EXHIBIT 4.1
DEBENTURE AGREEMENT
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EarthCare Company
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
10% Convertible Subordinated Debentures
Due October 31, 2006
October 19, 1999
To each of the Purchasers
of the above Debentures listed in
the Schedule of Purchasers
attached hereto as Schedule 1:
Gentlemen:
EarthCare Company, a Delaware corporation (the "Company"), hereby agrees
with you (each herein called a "Purchaser" and together, the "Purchasers") as
follows:
1. AUTHORIZATION OF DEBENTURES AND COMMON STOCK: The Company will
authorize the issue and sale of (i) up to $15,000,000 in aggregate principal
amount of its 10% Convertible Subordinated Debentures due October 31, 2006 (the
"Debentures"), and (ii) 1,304,348 shares of its Common Stock, $0.0001 par value
per share (the "Common Stock"), issuable upon conversion of the Debentures, such
number of shares and the conversion price being subject to adjustment as
provided in the Debentures. Each Debenture issued hereunder will be dated the
date purchased by you hereunder, will mature on October 31, 2006, will bear
interest on its unpaid principal balance from the date of issuance at the rate
of 10% per annum, payable quarterly on December 31, March 31, June 30, and
September 30 each year, commencing on December 31, 1999 and continuing to
October 31, 2006, and thereafter shall bear interest on its unpaid principal
balance at the rate of 18% per annum, payable quarterly on December 31, March
31, June 30, and September 30 each year, and upon any conversion or redemption
of a Debenture (or, if less than all of the principal amount of a Debenture is
converted, the portion of accrued and unpaid interest corresponding to the
portion of principal of such Debenture converted) and will have the other terms
and provisions provided herein and in the form of Debenture attached hereto as
Exhibit A, with such changes therefrom, if any, as may be approved by you and
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the Company. The term "Debenture" or "Debentures" as used herein shall include
each Debenture delivered pursuant to any provision of this
Agreement and each Debenture delivered in substitution or exchange for any such
Debenture pursuant to any such provision. Certain capitalized terms used in
this Agreement are defined in Section 14.
2. PURCHASE AND SALE OF DEBENTURES. The Company will issue and sell to
you and, subject to the terms and conditions of this Agreement, you will
purchase from the Company, at the Closings provided for in Section 3, the
principal amount of Debentures specified opposite your name in the Schedule of
Purchasers at the purchase price of 100% of the principal amount or value
thereof.
3. CLOSING. The initial sale of at least $5,000,000 in principal amount
of the Debentures to be purchased by you will take place at the offices of the
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Inc. (the "Placement Agent"), ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., Houston Time, at a closing to occur not later than
October 15, 1999, or such other Business Day thereafter as may be agreed upon by
the Purchasers and the Company. The sale and purchase of an additional
aggregate of up to $10,000,000 in principal amount of the Debentures to be
purchased by you will take place at the offices of SMM at 10:00 a.m., Houston
Time, at a closing to occur not later than October 29, 1999, or such other
Business Day as may be agreed upon by the Purchasers and the Company. Each such
closing is referred to herein as a "Closing," the Date of each such Closing is
referred to herein as a "Closing Date," the date of the initial Closing is
referred to herein as the "First Closing Date," and the date of the final
Closing is referred to herein as the "Final Closing Date."
At each Closing, the Company will deliver to you the Debentures to be
purchased by you in the form of one Debenture (or such greater number of
Debentures as you may request in denominations of not less than $1,000.00 per
note and integral multiples thereof and a minimum principal amount of $25,000
unless otherwise agreed to by the Company), each dated the date of the Closing
and registered in your name (or in the name of your nominee as indicated on the
Schedule of Purchasers or otherwise made known in writing by you to the Company
prior to the Closing), against delivery by you to the Company or its order of
immediately available funds in the amount of the purchase price therefor.
4. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to you that:
4.1. Organization, Qualification, Standing, Capital Stock, etc. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, has the corporate power to
own its properties and to carry on its businesses as the same are now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned by it or the nature
of its businesses makes such qualification necessary, except where the failure
to so qualify would not have a Material Adverse Effect. The authorized capital
stock of the Company consists of 70,000,000 shares of Common Stock, $0.0001 par
value per share, of which 11,122,784 shares were issued
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and outstanding at the First Closing Date and 30,000,000 shares of Preferred
▇▇▇▇▇, ▇.▇▇▇▇ par value per share, of which zero shares of Preferred Stock were
issued and outstanding at the First Closing Date. All of such outstanding shares
have been validly issued and are fully paid and nonassessable. The Company has
reserved (i) 1,304,348 shares of Common Stock for issuance pursuant to the
Debentures, (ii) 3,030,565 shares of Common Stock for issuance pursuant to
options and warrants outstanding at the First Closing Date, (iii) 120,000 shares
of Common Stock for issuance pursuant to acquisition agreements, and (iv)
5,000,000 shares of Common Stock for issuance in acquisitions pursuant to the
Company registration statement on Form S-1. Except as stated in this Section
4.1, the Company has not reserved any additional shares for issuance (except as
expressly required by this Agreement) and has not issued any shares of its
Common Stock. Except for those described in the second preceding sentence and
for an agreement to issue to the Placement Agent a warrant to purchase the
number of shares of Common Stock equal to ten percent of the aggregate principal
amount of Debentures issued pursuant to this Agreement divided by the initial
Conversion Price in partial consideration for its services to the Company in
connection with the placement of the Debentures, there are not outstanding, nor
is the Company subject to any agreement, arrangement, or understanding under
which there may become outstanding, any option, warrant, or other right to
purchase or subscribe to, or security convertible into or exchangeable for, any
shares of capital stock of any class of the Company. The Company's Subsidiaries
are identified in Item 1 of the Form 10-K and such Item correctly states the
jurisdiction of organization and the extent of the Company's ownership of
outstanding voting securities of each such Subsidiary. All such voting
securities are owned by the Company free and clear of any liens, claims or
encumbrances of any nature.
4.2. Financial Statements, Subsequent Changes, etc. The Form 10-K, one or
more copies of which have been furnished to you, contains consolidated balance
sheets of the Company and its consolidated Subsidiary, and the consolidated
statements of income, stockholders' equity, and cash flows of the Company and
its consolidated Subsidiaries for each of the three years ended December 31,
1998, including notes thereto, and the opinion of PriceWaterhouseCoopers LLP,
independent certified public accountants with respect to such financial
statements. The Form 10-Q, one or more copies of which have been furnished to
you, contains the unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries at, and the unaudited consolidated statements of
income, stockholders' equity, and cash flows of the Company and its consolidated
Subsidiaries for the period ended, June 30, 1999. All of the foregoing
financial statements are complete and correct in all material respects and
fairly present in all material respects the consolidated financial condition of
the Company and its consolidated Subsidiaries at the respective dates of said
balance sheets and the consolidated results of operations of the Company and its
consolidated Subsidiaries for the respective periods covered thereby. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as otherwise noted therein). There were no material
liabilities, direct or indirect, fixed or contingent, of the Company and its
consolidated Subsidiaries as of the respective dates of such balance sheets that
are not reflected therein or in the notes thereto. Except as disclosed in the
Memorandum, there has been no material change in the consolidated condition,
financial or otherwise, or operations of the Company and its consolidated
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Subsidiaries since June 30, 1999, nor has the Company or any Subsidiaries,
except for the execution, delivery, and performance of this Agreement, incurred
any Indebtedness for borrowed money, incurred any material liability, contingent
or otherwise, except in the ordinary course of business (including acquisitions
of business and assets), or entered into any material commitment or other
transaction not in the ordinary course of business since such date.
4.3. Other Information as to the Company. Each of the documents filed by
the Company with the SEC complied when filed in all material respects with all
of the requirements of the Securities Act and the Exchange Act, as applicable,
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be contained therein or necessary or necessary in
order to make the statements therein not misleading.
