Schedule 4.1, (i) there is no existing option, warrant, call,
commitment or other agreement to which Company is a party requiring, and there
are no convertible securities of Company outstanding which upon conversion would
require, the issuance of any additional shares of Stock of Company or other
securities convertible into shares of equity securities of Company, other than
the Note, and (ii) there are no agreements to which Company is a party with
respect to the voting or transfer of the Stock of Company. Except as set forth
on Schedule 4.1, there are no stockholders' preemptive rights or rights of first
refusal or other similar rights with respect to the issuance of Stock by
Company. True and correct copies of the certificate of incorporation and by-
laws of Company have been delivered to Purchaser.
4.2 Authorization and Issuance of Note. The issuance of the Note has
----------------------------------
been duly authorized by all necessary corporate action on the part of Company
and, upon delivery to Purchaser of the Note against payment in accordance with
the terms hereof, the Note will have been validly issued, free and clear of all
pledges, liens, encumbrances and preemptive rights. The issuance of shares of
Common Stock upon conversion of the Note has been duly authorized by all
necessary corporate action on the part of Company and, when issued upon
conversion of the Note, such Common Stock will have been validly issued and
fully paid and non-assessable. Company has duly reserved 1,386,322 shares of
Common Stock for issuance pursuant to the terms of the Note.
4.3 Securities Laws. In reliance on the investment representations
---------------
contained in Sections 3.1 and 3.2, the offer, issuance, sale and delivery of
the Note, as provided in this Agreement, are exempt from the registration
requirements of the Securities Act and all applicable state securities laws,
and are otherwise in compliance with such laws. Neither Company nor any Person
acting on its behalf has taken or will
18
take any action (including any offering of any securities of Company under
circumstances which would require the integration of such offering with the
offering of the Note under the Securities Act and the rules and regulations of
the SEC thereunder) which might subject the offering, issuance or sale of the
Note, to the registration requirements of Section 5 of the Securities Act.
4.4 Corporate Existence; Compliance with Law. Company and each of its
----------------------------------------
Subsidiaries, if any, (i) is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania in the case
of Company and as set forth on Schedule 4.5 in the case of its Subsidiaries;
(ii) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification (except for jurisdictions in
which such failure to so qualify or to be in good standing would not have a
Material Adverse Effect); (iii) has the requisite corporate power and authority
and the legal right to own, pledge, mortgage or otherwise encumber and operate
its properties, to lease the property it operates under lease, and to conduct
its business as now being conducted; (iv) has, or has applied for, all material
licenses, permits, consents or approvals from or by, and has made all material
filings with, and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct, except where the failure to obtain such approval or
authorization would not result in a Material Adverse Effect; (v) is in
compliance with its certificate or articles of incorporation and by-laws; and
(vi) is in compliance with all applicable provisions of law, except for such
non-compliance which would not have a Material Adverse Effect.
4.5 Subsidiaries. There currently exist no Subsidiaries of Company
------------
other than as set forth on Schedule 4.5 hereto, which sets forth such
Subsidiaries, together with their respective jurisdictions of organization, and
the authorized and outstanding capital Stock of each such Subsidiary, by class
and number and percentage of each class owned by Company or a Subsidiary of
Company or any other Person. There are no options, warrants, rights to
purchase or similar rights covering capital Stock for any such Subsidiary.
4.6 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by Company of this Agreement, the other
Transaction Documents to which it is a party and all instruments and documents
to be delivered by Company, the issuance and sale of the Note and the
consummation of the other transactions contemplated by any of the foregoing:
(i) are within Company's corporate power and authority; (ii) have been duly
authorized by all necessary or proper corporate action; (iii) are not in
contravention of any provision of Company's certificate of incorporation or
by-laws; (iv) will not violate any law or regulation, or any order or decree of
any court or governmental instrumentality; (v) will not conflict with or result
in the breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Company or any of its Subsidiaries is a
party or by which Company, any of its Subsidiaries or any of their property is
bound; (vi) will not result in the creation or
19
imposition of any Lien upon any of the property of Company or any of its
Subsidiaries; and (vii) do not require the consent or approval of, or any
filing with, any Governmental Authority or any other Person (except (A) for
those filings required by the Registration Rights Agreement and (B) to the
extent previously obtained or made). At or prior to the Closing Date, each of
this Agreement and the other Transaction Documents shall have been duly
executed and delivered by Company and each shall then constitute a legal, valid
and binding obligation of Company, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
4.7 Financial Statements. (a) The audited consolidated balance sheet
--------------------
of Company as at December 31, 1998, and the related consolidated statements of
income and cash flows for the year then ended, with the opinion thereon of
Xxxxxx Xxxxxxxx L.L.P., and the unaudited consolidated balance sheet of Company
as at March 31, 1999 (the "Balance Sheet") and the related unaudited
consolidated statements of income, and cash flows for the three months then
ended, copies of which have previously been delivered to Purchaser, have been,
except as noted therein, prepared in conformity with GAAP consistently applied
throughout the periods involved and present fairly in all material respects the
consolidated financial position of Company as at the dates thereof, and the
consolidated results of its operations and cash flows for the periods then
ended, subject, in the case of the interim financial statements, to normal year-
end audit adjustments and any other adjustments described therein.
(b) Except as set forth on Schedule 4.7, neither Company nor any of its
Subsidiaries has any material obligations, contingent or otherwise, including
liabilities for Charges, long-term leases or unusual forward or long-term
commitments which are not reflected in the Balance Sheet, other than those
incurred since December 31, 1998, in the ordinary course of business.
(c) Except as set forth on Schedule 4.7, no dividends or other
distributions have been declared, paid or made upon any shares of capital Stock
of Company, nor have any shares of capital Stock of Company been redeemed,
retired, purchased or otherwise acquired for value by Company since December
31, 1998.
4.8 Ownership of Property. Each of Company and its Subsidiaries has
---------------------
good and marketable and insurable fee simple title to its owned real property,
free and clear of all Liens. Each of Company and its Subsidiaries has valid
and marketable leasehold interests in each of its leases, good and marketable
title to, or valid leasehold interests in, all of its other properties and
assets free and clear of all Liens, except Permitted Liens. Each of such
leases is valid and enforceable in accordance with its terms (subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
20
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity)) and is in full force and effect except to the extent that such lack of
validity or enforceability would not have a Material Adverse Effect. None of
Company, any of its Subsidiaries nor, to its knowledge, any other party to any
such lease is in default of its obligations thereunder or has delivered or
received any notice of default under any such lease, nor has any event occurred
which, with the giving of notice, the passage of time or both, would constitute
a default under any such lease except to the extent that such default would not
reasonably be expected to have a Material Adverse Effect. Neither Company nor
any of its Subsidiaries is obligated under or a party to, any option, right of
first refusal, or any other contractual right to purchase, acquire, sell,
assign or dispose of any material real property owned or leased by Company or
such Subsidiary.
4.9 Material Contracts. Schedule 4.9 contains a true, correct and
------------------
complete list and description of all Material Contracts (other than those
Material Contracts which have been filed as an exhibit to the Company SEC
Documents). Each Material Contract is a valid and binding agreement of Company
or its Subsidiaries (as the case may be) enforceable against Company or such
Subsidiary in accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)), and neither
Company nor any of its Subsidiaries has any knowledge that any Material
Contract is not a valid and binding agreement against the other parties
thereto. Company and each of its Subsidiaries has fulfilled all obligations
required pursuant to the Material Contract to have been performed by Company or
such Subsidiary on its part. Except as set forth in Schedule 4.9, neither
Company nor any of its Subsidiaries is in default or breach, nor to Company's
or such Subsidiary's knowledge is any third party in default or breach, under
or with respect to any Material Contract.
4.10 Environmental Protection. (a) Except as set forth on Schedule
------------------------
4.10, to Company's and its Subsidiaries' knowledge, all real property owned,
leased or otherwise operated by Company and its Subsidiaries (each, a
"Facility") is free of contamination from any substance, waste or material (i)
currently identified to be toxic or hazardous pursuant to, or which may result
in liability under, any Environmental Law or (ii) within the definition of a
substance which is toxic or hazardous under any Environmental Law, including
any asbestos, pcb, radioactive substance, methane, volatile hydrocarbons,
industrial solvents, oil or petroleum or chemical liquids or solids, liquid or
gaseous products, or any other material or substance which has in the past or
could at any time in the future cause or constitute a health, safety, or
environmental hazard to any Person or property or result in any Environmental
Liabilities and Costs ("Hazardous Substance") of more than $100,000 or which,
in either case, could have a Material Adverse Effect. Except as set forth on
Schedule 4.10, neither Company nor any of its Subsidiaries has caused or
suffered to occur any release, spill, migration, leakage,
21
discharge, spillage, uncontrolled loss, seepage, or filtration of Hazard
Substances at or from the Facility (a "Spill") which could result in
Environmental Liabilities and Costs in excess of $100,000.
(b) Company and each Subsidiary has generated, treated, stored and disposed
of any Hazardous Substances in full compliance with applicable Environmental
Laws, except for such non-compliances which would not reasonably be expected to
have a Material Adverse Effect.
