EXHIBIT 2.2
TSL SERVICES, INC.
AGREEMENT RE: PREFERRED STOCK
In connection with that certain Stock Purchase Agreement (the
"Agreement") dated November 30, 1998 by and among ProfitSource Corporation, a
Delaware corporation ("Buyer"), Brite Voice Systems, Inc., a Kansas
corporation ("Brite"), BVS Investco, Inc., a Delaware corporation ("Seller'),
and TSL Services, Inc., a Delaware corporation ("TSL"), and in order for
Buyer to be able to obtain the financing contemplated by SECTION 6.2(h) of
the Agreement which is a condition to Buyer's obligation to consummate the
transactions contemplated by the Agreement, Buyer, Brite, Seller and TSL
agree as follows.
Seller shall have the option as a preferred stockholder of TSL to
vote to amend the preferred stock provisions of the Restated Certificate of
Incorporation of TSL in a manner satisfactory to the financial institutions
providing the financing for the Consolidation Transaction (as defined in the
Agreement). Such amendments shall incorporate the subordination provisions
of the Subordination Agreement, a copy of which is attached as Exhibit B
hereto and which is the subordination agreement used in connection with the
subordinated notes issued to other Consolidation Transaction participants, as
if the preferred stock were a subordinated note; provided, however, that if
for any reason Seller elects not to make such an amendment and not otherwise
terminate or waive the objectionable provisions of the Related Certificate of
Incorporation within 30 days after the Closing, then Seller hereby consents
to the termination and elimination of its preferred stock in exchange for a
Subordinated Note of Buyer in the form attached hereto as Exhibit A, issued
to Seller in the amount of $5,000,000, and hereby agrees to execute the
Subordination Agreement attached hereto as Exhibit B.
BRITE VOICE SYSTEMS, INC. PROFITSOURCE CORPORATION
By: s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ By: s/ ▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇
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Title: CFO & Secretary Title: President
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BVS INVESTCO, INC. TSL SERVICES, INC.
By: s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ By: s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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Title: President Title: President
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EXHIBIT A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL FOR THE
HOLDER OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATED IN
THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION
AGREEMENT (AS AMENDED, MODIFIED OR RESTATED AND INCLUDING ANY SUBORDINATION
AGREEMENT ENTERED INTO IN REPLACEMENT THEREOF IN FAVOR OF ANY SENIOR
CREDITORS, THE "SUBORDINATION AGREEMENT") DATED AS OF DECEMBER 10, 1998 AMONG
THE COMPANY, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS AGENT
(AND SUBSEQUENT SENIOR CREDITORS), AND THE HOLDER (AS DEFINED BELOW), AS
SUBORDINATED CREDITOR, TO THE SENIOR DEBT (AS DEFINED IN SUCH SUBORDINATION
AGREEMENT) AND EACH HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE
BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.
PROFITSOURCE CORPORATION
SUBORDINATED PROMISSORY NOTE
$((NOTE_AMOUNT)) DECEMBER 10, 1998
Profitsource Corporation, a Delaware corporation (together with its
successors and assignees under this Note, the "COMPANY"), for value received,
hereby promises to pay to NOTE_HOLDER or permitted successors, endorsees or
assignees (the "HOLDER"), the sum of NOTE_DESCRIPTION $(NOTE_AMOUNT),
together with any amounts added to the principal amount hereof pursuant to
SECTION 2 (collectively the "PRINCIPAL AMOUNT") on the Due Date, as defined
in SECTION 5.1.
The following is a statement of the rights of the Holder of this
Note and the conditions to which this Note is subject, and to which the
Holder hereof, by the acceptance of this Note, agrees:
1. DEFINITIONS. As used in this Note, the following terms,
unless the context otherwise requires, have the following meanings:
"COMPANY" includes any entity that succeeds to or assumes the
obligations of ProfitSource Corporation under this Note.
"NON-EQUITY NOTEHOLDERS" means persons or entities receiving cash
and/or notes but no equity interest in consideration of sale of their
business to the Company or its affiliates.