4.4. Litigation. Except as disclosed in the Memorandum, there is no
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or agency or any arbitrator now pending or, to the Company's
knowledge, threatened, against, or affecting the Company, its Subsidiaries or
any of their respective properties or rights, which, if adversely determined,
would be reasonable likely to, either in any case or in the aggregate result in
a Material Adverse Change, or result in any substantial liability not adequately
covered by insurance, or for which adequate reserves are not maintained on the
Company's consolidated balance sheet.
4.5. Franchises, Licenses, Trademarks, etc. Except as disclosed in the
Memorandum, the Company and the Subsidiaries have all franchises, permits,
licenses and other authority as are necessary to enable it to conduct its
business as now conducted and as proposed to be conducted, and to the best of
the Company's knowledge, neither the Company nor any Subsidiary is in default
under any such franchises, permits, licenses or other authority. Except as
disclosed in the Memorandum, the Company and each Subsidiaries own (or have made
appropriate application for) or are duly licensed to use trademarks, trademark
rights, trade names, trade name rights, and copyrights required to conduct its
business as the same is now being operated, to the Company's knowledge, and none
of the foregoing conflict with or infringe trademarks, copyrights, or trade
names of others.
4.6. Due Authorization and Compliance with Other Instruments. This
Agreement and the Debentures have been duly and validly authorized by all
requisite corporate proceeding and this Agreement constitutes, and the
Debentures when executed and delivered will be, valid and legally binding
obligations of the Company enforceable against the Company in accordance with
their terms except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium, or other laws relating to or affecting generally the
enforcement of creditors' rights and except to the extent that availability of
equitable remedies are subject to the discretion of courts before which any
proceeding therefor may be brought and the Debentures will be entitled to the
benefits of this Agreement and are not subject to any preemptive or similar
rights on the part of any holder or holders of shares of capital stock of the
Company. The shares of Common Stock to be issued to you upon conversion of the
Debentures have been authorized and reserved for issuance, are not subject to
any preemptive or similar rights on the part of any holder or holders
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of shares of capital stock of the Company and, if issued upon such conversion,
will be validly issued, fully paid and nonassessable.
4.7. Burdensome and Conflicting Agreements and Violations of Charter
Provisions. Neither the Company nor any Subsidiary is bound by any agreement or
instrument or subject to any
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charter or other corporate restriction which materially and adversely affects
its business, properties, operations, prospects or condition, financial or
otherwise. The Company is not in violation of its charter or by-laws or of any
agreement or instrument by which it is bound, or of any statute, law, rule or
regulation, or of any judgment, decree, writ, injunction, order or award of any
arbitrator, court or governmental authority applicable to it, in a manner that
could result in the imposition of substantial penalties or result in a Material
Adverse Change. Neither the authorization, execution and delivery of this
Agreement or the Debentures, the issuance and delivery of shares of Common Stock
upon conversion of any of the Debentures, the consummation of the transactions
herein and therein contemplated, nor the fulfillment of or compliance with the
terms hereof and thereof, will conflict with or result in a breach of any of the
terms of the charter or by-laws, or of any material statute, law, rule or
regulation, or of any judgment, decree, writ, injunction, order or award of any
arbitrator, court or governmental authority, or of any instrument, which is
applicable to the Company or its Subsidiaries or by which the Company or any
Subsidiary is bound, or result in the imposition of any lien upon any of the
properties or assets of the Company or its Subsidiaries.
4.8. Consents and Approvals. The Company has obtained or made provisions
to obtain all material (a) governmental consents, approvals and authorizations,
and registrations and filings with governmental authorities, and (b) consents,
approvals, waivers and notifications of stockholders, creditors, lessors and
other non-governmental persons, in each case, in connection with the execution
and delivery of this Agreement and the Debentures, and except for any
registrations and filings necessary in connection with the registration of the
Common Stock issuable upon conversion of the Debentures, the consummation of the
transactions herein and therein contemplated.