(c) Company and each Subsidiary has obtained, or has applied for, and is in
full compliance with and in good standing under all permits required under
Environmental Laws (except for such failures which would not reasonably be
expected to have a Material Adverse Effect) and neither Company nor any of its
Subsidiaries has any knowledge of any proceedings to substantially modify or to
revoke any such permit.
(d) Except as set forth on Schedule 4.10, there are no investigations,
proceedings or litigation pending or, to Company's or its Subsidiaries'
knowledge, threatened affecting or against Company, any of its Subsidiaries or
the Facilities relating to Environmental Laws or Hazardous Substances.
(e) Since January 1, 1996, except for communications in connection with the
matters listed on Schedule 4.10, neither Company nor any of its Subsidiaries
has received any communication or notice (including requests for information)
indicating the potential of Environmental Liabilities and Costs against Company
or its Subsidiaries.
4.11 Labor Matters. (a) There are no strikes or other labor disputes
-------------
against Company or any of its Subsidiaries pending or, to Company's or its
Subsidiaries' knowledge, threatened. Hours worked by and payment made to
employees of Company and its Subsidiaries have not been in violation of the
Fair Labor Standards Act or any other applicable law dealing with such matters.
All payments due from Company and each of its Subsidiaries on account of
employee health and welfare insurance have been paid or accrued as a liability
on the books of Company or such Subsidiary. There is no organizing activity
involving Company or any of its Subsidiaries pending or, to Company's or its
Subsidiaries' knowledge, threatened by any labor union or group of employees.
There are no representation proceedings pending or, to Company's or its
Subsidiaries' knowledge, threatened with the National Labor Relations Board,
and no labor organization or group of employees of Company or its Subsidiaries
has made a pending demand for recognition. There are no complaints or charges
against Company or any of its Subsidiaries pending or, to Company's or its
Subsidiaries' knowledge, threatened to be filed with any federal, state, local
or foreign court, governmental agency or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment by Company or any of its Subsidiaries of any individual.
(b) Neither Company nor any of its Subsidiaries is, or during the five years
preceding the date hereof was, a party to any labor or collective bargaining
agreement
22
and there are no labor or collective bargaining agreements which pertain to
employees of Company or its Subsidiaries.
4.12 Other Ventures. Except as set forth on Schedule 4.12, neither
--------------
Company nor any of its Subsidiaries is engaged in any joint venture or
partnership with any other Person.
4.13 Taxes. Except as set forth on Schedule 4.13, all federal, state,
-----
local and foreign tax returns, reports and statements required to be filed by
Company and its Subsidiaries have been timely filed with the appropriate
Governmental Authority and all such returns, reports and statements are true,
correct and complete in all material respects. All Charges and other
impositions due and payable for the periods covered by such returns, reports
and statements have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof, or any
such fine, penalty, interest, late charge or loss has been paid. Proper and
accurate amounts have been withheld by Company and its Subsidiaries from its
employees for all periods in full and complete compliance with the tax, social
security and unemployment withholding provisions of applicable federal, state,
local and foreign law and such withholdings have been timely paid to the
respective governmental agencies. Neither Company nor any of its Subsidiaries
has executed or filed with the IRS or any other Governmental Authority any
agreement or other document extending, or having the effect of extending, the
period for assessment or collection of any Charges. No tax audits or other
administrative or judicial proceedings are pending or threatened with regard to
any Charges for which Company or any Subsidiary may be liable and no assessment
of Charges is proposed against the Company or any Subsidiary. Neither Company
nor any of its Subsidiaries has filed a consent pursuant to IRC Section 341(f)
or agreed to have IRC Section 341(f)(2) apply to any dispositions of subsection
(f) assets (as such term is defined in IRC Section 341(f)(4)). None of the
property owned by Company or any of its Subsidiaries is property which such
company is required to treat as being owned by any other Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, and in effect immediately prior to the enactment of the Tax Reform Act
of 1986 or is "tax-exempt use property" within the meaning of IRC Section
168(h). Neither Company nor any of its Subsidiaries has agreed or has been
requested to make any adjustment under IRC Section 481(a) by reason of a change
in accounting method or otherwise. Neither Company nor any of its Subsidiaries
has any obligation under any written tax sharing agreement.
4.14 No Litigation. Except as disclosed on Schedule 4.14, no action,
-------------
claim or proceeding is now pending or, to the knowledge of Company or its
Subsidiaries, threatened against Company or any of its Subsidiaries, at law, in
equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of arbitrators which
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
23
4.15 Brokers. Except as set forth on Schedule 4.15, no broker or
-------
finder acting on behalf of Company or any of its Subsidiaries brought about the
consummation of the transactions contemplated pursuant to this Agreement and
neither Company nor any of its Subsidiaries has any obligation to any Person in
respect of any finder's or brokerage fees (or any similar obligation) in
connection with the transactions contemplated by this Agreement. Company is
solely responsible for the payment of all such finder's or brokerage fees.
4.16 Patents, Trademarks, Copyrights and Licenses. Company and each of
--------------------------------------------
its Subsidiaries owns all licenses, patents, patent applications, copyrights,
service marks, trademarks and registrations and applications for registration
thereof, and trade names necessary to continue to conduct its business as
heretofore conducted by it and now being conducted by it. To Company's
knowledge, Company and each of its Subsidiaries conducts its businesses without
infringement or claim of infringement of any license, patent, copyright, service
xxxx, trademark, trade name, trade secret or other intellectual property right
of others except where the same would not reasonably be expected to have a
Material Adverse Effect. To Company's knowledge, there is no infringement by
others of any license, patent, copyright, service xxxx, trademark, trade name,
trade secret or other intellectual property right of Company or any of its
Subsidiaries, except where the same would not reasonably be expected to have a
Material Adverse Effect.
4.17 No Material Adverse Effect. Except as disclosed in the Company
--------------------------
SEC Documents, no event has occurred since December 31, 1998 which has had or
could be reasonably expected to have a Material Adverse Effect, other than
events or circumstances which relate exclusively to (i) changes in trends in
the information technology industry and (ii) general economic conditions in the
United States as a whole.
4.18 ERISA. (a) Schedule 4.18 sets forth: (i) all "employee benefit
-----
plans", as defined in Section 3(3) of ERISA, and describes any other
material employee benefit arrangements (the "Plans") maintained by Company and
any of its Subsidiaries or to which Company or any its Subsidiaries
contributed or is obligated to contribute thereunder, and (ii) all "employee
pension plans", as defined in Section 3(2) of ERISA (the "Pension Plans"),
maintained by Company, any of its Subsidiaries or any of its ERISA Affiliates
to which Company, any of its Subsidiaries or any of its ERISA Affiliates
contributed or is obligated to contribute thereunder.
(b) Purchaser will not have (i) any obligation to make any contribution to
any Multiemployer Plan or (ii) any withdrawal liability from any such
Multiemployer Plan under Section 4201 of ERISA which it would not have had if
it had not purchased the Note from Company at the Closing in accordance with
the terms of this Agreement.
(c) The Pension Plans intended to be qualified under Section 401 of the IRC
are so qualified and the trusts maintained pursuant thereto are exempt from
federal income taxation under Section 501 of the IRC, and nothing has occurred
with respect to the
24
operation of the Pension Plans which could cause the loss of such qualification
or exemption or the imposition of any liability, penalty, or tax under ERISA or
the IRC.
(d) All contributions required by law or pursuant to the terms of the Plans
(without regard to any waivers granted under Section 412 of the IRC) to any
funds or trusts established thereunder or in connection therewith have been
made by the due date thereof (including any valid extension) and no accumulated
funding deficiencies exist in any of the Pension Plans.
(e) There is no "amount of unfunded benefit liabilities" as defined in
Section 4001(a)(18) of ERISA in any of the respective Pension Plans. Each of
the respective Pension Plans are fully funded in accordance with the actuarial
assumptions used by the PBGC to determine the level of funding required in the
event of the termination of the Pension Plan and all benefit liabilities do not
exceed the assets of such Pension Plans.
(f) There has been no "reportable event" as that term is defined in Section
4043 of ERISA and the regulations thereunder with respect to the Pension Plans
which would require the giving of notice, or any event requiring disclosure
under Sections 4041(c)(3)(C), 4063(a) or 4068(f) of ERISA.
(g) There is no material violation of ERISA with respect to the filing of
applicable reports, documents, and notices regarding the Plans with the
Secretary of Labor and the Secretary of the Treasury or the furnishing of such
documents to the participants or beneficiaries of the Plans.
(h) True, correct and complete copies of the following documents, with
respect to each of the Plans, have been made available or delivered to
Purchaser by Company: (A) any plans and related trust documents, and amendments
thereto, (B) the most recent Forms 5500 (including any schedules thereto) and
the most recent actuarial valuation report, if any, (C) the last IRS
determination letter, (D) summary plan descriptions, (E) written communications
to employees relating to the Plans and (F) written descriptions of all
non-written agreements relating to the Plans.
(i) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Plans, the assets of any of the trusts under
such Plans or the Plan sponsor or the Plan administrator, or against any
fiduciary of the Plans with respect to the operation of such Plans (other than
routine benefit claims), nor does Company or any of its Subsidiaries have
knowledge of facts which could form the basis for any such claim or lawsuit.