"SENIOR INDEBTEDNESS" means all "Senior Debt", as such term is
defined in the Subordination Agreement.
"SUBORDINATION AGREEMENT" means that certain Subordination
Agreement dated as of December 10, 1998 among the Company, Bank of America
National Trust and Savings Association, a national banking association, as
agent for lenders under the Credit Agreement (as defined therein), and the
Holder, as the same may be amended, modified or restated, and including any
subordination agreement entered into in replacement thereof in favor of any
senior creditors.
2. INTEREST. On each February 15, May 15, August 15 and November
15 until the Principal Amount has been paid in full (each, an "INTEREST
PAYMENT DATE"), the Company shall pay interest in arrears through the most
recently completed fiscal quarter prior to such Interest Payment Date (each,
an "INTEREST PAYMENT") at the rate of ten percent (10%) per annum (the
"INTEREST RATE") on the Principal Amount. Interest shall be paid in cash
except that, to the extent necessary to comply with subordination provisions
or other covenants of the Company in favor of holders of Senior Indebtedness,
the Company may pay interest by increasing the Principal Amount by the amount
of any Interest Payment. On each Interest Payment Date, the percentage of
any Interest Payment hereunder made by the Company in cash shall not be less
than the percentage of any interest payment made on that Interest Payment
Date in cash by the Company to any other holder (other than Non-Equity
Noteholders) of a subordinated promissory note issued by the Company in
connection with any acquisition by the Company of the stock or assets of any
entity or business operation. In order to make an Interest Payment in whole
or part by increasing the Principal Amount, the Company must deliver to
Holder a notice in the form of EXHIBIT A hereto, executed on behalf of the
Company, and such notice shall constitute documentation of the increase of
the Principal Amount by the amount referenced in such notice and the
Company's obligation to pay the amount referenced in such notice, together
with interest thereon, as if such amount were included in the original
principal amount hereof. The Company shall make all cash payments to Holder
at such place as Holder may designate from time to time in writing. If any
payment under this Note becomes due on a Saturday or Sunday or a banking
holiday in the State of California, the maturity thereof will be extended to
the next succeeding business day.
3. EVENTS OF DEFAULT. If any of the following events shall occur
(herein individually referred to as an "EVENT OF DEFAULT"), the Holder of the
Note may, so long as such conditions exist, declare the entire Principal
Amount and unpaid accrued interest hereon immediately due and payable, by
notice in writing to the Company:
(i) Failure by the Company to make any payment hereunder when
due and payable if such default is not cured by the Company within thirty
(30) days after the Holder has given the Company written notice of such
default; or
(ii) The institution by the Company of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by the Company to the
institution of bankruptcy or insolvency proceedings against the Company or
the filing by the Company of a petition or answer or consent seeking
reorganization or release under the federal Bankruptcy Act, or any other
similar federal or state law, or the consent by the Company to the filing
of any such petition or the appointment of a receiver, liquidator,
assignee, trustee or other similar official of the Company, or of any
substantial part of the Company's property, or the making by the Company of
an assignment for the benefit of creditors, or the taking of corporate
action by the Company in furtherance of any such action; or
(iii) The commencement of an action against the Company (and
service of process in connection therewith on the Company) seeking
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, upon the
final adjudication of such action and entry of an order for relief against
the Company thereon; or
(iv) The acceleration (but not voluntary prepayment) of an
aggregate principal amount of Senior Indebtedness exceeding Ten Million
Dollars ($10,000,000).
4. SUBORDINATION. This Note and the indebtedness evidenced
hereby are subordinated in the manner and to the extent set forth in the
Subordination Agreement, and each holder of this Note, by such Holder's
acceptance hereof, shall be bound by the provisions of the Subordination
Agreement.
5. PREPAYMENT, REPAYMENT AND REDEMPTION.
5.1 DUE DATE. For purposes hereof, the "DUE DATE" is the earliest
to occur of (a) December 10, 2001; (b) five (5) days after the closing of an
underwritten initial public offering of the equity securities of the Company
having gross proceeds to the Company of at least $200 million; and (c) the
date declared due and payable by the Holder upon the occurrence of an Event
of Default.
5.2 PREPAYMENT. The Principal Amount and any interest accrued
thereon may be prepaid by the Company in full or in part at any time and from
time to time without premium or penalty, provided that all payments made
hereunder are first to be applied to any accrued and unpaid interest
outstanding on the date of such payment.
5.3 BUSINESS DAYS. If any payment under this Note becomes due on
a Saturday or Sunday or a banking holiday in the State of California, the
maturity thereof will be extended to the next succeeding business day.
6. MISCELLANEOUS.
6.1 ASSIGNMENT. The Holder may not transfer this Note or assign
its rights or obligations hereunder without the express written consent of
the Company. Subject to the
foregoing, the rights and obligations of the Company and the Holder of this
Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
6.2 WAIVER. Diligence, presentment, protest, demand, dishonor,
nonpayment, and notice of every kind are waived by all makers, sureties,
guarantors, and endorsers of this Note to the fullest extent permitted by
applicable law.
6.3 REMEDIES. No delay or omission on the part of Holder in
exercising any right or remedy under this Note or applicable law will operate
as a waiver of such right or remedy or of any other right or remedy. No
single or partial exercise of any power under this Note or applicable law
will preclude other or further exercise thereof or the exercise of any other
power. The release of any party liable under this Note will not operate to
release any other party liable under this Note.
6.4 AMENDMENT. No provision of this Note may be amended, waived
or modified except by written agreement of the Company and the Holder, except
that the Company and any sureties or guarantors of this Note consent to all
extensions without notice for any period or periods of time and to the
acceptance of partial payments before or after maturity, all without
prejudice to Holder. Holder will have the right to deal in any way, at any
time, with the Company, or with any surety or guarantor hereof, without
notice to any other party, and to grant any such party any extensions of time
for payment of any of the indebtedness hereunder, or to grant any other
indulgences or forbearances whatsoever, without notice to any other party and
without in any way affecting the liability of any such party.
6.5 USURY. All agreements between the Company and Holder are
expressly limited so that in no contingency or event whatsoever, whether by
reason of advancement of the proceeds hereof, acceleration of maturity of the
unpaid principal balance hereof, or otherwise, will the amount paid or agreed
to be paid to Holder for the use, forbearance or detention of money exceed
the highest lawful rate permissible under applicable usury laws. If, from
any circumstances whatsoever, fulfillment of any provision of this Note or
any agreement or guaranty securing this Note, at the time performance of such
provision is due, involves transcending the limit of validity prescribed by
law which a court of competent jurisdiction may deem applicable hereto, then
the obligation to be fulfilled will be reduced to the limit of such validity.
Furthermore, if, from any circumstances whatsoever, Holder ever receives as
interest an amount which would exceed the highest lawful rate, the amount
which would be excessive interest will be applied to the reduction of the
unpaid principal balance due hereunder and not to the payment of interest.
This provision controls every other provision of all agreements between the
Company and Holder.
6.6 SEVERABILITY. If any term or provision of this Note is held
invalid, illegal, or unenforceable, the validity of all other terms and
provisions hereof will in no way be affected thereby.
6.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, excluding
that body of law relating to conflict of laws. Any legal action or
proceeding arising out of or in connection with this Note
must be brought exclusively in the state or federal courts sitting in Orange
County, California. The Company hereby irrevocably submits to the
jurisdiction of each such court, and agrees that any summons, pleading,
judgment, memorandum of law, or other paper relevant to any such action or
proceeding, including without limitation, service of process sufficient for
personal jurisdiction in any action against the Company, will be sufficiently
served if delivered to the Company by certified or registered mail (with
return receipt) at its principal executive offices. Nothing in the preceding
sentence will affect the right of any party to proceed in any jurisdiction
for the enforcement or execution of any judgment, decree or order made by a
court of competent jurisdiction.
6.8 DISPUTES. If any dispute regarding this Note is substantially
related to any matter subject to arbitration between the Company and Holder,
that dispute regarding this Note will be consolidated with and resolved in
such arbitration.