(j) All amendments and actions required to bring the Plans into conformity
in all material respects with all of the applicable provisions of ERISA and
other applicable laws have been made or taken except to the extent that such
amendments or actions are not required by law to be made or taken until a date
after the Closing Date.
25
(k) The Plans have been maintained, in all material respects, in accordance
with their terms and with all provisions of ERISA (including rules and
regulations thereunder) and other applicable Federal and state law, and neither
Company nor any of its Subsidiaries or "party in interest" or "disqualified
person" with respect to the Plans has engaged in a "prohibited transaction"
within the meaning of Section 4975 of the IRC or Section 406 of ERISA.
(l) None of Company, any of its Subsidiaries or any ERISA Affiliate has
terminated any Pension Plan, or incurred any outstanding liability under
Section 4062 of ERISA to the PBGC, or to a trustee appointed under Section 4042
of ERISA.
(m) None of Company, any of its Subsidiaries or any ERISA Affiliate
maintains retired life and retired health insurance plans which are Welfare
Plans and which provide for continuing benefits or coverage for any participant
or any beneficiary of a participant except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA")
and at the expense of the participant or the participant's beneficiary.
Company, all of its Subsidiaries and all ERISA Affiliates which maintains a
Welfare Plan has complied with the notice and continuation requirements of
COBRA and the regulations thereunder.
(n) None of Company, any of its Subsidiaries or any ERISA Affiliate has
contributed or been obligated to contribute to a Multiemployer Plan as of the
Closing.
(o) None of Company, any of its Subsidiaries or any ERISA Affiliate has
withdrawn in a complete or partial withdrawal from any Multiemployer Plan prior
to the Closing Date, nor has any of them incurred any liability due to the
termination or reorganization of a Multiemployer Plan.
(p) None of Company, any of its Subsidiaries, any ERISA Affiliate or any
organization to which Company is a successor or parent corporation, within the
meaning of Section 4069(b) of ERISA, has engaged in any transaction, within the
meaning of Section 4069 of ERISA.
4.19 SEC Documents. Company has made available to Purchaser a true and
-------------
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Company with the SEC since January 1, 1998 and prior to
the date of this Agreement (the "Company SEC Documents"), which are all the
documents (other than preliminary material) that Company was required to file
with the SEC since such date. As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Documents, and
none of the Company SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
26
4.20 Ordinary Course of Business. Except as set forth on Schedule 4.7
---------------------------
or in response to the events described therein, since January 1, 1998, Company
and each of its Subsidiaries has conducted its operations only in the ordinary
course of business consistent with past practice.
4.21 Insurance. There are in full force and effect for the benefit of
---------
Company and its Subsidiaries insurance policies and bonds providing adequate
coverage from reputable and financially sound insurers in amounts sufficient to
insure the assets and risks of Company and its Subsidiaries in accordance with
prudent business practice in the industry of Company and Subsidiaries. No
notice has been given or claim made and to the knowledge of Company, no grounds
exist, to cancel or void any such policies or bonds or to reduce the coverage
provided thereby.
4.22 Accounts Receivable. All accounts receivable of Company and its
-------------------
Subsidiaries as shown on the Balance Sheet are collectible in the ordinary
course of business by Company or such Subsidiary, net of the reserves for bad
debts shown on the Balance Sheet.
4.23 Minute Books. The minute books of Company for the period
------------
commencing October 1, 1998 through March 31, 1999, as previously made available
to Purchaser, accurately reflect all formal corporate action of the
stockholders and Board of Directors of Company during such period.
4.24 Year 2000 Compliance. Each system comprised of software,
--------------------
hardware, databases or embedded control systems (microprocessor controlled or
controlled by any robotic or other device) (collectively, a "System") that
constitutes any material part of, or is used in connection with the use,
operation or enjoyment of, any material tangible or intangible asset or real
property of Company or any of its Subsidiaries will not be materially adversely
affected by the advent of the year 2000, the advent of the twenty-first century
or the transition from the twentieth century through the year 2000 and into the
twenty-first century ("Year 2000 Compliant") in a manner that could reasonably
be expected to have a Material Adverse Effect. Company has no reason to
believe that it or any of its Subsidiaries may incur material expenses arising
from or relating to the failure of any of their Systems as a result of the
advent of the year 2000, the advent of the twenty-first century or the
transition from the twentieth century through the year 2000 and into the
twenty-first century. Each System of Company and its Subsidiaries is able to
accurately process date data, including, but not limited to, calculating,
comparing and sequencing from, into and between the twentieth century (through
year 1999), the year 2000 and the twenty-first century, including leap year
calculations.
4.25 Full Disclosure. No information contained in this Agreement or
---------------
any other Loan Document contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which
made.
27
5. COVENANTS
---------
5.1 Affirmative and Financial Covenants. Company covenants and agrees
-----------------------------------
that from and after the date hereof (except as otherwise provided herein, or
unless the Required Holders have given their prior written consent) so long as
any unpaid amount on the Note is outstanding:
(a) Preservation of Existence, Etc. Company and each of its Subsidiaries
------------------------------
shall maintain its corporate existence and its license or qualification and its
good standing in the state of its incorporation and in each other jurisdiction
in which its ownership or lease of property or the nature of its businesses
makes such license or qualification necessary (except for such other
jurisdictions in which such failure to be so licensed or qualified individually
and in the aggregate would not result in a Material Adverse Effect).
(b) Accounting System; Reporting Requirements. Company on a consolidated
-----------------------------------------
basis will maintain a system of accounting established and administered in
accordance with GAAP. Further, Company will:
(i) deliver to Purchaser, within forty-five (45) days after the end of
each of the first three (3) Fiscal Quarters in each Fiscal Year of Company, (A)
consolidated balance sheet as at the end of such period for Company and its
Subsidiaries, (B) consolidated statements of income for such period for Company
and its Subsidiaries and, in the case of the second and third quarterly periods,
for the quarterly period, and (C) consolidated statements of cash flow for such
period for Company and its Subsidiaries and, in the case of the second and third
quarterly periods, for the period from the beginning of the current Fiscal Year
to the end of such quarterly period; and each such statement shall set forth, in
comparative form, corresponding figures for the corresponding period in the
immediately preceding Fiscal year; and all such statements shall be prepared in
reasonable detail and certified, subject to changes resulting from year-end
adjustments, by the chief financial Officer, treasurer or controller of Company;
(ii) deliver to the Purchaser, within 90 days after the end of each
Fiscal Year of Company (A) consolidated balance sheets as at the end of such
year for Company and its Subsidiaries, (B) consolidated statements of income for
such year for Company and its Subsidiaries, (C) consolidated statements of cash
flow for such year for Company and its Subsidiaries, and (D) consolidated
statements of shareholders equity for such year for Company and its
Subsidiaries; and each such statement shall set forth, in comparative form,
corresponding figures for the immediately preceding Fiscal Year; and all such
financial statements shall present fairly in all material respects the financial
position of Company and its consolidated Subsidiaries, as at the dates indicated
and the results of its operations and cash flow for the periods indicated, in
conformity with GAAP; and Company shall cause each of the consolidated financial
statements described in clauses (A) through (D) of above to be certified without
limitation as to scope or material qualification by Xxxxxx Xxxxxxxx L.L.P. or
other independent certified public accountants acceptable to the Required
Holders;
28
(iii) promptly give written notice to Purchaser of the happening of
any event (which is known to Company) which constitutes an Event of Default or a
Default hereunder, but in no event shall any such notice be given later than
five (5) Business Days after Company knows or should have known of such event;
(iv) promptly give written notice to Purchaser of any pending or, to
the knowledge of Purchaser, overtly threatened claim in writing, litigation or
threat of litigation which arises between Purchaser, or any of its Subsidiaries,
and any other party or parties (including any Governmental Authority) which
claim, litigation or threat of litigation, individually or in the aggregate, is
reasonably likely to cause a Material Adverse Effect, any such notice to be
given not later than five (5) Business Days after any of Company becomes aware
of the occurrence of any such claim, litigation or threat of litigation;
(v) promptly deliver to Purchaser, but in no event later than twenty
(20) days after the mailing or filing thereof, copies of (A) all reports,
notices and proxy statements sent by Company to its shareholders, and (B) all
regular and periodic reports and definitive proxy materials (including Forms 10-
k, 10-Q and 8-K) filed by Company with any securities exchange or the Federal
Securities and Exchange Commission;
(vi) promptly deliver to Purchaser, but in no event later than twenty
(20) days after Company receives the same, copies of any management letters
addressed to Company by its independent certified public accountant; and
(vii) such reports as are required to be delivered to the lenders
under the Credit Agreement, and if an Event of Default shall have occurred, such
other reports and information as Purchaser may from time to time reasonably
request.
(c) Notices Regarding Plans.