6.9 ATTORNEY'S FEES. The Company agrees to pay the costs
(including without limitation reasonable attorney's fees and costs) of
enforcement and collection of this Note in case of any breach or default by
the Company hereunder.
6.10 OTHER OBLIGATIONS. Performance under this Note is not
intended and is not to be construed as an accord and satisfaction or other
release or discharge of any obligations or indebtedness of the Company to
Holder not otherwise evidenced specifically.
6.11 HEADING; REFERENCES. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
6.12 OTHER SUBORDINATED NOTES AND SUBORDINATION AGREEMENTS. The
Company represents to the Holder that the form of subordinated note issued by
the Company to, and the form of subordination agreement entered into by, each
holder (other than Non-Equity Noteholders) of a subordinated promissory note
issued by the Company in connection with any acquisition by the Company of
the stock or assets of any entity or business operation closing
contemporaneously with the transactions giving rise to this Note will be the
same as this Note and the Subordination Agreement, respectively.
6.13 WAIVER OF JURY TRIAL / WAIVER OF OBJECTION TO VENUE. THE
COMPANY WAIVES THE RIGHT TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR IN CONNECTION WITH THIS NOTE, AND ANY RIGHT
THE COMPANY MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON-CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT HEREUNDER.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed and delivered as of the date first written above.
PROFITSOURCE CORPORATION
By: _______________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice-President
EXHIBIT A
TO
PROMISSORY NOTE
Pursuant to Section 2 of that certain Promissory Note (the "NOTE")
made by ProfitSource Corporation (the "COMPANY") to NOTE_HOLDER dated
December 10, 1998 in the original principal amount of $NOTE_AMOUNT, the
Company has elected to meet its obligation to pay, on the "Payment Date"
referenced below, interest in the amount of the "Interest Amount" referenced
below by adding such amount to the Principal Amount of the Note.
Payment Date: ________________________________________
Interest Amount: _____________________________________
The Company acknowledges its obligation to pay the Interest Amount,
together with interest thereon from and after the Payment Date, as if the
Interest Amount were included in the original principal amount of the Note.
PROFITSOURCE CORPORATION
By: ______________________________
Name: ____________________________
Title: ____________________________
Date: ____________________________
EXHIBIT B
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT") is entered into as
of ________ ___, 1998, by and among ProfitSource Corporation, a Delaware
corporation (the "COMPANY"); __________________________, a [Delaware]
corporation ("[NAME]"), as Agent ("AGENT") for Lenders ("LENDERS") under the
Credit Agreement described below; and _______________________ (the
"SUBORDINATED CREDITOR").
R E C I T A L S
A. [ProfitSource Operating Company], a Delaware corporation and a
wholly-owned subsidiary of the Company ("BORROWER"), Agent and Lenders will
enter into a Credit Agreement of even date herewith (as the same may be
amended, supplemented, restated or otherwise modified from time to time, the
"CREDIT AGREEMENT") pursuant to which Lenders will, subject to the terms set
forth in the Credit Agreement, make loans and other extensions of credit to
Borrower, which loans and extensions of credit will be guarantied by the
Company pursuant to the Guaranty of even date herewith by the Company in
favor of Agent and Lenders (as the same may be amended, supplemented,
restated or otherwise modified from time to time, the "GUARANTY").
B. Pursuant to that certain [Stock] [Asset] Purchase Agreement
dated ___________________, 1998 (the "PURCHASE AGREEMENT"), the Company has
issued to the Subordinated Creditor a Subordinated Promissory Note of even
date herewith in the initial principal amount of $___________________ (the
"SUBORDINATED NOTE").
C. As an inducement to Lenders to enter into the Credit
Agreement, Lenders have required the execution and delivery of this Agreement
by Subordinated Creditor and the Company.