-----------------------
(i) Promptly upon becoming aware of the occurrence thereof, notice
(including the nature of the event and, when known, any action taken or
threatened by the IRS or the PBGC with respect thereto) shall be given to
Purchaser by Company of:
a. any Reportable Event with respect to Company or any ERISA
Affiliate,
b. any Prohibited Transaction which could subject Company or any
ERISA Affiliate to a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the IRS in connection with any Plan or any
trust created thereunder, if such tax and/or penalty is reasonably likely to
result in a Material Adverse Effect,
29
c. any assertion of material withdrawal liability with respect to
any Multiemployer Plan,
d. any partial or complete withdrawal from a Multiemployer Plan by
Company or any ERISA Affiliate under Title IV of ERISA (or assertion thereof),
where such withdrawal is likely to result in material withdrawal liability,
e. any cessation of operations (by Company of any member or the
ERISA Affiliate) at a facility in the circumstances described in Section
4062(e) of ERISA,
f. withdrawal by Company or any ERISA Affiliate from a Multiple
Employer Plan,
g. a failure by Company or any ERISA Affiliate to make a payment
to a Plan required to avoid imposition of a lien under Section 302(f) of ERISA,
h. the adoption of an amendment to a Plan requiring the provision
of security to such Plan pursuant to Section 307 of ERISA, or
i. any change in the actuarial assumptions or funding methods used
for any Plan, where the effect of such change is to materially increase or
materially reduce the unfunded benefit liability or obligation to make periodic
contributions.
(ii) Promptly after receipt thereof copies of (i) all notices received
by Company or any ERISA Affiliate of the PBGC's intent to terminate any Plan
administered or maintained by Company or any ERISA Affiliate, or to have a
trustee appointed to administer any such Plan; and (ii) at the request of
Purchaser each annual report (IRS) Form 5500 series) and all accompanying
schedules, the most recent actuarial reports, the most recent financial
information concerning the financial status of each Plan administered or
maintained by Company or any ERISA Affiliate, and schedules showing the amounts
contributed to each such Plan by or on behalf of Company or any ERISA Affiliate
in which any of their respective personnel participate or from which such
personnel may derive a benefit, and each Schedule B (Actuarial Information) to
the annual report filed by the Company or any ERISA Affiliate with the IRS with
respect to each such Plan shall be given to Purchaser by Company.
(iii) Promptly upon the filing thereof, copies of any PBGC Form 200,
500, 600 or 601, or any successor form, filed with the PBGC in connection with
the termination of any Plan.
(d) Payment of Liabilities, Including Taxes, etc. Company shall duly pay
---------------------------------------------
and discharge, and shall cause its Subsidiaries to pay and discharge (subject,
where applicable, to specified grace periods and, in the case of trade
payables, to normal payment practices) promptly as and when the same shall
become due and payable, all liabilities which singularly are in excess of
$100,000 or which in the aggregate exceed
30
$500,000 to which they are subject or which are asserted against them,
including all Taxes and Charges upon them or any of their properties, assets,
income or profits, prior to the date on which penalties attach thereto;
provided, however, Company may choose not to pay any such liabilities, including
-------- -------
Taxes or Charges, if the same are being contested in good faith and for which
such reserves (including reserves for any additional amounts which would be
payable as a result of the failure to discharge timely any such liabilities) or
other appropriate provisions, if any, as shall be required by GAAP shall have
been made.
(e) Maintenance of Insurance. Company shall insure, and shall cause its
----------- -- ---------
Subsidiaries to insure, their respective properties and assets against loss or
damage in such amounts as similar properties and assets are insured by prudent
companies in similar circumstances carrying on similar businesses, and with
reputable and financially sound insurers, including self-insurance to the
extent customary, except where the failure to have such coverage would not,
individually or in the aggregate, have a Materially Adverse Effect.
(f) Maintenance of Properties and Leases. Company and its Subsidiaries
------------------------------------
shall maintain in good repair, working order and condition (ordinary wear and
tear excepted) in accordance with the general practice of other businesses of
similar character and size, all of those properties useful or necessary to
their respective businesses, and from time to time, Company will make or cause
to be made all appropriate repairs, renewals or replacements thereof.
(g) Maintenance of Permits and Franchises. Company and its Subsidiaries
-------------------------------------
shall maintain in full force and effect all franchises, permits and other
authorizations necessary for the ownership and operation of their respective
properties and business if the failure so to maintain the same, individually or
in the aggregate, would constitute a Material Adverse Effect.
(h) Keeping of Records and Books of Account. Company and its Subsidiaries,
---------------------------------------
shall maintain and keep proper books of record and account which enable Company
to issue financial statements in accordance with GAAP and as otherwise required
by applicable laws of any Governmental Authority having jurisdiction over
Company and its Subsidiaries, and in which full, true and correct entries shall
be made in all material respects of all their respective dealings and business
and financial affairs.
(i) Plans. Company shall, and shall cause each ERISA Affiliate to, comply
-----
with ERISA, the IRC and other applicable Laws applicable to Plans except where
such failure, alone or in conjunction with any other failure, would not result
in a Material Adverse Effect. Without limiting the generality of the
foregoing, Company shall cause all of its Plans and all Plans maintained by any
ERISA Affiliate to be funded in accordance with the minimum funding
requirements of ERISA and shall make, and cause each ERISA Affiliate to make,
in a timely manner, all contributions due to Plans and Multiemployer Plans.
31
(j) Compliance with Laws. Company and its Subsidiaries shall comply with
--------------------
all applicable laws (including Environmental laws) in all respects, and shall
obtain and comply in all respects with and maintain any and all licenses,
approvals, registrations or permits required by Environmental Laws, provided
that they shall not be deemed to be a violation of this section if any failure
to comply with any law would not result in fines, penalties, other similar
liabilities or injunctive relief which in the aggregate would reasonably be
expected to have a Material Adverse Effect. Company and its Subsidiaries shall
conduct and complete in all respects all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all respects with all lawful orders
and directives of all Governmental Authorities respecting Environmental Laws,
except to the extent that the same are being contested in good faith by
appropriate and lawful proceedings diligently conducted and for which such
reserves or other appropriate provisions, if any, required by GAAP shall have
been made, and except to the extent that the same would not reasonably be
expected to have a Material Adverse Effect.
(k) Use of Proceeds. Company will use the proceeds of the purchase price
---------------
only for lawful purposes in accordance with Section 2.5 hereof as applicable
and such uses shall not contravene any applicable law or any other provision
hereof.
(l) Performance Revenues Company shall deliver to Purchaser within 30 days
--------------------
after the last day of each Fiscal Quarter a statement setting forth, with
supporting documentation in reasonable detail as requested by Purchaser,
the Performance Revenues achieved in such Fiscal Quarter.
(m) Senior Debt Status. The obligations of Company under the Note will
------------------
rank at least pari passu in priority of payment with all other Indebtedness of
Company except Indebtedness of Company to the extent secured by Permitted
Liens.
(n) Maintenance of Exchange Listing The Company shall maintain its listing
-------------------------------
on the Nasdaq National Market or any other national securities exchange.
Promptly after the issuance of any shares of Common Stock in conversion of the
Note, Company shall secure the designation, listing and quotation of such
Common Stock on the Nasdaq National Market or such other national securities
exchange, as the case may be, and shall maintain such designation, listing and
quotation.
5.2 Negative Covenants. Company covenants and agrees that from and
------------------
after the date hereof (except as otherwise provided herein, or unless the
Required Holders have given their prior written consent) so long as any unpaid
amount on the Note is outstanding:
(a) Liens. Company and its Subsidiaries shall not at any time create,
-----
incur, assume or suffer to exist any Lien on any of their respective property
or assets, tangible or intangible, now owned or hereafter acquired, or agree or
become liable to do so, except Permitted Liens.
32
(b) Loans, Acquisitions and Investments. Company and its Subsidiaries shall
-----------------------------------
comply with all of the covenants of the Credit Agreement relating to loans,
acquisitions and investments and shall not at any time make any loan or advance
to, or purchase or otherwise acquire any stock, bonds, notes or securities of,
or any partnership interest (whether general or limited) or other equity
interest in, or assets of, or any other investment or interest in, or make any
capital contribution to any other Person, or agree to or become liable to do
any of the foregoing (each, an "Investment"), if such Investment exceeds
$100,000,000.
(c) Liquidations, Mergers and Consolidations. Company shall comply with the
----------------------------------------
covenants of the Credit Agreement relating to liquidations, mergers and
consolidations and shall not, and shall not permit any Subsidiary of Company
to, dissolve, liquidate or wind-up its affairs (each, a "Liquidation"), or
become a party to any merger, consolidation or other business combination,
whether accounted for under GAAP's as a purchase or a pooling of interests and
regardless of whether the value of the consideration paid or received is
comprised of cash, common or preferred stock or other equity interests, or
other assets or sell, lease, transfer, or otherwise dispose of all or
substantially all of its assets (each, a "Business Combination"), if such
Liquidation involves assets of Company or any of its Subsidiaries in excess of
$250,000,000 or if such Business Combination involves assets or revenues of the
target in such Business Combination in excess the $250,000,000.
(d) Disposition of Assets or Subsidiaries. The Company shall comply with
-------------------------------------
the covenants of the Credit Agreement relating to dispositions of assets or
subsidiaries. Excluding the payment of cash as consideration for assets
purchased by, or services rendered to, Company or any Subsidiary, subject to
paragraph (c) above, neither Company nor any of its Subsidiaries shall sell,
convey, assign, lease, or otherwise transfer or dispose of, voluntarily or
involuntarily, any of its properties or assets, tangible or intangible
(including but not limited to sale, assignment, discount or other disposition
or Receivables, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares or beneficial
interests or partnership interests in Subsidiaries) (each, a "Disposition"), if
such Disposition involves assets in excess of $50,000,000.
(e) Affiliate Transactions. Except as set forth on Schedule 5.2(e), neither
----------------------
Company nor any Subsidiary of Company shall enter into or carry out any
material transaction (including purchasing property or services or selling
property or services) with an Affiliate which is not a Subsidiary unless such
transaction is not otherwise prohibited by this Agreement, is entered into in
the ordinary course of business upon fair and reasonable arm's length terms and
conditions in accordance with all applicable law.
(f) Continuation of or Change in Business. Neither Company nor any
-------------------------------------
Subsidiary of Company shall cease being engaged in the information technology
business or a business related thereto.
(g) Plans. Company shall not, and shall not permit any ERISA Affiliate to:
-----
33
(i) fail to satisfy the minimum funding requirements of ERISA and the
IRC with respect to any Plan;
(ii) request a minimum funding waiver from the IRS with respect to any
Plan;
(iii) engage in a Prohibited Transaction with any Plan or
Multiemployer Plan which, alone or in conjunction with any other circumstances
or set of circumstances resulting in liability under ERISA, would constitute a
Material Adverse Effect;
(iv) fail to make when due any contribution to any Multiemployer Plan
that Company or any ERISA Affiliate may be required to make under any agreement
relating to such Multiemployer Plan, or any law pertaining thereto;
(v) withdraw (completely or partially) from any Multiemployer Plan or
be deemed under Section 40629e) of ERISA to withdraw from any Multiple Employer
Plan, where any such withdrawal is likely to result in a material liability of
Company or any ERISA Affiliate;
(vi) terminate, or institute proceedings to terminate, any Plan, where
such termination is likely to result in a material liability to Company or any
ERISA Affiliate;
(vii) make any amendment to any Plan with respect to which security
is required under Section 307 of ERISA; or
(viii) fail to give any and all notices and make all disclosures and
governmental filings required under ERISA or the IRC, where such failure is
likely to result in a Material Adverse Effect.
(h) Change in Organizational Documents. Company shall not, and shall not
----------------------------------
permit any of its Subsidiaries to, amend in any respect its certificate or
articles of incorporation without providing at least ten (10) calendar days'
prior written notice to Purchaser and, in the event such change would cause the
Common Stock to have rights which are different from the rights of other
publicly traded common stock of Company, without obtaining the prior written
consent of Purchaser.
(i) Financial Covenants.
-------------------
(i) Minimum Consolidated Net Worth. Company will not at any time
------------------------------
permit its Consolidated Net Worth to be less than an amount equal to the sum of
(A) $120,000,000 plus (B) 50% of the positive Consolidated Net Income for each
Fiscal Year ending after December 31, 1998, plus (C) an amount equal to 100% of
net cash proceeds from the issuance by Company after June 30, 1999, of
additional equity securities or other equity capital investments.
34
(ii) Interest Coverage. As of the last day of each Fiscal Quarter,
-----------------
Company shall not permit its ratio, measured on a rolling four Fiscal Quarter
basis, of EBIT to Consolidated Interest Expense to be less than 4.0:1.0.
(iii) Consolidated Senior Indebtedness to EBITDA Ratio. As of the
------------------------------------------------
last day of each Fiscal Quarter, Company shall not permit its Consolidated
Senior Indebtedness to EBITDA Ratio to exceed 3.0 to 1.0.
(iv) Liquidity Ratio. As of the last day of each Fiscal Quarter,
---------------
Company shall not permit the ratio of the (A) sum of its (1) Consolidated Cash,
(2) Consolidated Cash Equivalents, and (3) Consolidated Receivables to (B) its
Consolidated Senior Indebtedness to be less than 1.00:1.00.
6. CLOSING DELIVERIES
------------------
6.1 Company Closing Deliveries. On the date hereof, the Purchaser
--------------------------
received from Company, the following:
(a) Favorable opinions of Xxxxxxxx Xxxxxxxxx, counsel to Company,
substantially in the form attached hereto as Exhibit C, and each other opinion
of counsel relied upon by Xxxxxxxx Ingersoll.
(b) Resolutions of the board of directors of Company, certified by the
Secretary or Assistant Secretary of Company, as of the Closing Date, duly
adopted and in full force and effect on such date, authorizing (i) the
consummation of each of the transactions contemplated by this Agreement and
(ii) specific officers to execute and deliver this Agreement and each other
Loan Document to which it is a party.
(c) Governmental certificates, dated the most recent practicable date prior
to the Closing Date, with telegram updates where available, showing that
Company is organized and in good standing in the Commonwealth of Pennsylvania.
(d) A copy of the certificate of incorporation and all amendments thereto
of Company, certified as of a recent date by the Secretary of State of the
Commonwealth of Pennsylvania, and copies of Company's by-laws, certified by the
Secretary or Assistant Secretary of Company as true and correct as of the
Closing Date.
(e) The letter from Company to its accountants authorizing Purchaser at any
time after the occurrence of an Event of Default to communicate directly with
Company's independent certified public accountants and tax advisors and
authorizing those accountants to disclose at any time after the occurrence of
an Event of Default to Purchaser any and all financial statements and other
supporting financial documents and schedules including copies of any management
letter with respect to the business, financial condition and other affairs of
Company and its Subsidiaries; provided, however, it shall not be considered a
-------- -------
breach of Company's obligations under this Agreement if
35
Company's accountants shall fail to comply with the terms of the letter
described in this paragraph.
(f) The Registration Rights Agreement duly executed by the parties thereto.
(g) Certificates of the Secretary or an Assistant Secretary of Company,
dated the Closing Date, as to the incumbency and signatures of the officers of
Company executing this Agreement, the Note, each other Transaction Document to
which it is a party and any other certificate or other document to be delivered
pursuant hereto or thereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary.
(h) Certificate of the President or CEO of Company, dated the Closing Date,
stating that all of the representations and warranties of Company contained
herein or in the other Transaction Documents are true and correct on and as of
the Closing Date that no breach of any covenant contained in Article V has
occurred or would result from the Closing hereunder.
(i) A memorandum of understanding duly executed by the parties with respect
to the Joint Venture.
(j) A wire transfer of all reasonable fees and expenses of (i) GE
Capital's outside counsel, Weil, Gotshal & Xxxxxx LLP, and (ii) all special
local counsel retained in connection with this Agreement and the transactions
contemplated thereby; provided, however, that such fees did not, in the
-------- -------
aggregate, exceed $100,000.
7. CONVERSION
----------
7.1 Conversion of Note.
------------------
Subject to the provisions for adjustment hereinafter set forth, the
outstanding principal amount of the Note shall be convertible, in whole or in
part, at any time and from time to time, at the option of the holder thereof,
under the circumstances set forth in the following sentence (a "Conversion"),
into a number of fully paid and nonassessable shares of Common Stock equal to
the quotient obtained by dividing (A) the principal amount of the Note to be
converted by (B) the Conversion Price (as hereinafter defined). Purchaser may
elect to cause a Conversion of the Note on or after the occurrence of any or all
of the following events or circumstances: an Extraordinary Default, an Event of
Default, or the third anniversary of the Closing Date. The Conversion Price
shall initially be $21.64 per share and shall be subject to further adjustments
from time to time pursuant to Section 7.1(e) below. If an Extraordinary Default
shall have occurred prior to the third anniversary of the Closing Date, that
portion of the Note which equals the Extraordinary Default Target Percentage
Achieved shall, at
36
the election of the Purchaser, be convertible into Common Stock; provided,
--------
however, that if the Extraordinary Default Target Percentage Achieved equals
-------
95% or greater, 100% of the Note shall be convertible into Common Stock. On
and after the occurrence of (i) an Event of Default (other than a Payment
Default) or (ii) the third anniversary of the Closing Date, that portion of the
Note which equals the Target Percentage Achieved shall, at the election of
Purchaser, be convertible into Common Stock.
No fractional shares shall be issued upon the conversion of the Note.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of the Note by Purchaser shall be aggregated for purposes of
determining whether conversion would result in the issuance of any fractional
share. If, after the aforementioned aggregation, the conversion would result in
the issuance of a fraction of a share of Common Stock, Company shall, in lieu of
issuing any fractional share, pay Purchaser a sum in cash equal to the Closing
Price of such fraction on the date of conversion.
(a) A conversion of the Note may be effected by Purchaser upon the
surrender to Company at the principal office of Company of the Note to be
converted accompanied by a written notice stating that Purchaser elects to
convert all or a specified amount of its Note in accordance with the provisions
of this Section 7.1 and specifying the name or names in which Purchaser wishes
the certificate or certificates for shares of Common Stock to be issued.
(b) In case the written notice specifying the name or names in which
Purchaser wishes the certificate or certificates for shares of Common Stock to
be issued shall specify a name or names other than that of Purchaser, such
notice shall be accompanied by payment of all transfer taxes payable upon the
issuance of shares of Common Stock in such name or names. Other than such
taxes, Company will pay any and all issue and other taxes (other than taxes
based on income) that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of the Note pursuant hereto. As promptly
as practicable, and in any event within five Business Days after the surrender
of the Note and the receipt of such notice relating thereto and, if applicable,
payment of all transfer taxes (or the demonstration to the satisfaction of
Company that such taxes have been paid), Company shall deliver or cause to be
delivered (1) certificate(s) representing the number of validly issued, fully
paid and nonassessable full shares of Common Stock to which the holder of the
Note being converted shall be entitled and (2) if less than all of principal
amount of the Note evidenced by the surrendered Note is being converted, in
exchange for the Note surrendered, a new Note, of like tenor, in a principal
amount equal the full principal amount of the Note surrendered less the
principal amount being converted.