NOW, THEREFORE, in order to induce Lenders to enter into the Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. The following terms shall have the following
meanings in this Agreement:
"COLLECTION ACTION" means (a) to demand, ▇▇▇ for, take or
receive from or on behalf of the Company (including, without
limitation, by set-off, counterclaim or in any other manner) the
whole or part of the Subordinated Debt, (b) to initiate or
participate with others in any suit, action or proceeding against
the Company with respect to the Subordinated Debt, to (i) enforce
payment of or to collect the whole or any part of the
Subordinated Debt or (ii) commence enforcement of any of the
rights and remedies under the Subordinated Debt Documents or
applicable
law with respect to the Subordinated Debt, (c) to accelerate any
Subordinated Debt, or (d) to refuse or fail to perform any covenant
or agreement under the Purchase Agreement due to the occurrence of
a Subordinated Default.
"PROCEEDING" means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation,
dissolution, assignment for the benefit of creditors, appointment
of a custodian, receiver, trustee or other officer with similar
powers or any other proceeding for the liquidation, dissolution
or other winding up of the Company.
"SENIOR CREDITORS" means Agent and Lenders under the Credit
Agreement, all successors, assigns and participants thereof, and
any bank, commercial finance company or other lender from time to
time holding Senior Debt.
"SENIOR DEBT" means all indebtedness, obligations and
liabilities (whether or not liquidated or determinable) now or
hereafter owing by the Company or any of its subsidiaries
(including without limitation the Borrower) to any Senior
Creditor under or in respect of the Senior Debt Documents.
Senior Debt includes all interest accruing on the principal of
Senior Debt after the commencement of a Proceeding, whether or
not such interest accrues in any such Proceeding or is allowed as
a claim in any such Proceeding.
"SENIOR DEBT DOCUMENTS" means the Credit Agreement, the
Guaranty and all other agreements, documents and instruments now
or hereafter evidencing, securing or otherwise pertaining to all
or any portion of the Senior Debt, including any amendment,
modification, restatement, extension or renewal of the Credit
Agreement and successive refinancings or refundings of the Senior
Debt evidenced thereby.
"SENIOR DEFAULT" means any "Default" or "Event of Default"
described in the Senior Debt Documents or any condition or event
that (with or without notice, lapse of time, or both) would
permit the holders of Senior Debt to accelerate the maturity of
any Senior Debt if that condition or event were not cured or
removed within any applicable grace or cure period set forth
therein.
"SUBORDINATED DEBT" means all indebtedness, obligations and
liabilities of the Company now or hereafter owing under or in
respect of the Subordinated Note (including all indemnification
and other obligations of the Company under the Purchase Agreement
relating to the Subordinated Note, other than obligations to
deliver the cash and stock
portions of the purchase price payable under the Purchase Agreement
at the closing thereunder).
"SUBORDINATED DEFAULT" means any "Event of Default" described
in the Subordinated Note.
2. SUBORDINATION.
2.1. SUBORDINATION OF SUBORDINATED DEBT TO SENIOR DEBT. Each of
the Company and Subordinated Creditor agrees that the payment of the
Subordinated Debt shall be subordinate and subject, in right of payment, to
the prior payment in full of the Senior Debt, and that each holder of Senior
Debt, whether now outstanding or hereafter created, incurred, assumed or
guaranteed, shall be deemed to have acquired, maintained or advanced such
Senior Debt in reliance upon the provisions contained in this Agreement.
2.2. PROCEEDINGS. In the event of any Proceeding involving the
Company, (a) after any Proceeding all Senior Debt first shall be paid in full
before any payment of or with respect to Subordinated Debt shall be made; (b)
any payment or distribution after any Proceeding, whether in cash, property
or securities which, but for the terms hereof, otherwise would be payable or
deliverable after any Proceeding in respect of the Subordinated Debt, shall
be paid or delivered directly to Agent or its successors until all Senior
Debt is paid in full, and Subordinated Creditor irrevocably authorizes,
empowers and directs all receivers, trustees, debtors in possession,
liquidators, custodians, conservators and others having authority in the
premises to effect all such payments and distributions, and Subordinated
Creditor also irrevocably authorizes, empowers and directs Agent or its
successors to demand, ▇▇▇ for, collect and receive every such payment or
distribution; (c) Subordinated Creditor agrees to execute and deliver to
Agent or its successors all such further reasonable instruments confirming
the irrevocable authorizations referred to in the foregoing clause (b) as
Senior Creditors may reasonably request at any time; (d) Subordinated
Creditor agrees not to initiate or prosecute or encourage any other entity to
initiate or prosecute any claim, objection, action or proceeding (or vote any
claim in a Proceeding which would have the effect of) challenging or
objecting to the enforceability of the Senior Debt or any liens or security
interests securing the Senior Debt; and (e) Subordinated Creditor agrees to
execute, verify, deliver, and file appropriate proofs of claim in respect of
the Subordinated Debt in connection with any such Proceeding and irrevocably
authorizes, empowers and appoints Agent or its successors as Subordinated
Creditor's agent and attorney-in-fact to execute, verify, deliver and file
such proofs of claim if Subordinated Creditor fails to do so prior to 5 days
before the expiration of the time to file any such proof of claim. The
Senior Debt shall continue to be treated as Senior Debt and the provisions of
this Agreement shall continue to govern the relative rights and priorities of
Senior Creditors and Subordinated Creditor even if all or part of the Senior
Debt or the security interests securing the Senior Debt are subordinated, set
aside, avoided or disallowed in connection with any such Proceeding and this
Agreement shall be reinstated if at any time within ___ months of any payment
of any of the Senior Debt such payment is rescinded or must otherwise be
returned by any holder of Senior Debt or any representative of such holder.
2.3. RESTRICTION ON PAYMENT. Notwithstanding any provision of the
Subordinated Note or the Purchase Agreement to the contrary, the Company may
not make, and Subordinated Creditor may not receive or retain any payment of
or with respect to the Subordinated Debt until the Senior Debt is paid in
full and the Lenders are not obligated to extend further credit thereunder
except that, subject to SECTION 2.2 above, the Company may make scheduled
cash payments of accrued interest on the Subordinated Note so long as no
Senior Default shall have occurred and be continuing or would result
therefrom, the Company may repay the outstanding principal balance of the
Subordinated Note, together with accrued and unpaid interest thereon, from
the proceeds of an initial public offering of the Company's equity securities.
2.4. RESTRICTION ON ACTION BY SUBORDINATED CREDITORS.
Until the Senior Debt is paid in full and the Lenders are not
obligated to extend further credit thereunder, (a) Subordinated Creditor
shall not take any Collection Action with respect to the Subordinated Debt if
receipt of payment pursued in such Collection Action would violate this
Agreement and (b) Subordinated Creditor shall not, without the prior written
consent of Agent or its successors, agree to any amendment, modification or
supplement to the Subordinated Note that would be inconsistent with this
Agreement.
2.5. INCORRECT PAYMENTS. If any payment or distribution on account
of the Subordinated Debt not permitted to be made by the Company or received
by Subordinated Creditor under this Agreement is received by Subordinated
Creditor before all Senior Debt is paid in full , such payment or
distribution shall be held in trust by Subordinated Creditor for the benefit
of the Senior Creditors and shall be promptly paid over to Agent or its
successors for application to the payment of the Senior Debt then remaining
unpaid.
2.6. SALE, TRANSFER, ETC. Subordinated Creditor shall not sell,
assign, pledge, dispose of or otherwise transfer all or any portion of the
Subordinated Debt unless the purchaser, assignee, pledgee, or transferee has
acknowledged and undertaken for the benefit of Agent and the Lenders to be
bound by this Agreement. Notwithstanding the failure of Subordinated
Creditor to comply with the preceding sentence, the subordination effected
hereby shall survive any sale, assignment, pledgee, disposition or other
transfer of all or any portion of the Subordinated Debt, and the terms of
this Agreement shall be binding upon the successors and assigns of
Subordinated Creditor, as provided in SECTION 10 below.
2.7. LEGENDS. The Subordinated Note shall contain the following
legend:
"This Note and the indebtedness evidenced hereby are subordinated
in the manner and to the extent set forth in that certain Subordination
Agreement (the "Subordination Agreement") dated as of October ___, 1998 among
ProfitSource Corporation, ___________________, as Agent, and
________________, as Subordinated Creditor, to the Senior Debt (as defined in
such Subordination Agreement) and each holder of this Note, by its acceptance
hereof, shall be bound by the provisions of the Subordination Agreement."