(c) A conversion shall be deemed to have been made at the close of business
on the date of giving the written notice referred to in the first sentence of
(b) above and of such surrender of the certificate or certificates representing
the Note to be converted so that the rights of the holder thereof as to the
Note being converted shall cease except for the right to receive shares of
Common Stock in accordance herewith, and the Person
37
entitled to receive the shares of Common Stock shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
such time.
(d) Company shall at all times reserve, and keep available for issuance
upon the conversion of the Note, such number of its authorized but unissued
shares of Common Stock as will from time to time be sufficient to permit the
conversion of all of the outstanding principal balance of the Note, and shall
take all action required to increase the authorized number of shares of Common
Stock if necessary to permit the conversion of all of the outstanding principal
balance of the Note.
(e) The Conversion Price will be subject to adjustment from time to time as
follows:
(i) In case Company shall at any time or from time to time after the
Closing Date (A) pay a dividend, or make a distribution, on the outstanding
shares of Common Stock in shares of Common Stock, (B) subdivide the outstanding
shares of Common Stock, (C) combine the outstanding shares of Common Stock into
a smaller number of shares or (D) issue by reclassification of the shares of
Common Stock any shares of capital stock of Company, then, and in each such
case, the Conversion Price in effect immediately prior to such event or the
record date therefor, whichever is earlier, shall be adjusted so that the
holder of any Note thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock or other securities of Company
which Purchaser would have owned or have been entitled to receive after the
happening of any of the events described above, had such Note been surrendered
for conversion immediately prior to the happening of such event or the record
date therefor, whichever is earlier. An adjustment made pursuant to this
clause (i) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date for
the determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of such subdivision,
reclassification or combination, at the close of business on the day upon which
such corporate action becomes effective. No adjustment shall be made pursuant
to this clause (i) in connection with any transaction to which Section 7.1(f)
applies.
(ii) In case Company shall issue shares of Common Stock (or rights,
warrants or other securities convertible into or exchangeable for shares of
Common Stock), other than pursuant to existing obligations or pursuant to any
existing employee benefit plan (or any other tax qualified employee benefit
plan adopted by Company subsequent to the Closing Date) after the Closing Date,
other than issuances covered by clause (i) above, at a price per share (or
having an exercise, conversion or exchange price per share) less than 95% of
the Current Market Price as of the date of issuance of such shares or of such
rights, warrants or other convertible or exchangeable securities, then, and in
each such case, the Conversion Price shall be reduced (but not increased) to a
price determined by dividing (A) an amount equal to the sum of (x) the number
of shares of Common Stock outstanding immediately prior to such issue
multiplied by 95% of the then existing Current Market Price, plus (y) the
consideration, if any, received by Company upon such issue, by (B) the total
number of shares of
38
Common Stock outstanding immediately after such issue or sale (in the case of
warrants or convertible securities, on an as exercised or as converted basis,
as the case may be, to the extent the underlying Common Stock would be deemed
outstanding in accordance with GAAP for purposes of determining book value or
net income per share). For the purpose of determining the consideration
received by Company upon any such issue pursuant to clause (y) above, if the
consideration received by Company is other than cash, its value will be deemed
its fair market value, as determined in good faith by the Board of Directors of
Company.
(iii) An adjustment made pursuant to clause (ii) above shall be made on
the next Business Day following the date on which any such issuance is made and
shall be effective retroactively immediately after the close of business on
such date. No adjustment shall be made pursuant to clause (ii) in respect of
any issuance of shares of Common Stock on or prior to the Closing Date. For
purposes of clause (ii), the aggregate consideration received by Company in
connection with the issuance of shares of Common Stock or of rights, warrants
or other securities exchangeable or convertible into shares of Common Stock
shall be deemed to be equal to the sum of the aggregate offering price of all
such Common Stock and such rights, warrants, or other exchangeable or
convertible securities plus the aggregate amount, if any, receivable upon
exchange or conversion of any such exchangeable or convertible securities into
shares of Common Stock.
(iv) In case Company shall at any time or from time to time after the
Closing Date declare, order, pay or make a dividend or other distribution
(including any distribution of stock or other securities or property or rights
or warrants to subscribe for securities of Company or any of its Subsidiaries
by way of dividend or spin-off), on its Common Stock, other than dividends or
distributions of shares of Common Stock which are referred to in clause (i)
above and cash dividends paid out of retained earnings, then the Conversion
Price shall be adjusted so that it shall equal the price determined by
multiplying (A) the applicable Conversion Price on the day immediately prior to
the record date fixed for the determination of stockholders entitled to receive
such dividend or distribution by (B) a fraction, the numerator of which shall
be the Current Market Price per share of Common Stock at such record date less
the amount of such dividend or distribution per share of Common Stock, and the
denominator of which shall be such Current Market Price per share of Common
Stock. No adjustment shall be made pursuant to this clause (iv) in connection
with any transaction to which Section 7.1(f) applies.
(v) For purposes of this Section 7.1(e), the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock then
owned or held by or for the account of Company or any of its Subsidiaries.
(vi) If Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or other distribution,
and shall thereafter and before the distribution to stockholders thereof
legally abandon its plan to pay or deliver such dividend or distribution, then
thereafter no
39
adjustment in the number of shares of Common Stock issuable upon exercise of
the right of conversion granted by this Section 7.1(e) or in the Conversion
Price then in effect shall be required by reason of the taking of such record.
(vii) Anything in this Section 7.1(e) to the contrary notwithstanding,
Company shall not be required to give effect to any adjustment in the
Conversion Price unless and until the net effect of one or more adjustments
(each of which shall be carried forward), determined as above provided, shall
have resulted in a change of the Conversion Price by at least one cent, and
when the cumulative net effect of more than one adjustment so determined shall
be to change the Conversion Price by at least one cent, such change in
Conversion Price shall thereupon be given effect.
(viii) If any option or warrant expires or is cancelled without having
been exercised, then, for the purposes of the adjustments set forth above, such
option or warrant shall have been deemed not to have been issued and the
Conversion Price shall be adjusted accordingly. No holder of Common Stock
which was previously issued upon conversion of the Note shall have any
obligation to redeem or cancel any such shares of Common Stock as a result of
the operation of this clause (viii).
(f) Subject to the redemption rights in Section 2.3 and the conversion
rights in Section 7.1, in case of any reorganization of capital,
reclassification of capital stock (other than a reclassification of capital
subject to 7.1(e)(i)), consolidation or merger with or into another Person, or
sale, transfer or disposition of all or substantially all the property, assets
or business of Company to another Person (any one or more of such events being
an "Organic Change"), the Note then outstanding, shall thereafter be
convertible into, in lieu of the Common Stock issuable upon such conversion
prior to consummation of such Organic Change, the kind and amount of shares of
stock and other securities and property receivable (including cash) upon the
consummation of such Organic Change by a holder of that number of shares of
Common Stock into which the Note was convertible immediately prior to such
Organic Change (including, on a pro rata basis, the cash, securities or
property received by holders of Common Stock in any tender or exchange offer
that is a step in such Organic Change). In case securities or property other
than Common Stock shall be issuable or deliverable upon conversion as
aforesaid, then all references in this Section 7.1(f) shall be deemed to apply,
so far as appropriate and nearly as may be, to such other securities or
property.
(g) In case at any time or from time to time Company shall pay any stock
dividend or make any other non-cash distribution to the holders of its Common
Stock, or shall offer for subscription pro rata to the holders of its Common
Stock any additional shares of stock of any class or any other right, or there
shall be any capital reorganization or reclassification of the Common Stock of
Company or consolidation or merger of Company with or into another corporation,
or any sale or conveyance to another corporation of the property of Company as
an entirety or substantially as an entirety, or there shall be a voluntary or
involuntary dissolution, liquidation or winding up of Company, then, in any one
or more of said cases, Company shall give at least 20 days' prior written
notice to the registered holder of the Note at the address of each as shown
40
on the books of Company as of the date on which (i) the books of Company shall
close or a record shall be taken for such stock dividend, distribution or
subscription rights or (ii) such non-bankruptcy reorganization,
reclassification, consolidation, merger, sale or conveyance, dissolution,
liquidation or winding up shall take place, as the case may be, provided that
in the case of any Organic Change to which Section 7.1(f) applies Company shall
give at least 30 days' prior written notice as aforesaid. Such notice shall
also specify the date as of which the holders of the Common Stock of record
shall participate in such dividend, distribution or subscription rights or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such non-bankruptcy reorganization, reclassification,
consolidation, merger, sale or conveyance or participate in such dissolution,
liquidation or winding up, as the case may be. Failure to give such notice
shall not invalidate any action so taken.