3. MODIFICATIONS TO SENIOR DEBT. Senior Creditors may at any time
and from time to time without the consent of or notice to Subordinated
Creditor, without incurring liability to Subordinated Creditor and without
impairing or releasing the obligations of Subordinated Creditor under this
Agreement, change the manner or place of payment or extend the time of
payment of or renew or alter any Senior Debt, or amend in any manner any
Senior Debt Documents, or increase the amount of the Senior Debt, provided
that immediately following any such increase, the ratio of the Company's
EBITDA to Total Interest Expense is at least 2:1. For purposes hereof,
"EBITDA" means the Company's consolidated earnings before interest, taxes,
depreciation and amortization for the four most recently completed fiscal
quarters, as adjusted to give effect to the use by the Company of the
proceeds of such increase in Senior Debt, including without limitation to
acquire any other entity, and, to the extent that such calculation includes
earnings of entities acquired by the Company since the beginning of such
four-quarter measurement period, including entities acquired with the
proceeds of such increase in Senior Debt, as further adjusted to give effect
to pro-forma adjustments made to such acquired company's historical earnings
in connection with the valuation, acquisition, and integration of such
company by the Company. For purposes hereof, "TOTAL INTEREST EXPENSE" means
the Company's anticipated consolidated pro forma annual interest expense at
the time of and after giving effect to such increase in Senior Debt.
4. CONTINUED EFFECTIVENESS OF THIS AGREEMENT. The terms of this
Agreement and the subordination effected hereby shall not be affected,
modified or impaired in any manner by: (a) any amendment or modification of
or supplement to the Senior Debt Documents or the Subordinated Note; (b) the
validity or enforceability of any of such documents; (c) the enforcement (or
lack of enforcement) or release of security interests securing payment of the
Senior Debt; or (d) any exercise or non-exercise of any right, power or
remedy under or in respect of the Senior Debt or the Subordinated Debt or any
of the instruments or documents referred to in clause (a) above.
Subordinated Creditor acknowledges that the provisions of this Agreement are
intended to be enforceable at all times, whether before, in connection with
or after the commencement of a Proceeding.
5. REPRESENTATIONS AND WARRANTIES. Subordinated Creditor hereby
represents and warrants to Senior Creditors that Subordinated Creditor is the
current and sole owner and holder of the Subordinated Note.
6. CUMULATIVE RIGHTS, NO WAIVERS, SPECIFIC PERFORMANCE. Any
failure or delay on the part of any party in exercising any right, remedy or
power granted hereunder, or abandonment or discontinuance of steps to enforce
the same, shall not operate as a waiver thereof or affect the rights of the
affected party thereafter to exercise the same. The parties acknowledge and
agree that the other parties hereto may have no adequate remedy at law for a
breach of this Agreement and each agrees that, in addition to all other
remedies hereunder, the parties hereto shall have the right to specific
performance.
7. MODIFICATION. Any modification or waiver of any provision of
this Agreement, or any consent to any departure by any party therefrom, shall
not be effective in any event unless the same is in writing and signed by
Agent or its successors and by Subordinated
Creditor or its representative, and then such modification, waiver or consent
shall be effective only in the specific instance and for the specific purpose
given.
8. NOTICES. Unless otherwise specifically provided herein, any
notice or other communication required or permitted to be given shall be in
writing addressed to the respective party as set forth below and may be
personally served, telecopied or sent by overnight courier service or United
States mail certified or registered and shall be deemed to have been given
(a) if delivered in person, when delivered; (b) if delivered by telecopy, on
the date of transmission if transmitted on a business day before 4:00 p.m.
(Chicago time) or, if not, on the next succeeding business day; (c) if
delivered by overnight courier, one business day after delivery to such
courier properly addressed; or (d) if by United States mail, four business
days after deposit in the United States mail, postage, prepaid and properly
addressed.