(h) Upon any adjustment of the Conversion Price then in effect and any
increase or decrease in the number of shares of Common Stock issuable upon the
operation of the conversion set forth in this Section 7.1, then, and in each
such case, Company shall promptly deliver to the holder of the Note, a
certificate signed by the President or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of Company
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the Conversion
Price then in effect following such adjustment and the increased or decreased
number of shares issuable upon the conversion granted by this Section 7.1, and
shall set forth in reasonable detail the method of calculation of each and a
brief statement of the facts requiring such adjustment.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
--------------------------------------
8.1 Events of Default. The occurrence of any one or more of the
-----------------
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder and under the Note:
(a) Company shall fail to make any payment of principal of, or interest on
or any other amount owing in respect of, the Note, or any of the other
Obligations when due and payable or declared due and payable, including
pursuant to Section 2.4 hereof, which, other than principal or interest, shall
have remained unremedied for a period of ten (10) days.
(b) Company shall fail or neglect to perform, keep or observe any of the
provisions of Sections 5.1 or 5.2 hereof.
(c) Company shall fail or neglect to perform, keep or observe any other
provision of this Agreement or of any of the other Loan Documents, and the same
shall remain unremedied for a period of thirty (30) days after Company shall
receive written notice of any such failure from Xxxxxxxxx.
00
(x) A default shall occur under any other agreement, document or instrument
to which Company or any Subsidiary is a party or by which Company or any of its
Subsidiaries or any of their property is bound, and such default (i) involves
the failure to make any payment (whether of principal, interest or otherwise)
due (whether by scheduled maturity, required prepayment, acceleration, demand
or otherwise) in respect of (A) any Indebtedness of Company or any of its
Subsidiaries in an aggregate amount exceeding $10,000,000 or (B) the Credit
Agreement, or (ii) causes (or permits any holder of such Indebtedness or a
trustee to cause) such Indebtedness or a portion thereof in an aggregate amount
exceeding $10,000,000 or any Indebtedness under the Credit Agreement, to become
due prior to its stated maturity or prior to its regularly scheduled dates of
payment.
(e) Any representation or warranty herein or in any Loan Document or in any
written statement pursuant thereto or hereto, report, financial statement or
certificate made or delivered to Purchaser by Company pursuant hereto or
thereto that is qualified as to materiality or Material Adverse Effect shall be
untrue or incorrect in any respect, as of the date when made, and any of such
representations or warranties that is not so qualified shall have been true and
correct in all respects, as of the date when made except as the same would not
reasonably be expected to have a Material Adverse Effect.
(f) Any of the assets of Company or any of its Subsidiaries shall be
attached, seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of Company or any of its Subsidiaries and shall remain
unstayed or undismissed for sixty (60) consecutive days; or Company or any of
its Subsidiaries shall have concealed, removed or permitted to be concealed or
removed, any part of its property, with intent to hinder, delay or defraud its
creditors or any of them or made or suffered a transfer of any of its property
or the incurring of an obligation which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against Company or any
of its Subsidiaries in a court having competent jurisdiction seeking a decree
or order in respect of Company or any of its Subsidiaries (i) under title 11 of
the United States Code, as now constituted or hereafter amended, or any other
applicable federal, state or foreign bankruptcy or other similar law, (ii)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) of Company or any of its Subsidiaries or of any
substantial part of its or their properties, or (iii) ordering the winding-up
or liquidation of the affairs of Company or any of its Subsidiaries and such
case or proceeding shall remain undismissed or unstayed for sixty (60)
consecutive days or such court shall enter a decree or order granting the
relief sought in such case or proceeding.
(h) Company or any of its Subsidiaries shall (i) file a petition seeking
relief under title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal, state or foreign bankruptcy
or other similar law, (ii) consent to the institution of proceedings thereunder
or to the filing of any such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee
42
or sequestrator (or similar official) of Company or any of its Subsidiaries or
of any substantial part of its properties, (iii) fail generally to pay its
debts as such debts become due, or (iv) take any corporate action in
furtherance of any such action.
(i) Final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money, which has, or reasonably could be
expected to have, a Material Adverse Effect, shall be rendered against Company
or any of its Subsidiaries and the same shall not be (i) fully covered by
insurance, or (ii) vacated, stayed, bonded, paid or discharged for a period of
thirty (30) days.
(j) (i) With respect to any Plan, a prohibited transaction within the
meaning of Section 4975 of the IRC or Section 406 of ERISA occurs which in the
reasonable determination of the Agent could result in direct or indirect
liability to Company or any of its Subsidiaries, (ii) with respect to any Title
IV Plan, the filing of a notice to voluntarily terminate any such plan in a
distress termination, (iii) with respect to any Multiemployer Plan, Company,
any of its Subsidiaries or any ERISA Affiliate shall incur any Withdrawal
Liability, (iv) with respect to any Pension Plan subject to Section 412 of the
Code or Section 302 of ERISA, Company, any of its Subsidiaries or any ERISA
Affiliate shall incur an accumulated funding deficiency or request a funding
waiver from the IRS, or (v) with respect to any Title IV Plan or Multiemployer
Plan which has an ERISA Event not described in clauses (ii) - (iv) hereof, in
the reasonable determination of the Agent there is a reasonable likelihood for
termination of any such plan by the PBGC; provided, however, that the events
-------- -------
listed in clauses (i) - (v) hereof shall constitute Events of Default only if
the liability, deficiency or waiver request of Company, any of its Subsidiaries
or any ERISA Affiliate, whether or not assessed, exceeds $10,000,000 in any
case set forth in (i) - (v) above, or exceeds $10,000,000 in the aggregate for
all such cases.
(k) There shall occur any event or circumstances which have, or reasonably
could be expected to have, a Material Adverse Effect, other than any events or
circumstances which relate exclusively to (i) changes in trends in the
information technology industry and (ii) general economic conditions in the
United States as a whole.
(l) There shall occur any event or circumstances which prevent, or
reasonably could be expected to prevent, Company from complying with the
conversion provision of Section 7.1, or Company shall otherwise fail to perform
its obligations under Section 7.1.
8.2 Remedies. If any Event of Default specified in Section 8.1 shall
--------
have occurred and be continuing, Purchaser may, in addition to Purchaser's
rights pursuant to Section 7.1 (and without limiting the provisions of Section
9.5), without notice, declare all Obligations to be forthwith due and payable,
whereupon all such Obligations shall become and be due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by Borrower; provided, however, that upon the occurrence of an
-------- -------
Event of Default specified in Section 8.1(f), (g) or (h) hereof, such
Obligations shall become due and payable without declaration, notice or demand
by Purchaser.
43
Purchaser may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in its best interests, including any action
(or the failure to act) pursuant to the Loan Documents.
8.3 Waivers by Company. Except as otherwise provided for in this
------------------
Agreement and applicable law, Company waives (i) presentment, demand and
protest and notice of presentment, dishonor notice of intent to accelerate and
notice of acceleration, (ii) all rights to notice and a hearing prior to
Purchaser's taking possession or control of, or to Purchaser's replevy,
attachment or levy upon, the Collateral or any bond or security which might be
required by any court prior to allowing Purchaser to exercise any of its
remedies, and (iii) the benefit of all valuation, appraisal and exemption laws.
Company acknowledges that it has been advised by counsel of its choice with
respect to this Agreement, the other Loan Documents and the transactions
evidenced by this Agreement and the other Loan Documents.
8.4 Right of Set-Off. Upon the occurrence of any Payment Default,
----------------
Purchaser is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by Purchaser to or for the credit or the
account of Company against any and all of the obligations of Company now or
hereafter existing under this Agreement and the Note held by Purchaser
irrespective of whether or not Purchaser shall have made any demand under this
Agreement or the Note and although such obligations may be unmatured.
Purchaser agrees promptly to notify Company after any such set-off and
application made by Purchaser; provided, however, that the failure to give such
-------- -------
notice shall not affect the validity of such set-off and application. The
rights of Purchaser under this Section are in addition to other rights and
remedies (including other rights of set-off) which Purchaser may have.
9. MISCELLANEOUS
-------------
9.1 Complete Agreement; Modification of Agreement; Sale of Interest.
---------------------------------------------------------------
(a) The Transaction Documents constitute the complete agreement between the
parties with respect to the subject matter hereof and may not be modified,
altered or amended except as provided therein, or in the case of the Loan
Documents by an agreement in writing signed by Company and Purchaser in
accordance with Section 9.1(d) hereof. Company may not sell, assign or
transfer any of the Loan Documents or any portion thereof, including Company's
rights, title, interests, remedies, powers and duties hereunder or thereunder.
Company hereby consents to Purchaser's sale of participations, assignment,
transfer or other disposition, at any time or times to any Affiliate of
Purchaser, or if an Event of Default shall occur to any other Person, of any of
the Loan Documents or of any portion thereof or interest therein, including
Purchaser's rights, title, interests, remedies, powers or duties thereunder,
whether evidenced by a writing or not.
44
(b) In the event Purchaser assigns or otherwise transfers all or any part of
the Note, Company shall, upon the request of Purchaser issue new Notes to
effectuate such assignment or transfer.