Notices shall be addressed as follows:
(a) If to Subordinated Creditor to:
________________________
________________________
________________________
________________________
Attention: _______________
Telecopy: (___)_____-_____
(b) If to the Company to:
________________________
________________________
________________________
________________________
Attention: _______________
Telecopy: (___)_____-_____
(c) If to Agent:
________________________
________________________
________________________
________________________
Attention: _______________
Telecopy: (___)_____-_____
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this SECTION 8. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
9. SEVERABILITY. In the event that any provision of this
Agreement is determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby, and the
affected provision shall be modified to the minimum extent required by law so
as most fully to achieve the intention of this Agreement.
10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the successors and assigns of Agent and each Senior Creditor and
shall be binding upon the successors and assigns of Subordinated Creditor and
the Company.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall be one and the same instrument.
12. DEFINES RIGHTS OF CREDITORS. The provisions of this Agreement
are solely for the purpose of defining the relative rights of Subordinated
Creditor and Senior Creditors and shall not be deemed to create any rights or
priorities in favor of any other person or entity, including, without
limitation, the Company.
13. CONFLICT. In the event of any conflict between any term,
covenant or condition of this Agreement and any term, covenant or condition
of any of the Subordinated Note, the provisions of this Agreement shall
control and govern.
14. SUBROGATION TO RIGHTS OF SENIOR CREDITORS. Subject to the
payment in full of all Senior Debt and termination of the commitments of the
Lenders to extend further credit under the Senior Debt Documents,
Subordinated Creditor shall be subrogated to the rights of Senior Creditors
to receive payments and distributions of cash, property and securities
applicable to the Senior Debt to the extent that distributions otherwise
payable to Subordinated Creditor have been applied to the Senior Debt, until
all amounts payable under the Subordinated Debt shall have been paid in full.
For purposes of such subrogation, no payments or distributions to Senior
Creditors of any cash, property or securities to which Subordinated Creditor
would be entitled except for the provisions of this Agreement, and no
payments over by Subordinated Creditor to Senior Creditors pursuant to the
provisions of this Agreement shall, as among the Company, its creditors other
than Senior Creditors and Subordinated Creditor, be deemed to be a payments
or distribution by the Company to or on account of the Senior Debt.
15. HEADINGS. The section headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
16. TERMINATION. This Agreement shall terminate upon the
indefeasible payment in full of the Senior Debt and termination of the
commitments of the Lenders to extend further credit under the Senior Debt
Documents.
17. APPLICABLE LAW. This Agreement shall be governed by, and be
construed and interpreted in accordance with, the internal laws (as opposed
to conflict of laws provisions) of the State of New York. Subordinated
Creditor and the Company hereby consent to the
jurisdiction of any state or federal court located in New York, New York and
irrevocably agree that, subject to Agent's election, all actions or
proceedings arising out of or relating to this Agreement shall be litigated
in such courts. Nothing herein shall limit the right of any Senior Creditor
to bring proceedings against Subordinated Creditor or the Company in the
courts of any other jurisdiction.
18. WAIVER OF JURY TRIAL. EACH OF SUBORDINATED CREDITOR, THE
COMPANY, AGENT AND EACH SENIOR CREDITOR HEREBY WAIVES ITS RIGHT TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT.
19. WAIVER OF CONSOLIDATION. Subordinated Creditor acknowledges
and agrees that it will not at any time insist upon, plead or seek advantage
of any substantive consolidation, piercing the corporate veil or any other
judgment that causes an effective combination of the assets and liabilities
of the Company and any of its subsidiaries (including without limitation,
Borrower) in any case or proceeding under Title II of the United States Code
or similar proceeding.
IN WITNESS WHEREOF, the Company, Agent and Subordinated Creditor
have caused this Agreement to be executed as of the date first above written.
PROFITSOURCE CORPORATION
By: _________________________________
Its: _________________________________
AGENT:
___________________________
By: _________________________________
Its: _________________________________
SUBORDINATED CREDITOR:
___________________________
By: __________________________________
Its: __________________________________