(c) In addition to the provisions of the first paragraph of this Section
9.1, if an Event of Default shall have occurred and be continuing, Purchaser
may sell, assign, transfer or negotiate to one or more other lenders,
commercial banks, insurance companies, other financial institutions or any
other Person acceptable to Purchaser all or a portion of its rights and
obligations under the Note held by Purchaser and this Agreement; provided,
--------
however, that acceptance of such assignment by any assignee shall constitute
-------
the agreement of such assignee to be bound by the terms of this Agreement
applicable to Purchaser. From and after the effective date of such an
assignment, (x) the assignees thereunder shall, in addition to the rights and
obligations hereunder held by it immediately prior to such effective date, have
the rights and obligations hereunder that have been assigned to it pursuant to
such assignment and (y) the assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
assignment, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an assignment and acceptance covering all
or the remaining portion of an assignor's rights and obligations under this
Agreement, such assignor shall cease to be a party hereto).
(d) No amendment or waiver of any provision of this Agreement or the Note or
any other Loan Document, nor consent to any departure by Company therefrom,
shall in any event be effective unless the same shall be in writing and
signed by the Required Holders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall,
-------- -------
unless in writing and signed by each holder of a Note affected thereby do any
of the following: (i) subject such holder to any additional obligations, (ii)
reduce the principal of, or interest on, the Note or other amounts payable
hereunder or release or discharge Company from its obligations to make such
payments, (iii) postpone any date fixed for any payment of principal of, or
interest on, the Note or other amounts payable hereunder, (iv) change the
aggregate unpaid principal amount of the Note, or the number of holders
thereof, which shall be required for such holders or any of them to take any
action hereunder, (v) modify the terms of Section 7, or (vi) amend this
Section 9.1(d).
9.2 Xxxx-Xxxxx-Xxxxxx Filing
------------------------
(a) Company agrees to make, and to use its reasonable best efforts to
assist Purchaser in making, appropriate filings of a Notification and Report
Form pursuant to the HSR Act with respect to the transactions contemplated
hereby as promptly as practicable and in any event within 30 days of the
Closing Date, and to supply as promptly as practicable any additional
information and documentary material that may be requested by Purchaser in
connection with the HSR Act and to take all other actions necessary to cause
the expiration or termination of the applicable waiting periods under the HSR
Act as soon as is practicable. Purchaser shall pay any filing fee required
45
pursuant to the HSR Act in connection with the transactions contemplated by the
Loan Documents.
(b) Company, in connection with the efforts to obtain all requisite
approvals and authorizations for the transactions contemplated by this
Agreement under the HSR Act, shall use its best efforts to (i) cooperate in all
respects with Purchaser in connection with any filing or submission in
connection with any investigation or other inquiry, including any proceeding
initiating by a private party, and (ii) promptly to inform, and to the extent
permitted by law deliver to, Purchaser any communication received by such party
from, or given by such party to, the DOJ, the FTC or any other Governmental
Authority, and of any material communication received or given in connection
with any proceeding by a private party, in each case regarding the transactions
contemplated hereby, or (iii) consult with Purchaser in advance of any meeting
or conference with any other Person, and to the extent permitted by the DOJ,
the FTC and such other applicable Governmental Authority, to give the Purchaser
the opportunity to attend and participate in such meetings or conferences.
9.3 Fees and Expenses. Company shall pay all reasonable out-of-pocket
-----------------
expenses of Purchaser in connection with the preparation of the Transaction
Documents and the transactions contemplated thereby, including all reasonable
legal expenses; provided, however, that the aggregate legal fees in connection
-------- -------
with the preparation and negotiation of the Transaction Documents shall not, in
the aggregate, exceed $100,000; provided, further, that fees and expenses
-------- -------
relating to the Joint Venture are excluded from this Section 9.3. If, at any
time or times, regardless of the existence of an Event of Default (except with
respect to paragraphs (iii) and (iv) below, which shall be subject to an Event
of Default having occurred and be continuing), Purchaser shall employ counsel
or other advisors for advice or other representation or shall incur reasonable
legal or other costs and expenses in connection with:
(i) any amendment, modification or waiver, or consent with respect to, any
of the Loan Documents or advice in connection with the administration of the
loans made pursuant hereto or its rights hereunder or thereunder;
(ii) any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Purchaser, Company, any Subsidiary of Company or any other
Person) in any way relating to any of the Loan Documents or any other
agreements to be executed or delivered in connection herewith; or
(iii) any attempt to enforce any rights of Purchaser against Company, any
Subsidiary of Company or any other Person, that may be obligated to Purchaser
by virtue of any of the Loan Documents, including under Section 2.10;
then, and in any such event, the reasonable attorneys' and other parties' fees
arising from such services, including those of any appellate proceedings, and
all expenses, costs, charges and other fees incurred by such counsel and others
in any way or respect arising in connection with or relating to any of the
events or actions described in this Section
46
shall be payable, on demand, by Company to Purchaser and shall be additional
Obligations under this Agreement and the other Loan Documents. Without
limiting the generality of the foregoing, such expenses, costs, charges and
fees may include: paralegal fees, costs and expenses; accountants' and
investment bankers' fees, costs and expenses; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal services.
9.4 No Waiver by Purchaser. Purchaser's failure, at any time or
----------------------
times, to require strict performance by Company of any provision of this
Agreement and any of the other Loan Documents shall not waive, affect or
diminish any right of Purchaser thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Purchaser of an Event of
Default by Company under the Loan Documents shall not suspend, waive or affect
any other Event of Default by Company under this Agreement and any of the other
Loan Documents whether the same is prior or subsequent thereto and whether of
the same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of Company contained in this
Agreement or any of the other Loan Documents and no Event of Default by Company
under this Agreement and no defaults by Company under any of the other Loan
Documents shall be deemed to have been suspended or waived by Purchaser, unless
such suspension or waiver is by an instrument in writing signed by an officer
of Purchaser and the Required Holders and directed to Company specifying such
suspension or waiver.
9.5 Remedies. Purchaser's rights and remedies under this Agreement
--------
shall be cumulative and nonexclusive of any other rights and remedies which
Purchaser may have under any other agreement, including the Loan Documents, the
other Transaction Documents, by operation of law or otherwise.
9.6 Waiver of Jury Trial. The parties hereto waive all right to trial
--------------------
by jury in any action or proceeding to enforce or defend any rights under the
Transaction Documents.
9.7 Severability. Wherever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
9.8 Binding Effect; Benefits. This Agreement and the other Transaction
------------------------
Documents shall be binding upon, and inure to the benefit of, the successors of
Company and Purchaser and the assigns, transferees and endorsees of Purchaser,
including all provisions with respect to Change of Control of Company.
47
9.9 Conflict of Terms. Except as otherwise provided in this Agreement
-----------------
or any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is
in conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
9.10 Governing Law. This Agreement and the Obligations arising
-------------
hereunder shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York applicable to contracts made and performed in
such state, without regard to the principles thereof regarding conflict of
laws, and any applicable laws of the United States of America. Purchaser and
Company agree to submit to personal jurisdiction and to waive any objection as
to venue in the federal or New York State courts located in the County of New
York, State of New York. Service of process on Purchaser or Company in any
action arising out of or relating to any of the Transaction Documents shall be
effective if mailed to such party at the address listed in Section 9.11 hereof.
Nothing herein shall preclude Purchaser or Company from bringing suit or taking
other legal action in any other jurisdiction.
9.11 Notices. Except as otherwise provided herein, whenever it is
-------
provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by another, or whenever any of the parties desires to give or
serve upon another any such communication with respect to this Agreement, each
such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person with
receipt acknowledged or by registered or certified mail, return receipt
requested, postage prepaid, or by telecopy and confirmed by telecopy answerback
addressed as follows:
If to Company:
Mastech Corporation
0000 XxXxx Xxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxx XxXxxxxxxx
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxxxx Ingersoll
One Oxford Centre
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxx Xxxxx, Esq. and Xxxxx Xxxxxx, Esq.
Telecopy Number: (000) 000-0000
If to Purchaser:
48
General Electric Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: GE Equity Group - Technology and Communications Group
Telecopy Number: (000) 000-0000
with copies to:
General Electric Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: GE Equity Group Legal Counsel
Telecopy Number: (000) 000-0000
and
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxxx, Esq.
Telecopy Number: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback, or
three (3) Business Days after the same shall have been deposited with the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the Persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
9.12 Survival. The representations, warranties and covenants of
--------
Company in this Agreement shall survive the execution, delivery and acceptance
hereof by the parties hereto and the closing of the transactions described
herein or related hereto.
9.13 Section and Other Headings. The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
9.14 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
49
9.15 Publicity. Neither Purchaser nor Company shall issue any press
---------
release or make any public disclosure regarding the transactions contemplated
hereby unless such press release or public disclosure is approved by the other
party in advance. Notwithstanding the foregoing, each of the parties hereto
may, in documents required to be filed by it with the SEC or other regulatory
bodies, make such statements with respect to the transactions contemplated
hereby as each may be advised by counsel is legally necessary or advisable, and
may make such disclosure as it is advised by its counsel is required by law,
subject to advance consultation with Purchaser.
50
IN WITNESS WHEREOF, Company and Purchaser have executed this Agreement
as of the day and year first above written.
MASTECH CORPORATION
By: /s/ Xxxxx Xxxxxxxx
_________________________________
Name: Xxxxx Xxxxxxxx
Title:
Purchaser:
---------
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
_________________________________
Name: Xxxxx X. Xxxxxxxx
Title: Duly authorized signatory
51