4.9. Tax Returns and Payments. The Company and its Subsidiaries have
filed all required information and tax returns and reports and have paid, or
adequately provided for the payment of, all taxes, assessments and other
governmental charges that are material in amount respectively imposed upon them
or upon any of their respective assets, income or franchises, other than any
such charges which are currently payable without penalty or interest. The
charges, accruals and reserves on the books of the Company and the Subsidiaries
with respect to taxes for all fiscal periods are adequate, in the opinion of the
Company, and neither the Company nor any Subsidiary knows of any actual or
proposed tax assessment that is material in amount for any fiscal period or of
any basis therefor against which adequate reserves have not been set up. The
Company has not been advised that any federal income tax or information return
of the Company or any Subsidiary has been, or will be, examined or audited by
the Internal Revenue Service.
4.10. Offering of the Securities. Neither the Company nor anyone
authorized to act on its behalf (other than the Placement Agent) has or will
directly or indirectly sell or offer the Securities or any part thereof or any
similar securities to, or solicit any offer to buy any thereof from, any Person
so as to bring the issue and sale of any thereof within the provisions of
Section 5 of the Securities Act. In connection with the offering of the
Securities, the Company has agreed to pay the Placement Agent a fee equal to 7%
of the gross proceeds (3% in the case of any Securities purchased by ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇. or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ or their affiliates) to the
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Company from the sale of the Securities and to issue to the Placement Agent a
warrant to purchase the number of shares of Common Stock equal to ten percent of
the aggregate principal amount of the Debentures issued pursuant to this
Agreement divided by the initial Conversion Price at a purchase price per share
equal to the Conversion Price.
4.11. Outstanding Registration Rights. Except as described in the
Memorandum, neither the Company nor any Subsidiary is a party to any contract or
agreement pursuant to which any other party or parties thereto have the right to
require the Company or any such Subsidiary (on a best efforts basis or
otherwise) (a) to register securities of the Company or any such Subsidiary
under the Securities Act for sale by or on behalf of such party or parties or
(b) to notify such party or parties of the Company's or any such Subsidiary's
intention to file a registration statement under the Securities Act and at the
request of such party or parties to include therein securities of the Company or
any such Subsidiary for sale by or on behalf of such party or parties.
4.12. Other Adverse Facts, etc. To the best of the Company's knowledge,
there are no existing facts or circumstances which materially and adversely
affect, or (insofar as the Company can now reasonably foresee) in the future may
materially and adversely affect, the business, prospects, results of operations
or condition, financial or otherwise, of the Company and the Subsidiaries, on a
consolidated basis, which are not disclosed in the Form 10-K, the Form 10-Q,
other documents filed with the SEC pursuant to the Exchange Act, or in this
Agreement or any exhibit hereto, the Memorandum, or which are required to be
disclosed by the Company in an Exchange Act filing.
4.13. Status Under Certain Statutes. Neither the Company nor any
Subsidiary is either (i) a "public utility company" or a "holding company", or
an "affiliate" or a "subsidiary company" of a "holding company", or an
"affiliate" of such a "subsidiary company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a "public
utility" as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person" thereof or an "affiliated person"
of any such "affiliated person," as such terms are defined in the Investment
Company Act of 1940, as amended.
4.14. Year 2000 Compliance. The mission critical used by the Company as
of the First Closing Date (including without limitation all software and
hardware) are Year 2000 Compliant or will be Year 2000 Compliant by December 31,
1999, except where the failure to be Year 2000 Compliant would not have a
Material Adverse Change.
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5. REDEMPTION OF THE DEBENTURES.
5.1. Optional Redemption. The Company may, at its option at any time
after the third anniversary date of the Final Closing Date, upon notice as
provided in Section 5.2, redeem the Debentures in whole, but not in part, at the
principal amount of the Debentures so prepaid, plus accrued and unpaid interest
to and including the date of redemption (the "Redemption Date"), if (i) the
Redemption Date occurs within 30 days after the expiration of any period of 20
consecutive Trading Days during which the Current Market Price for shares of
Common Stock exceeded 150% of the Conversion Price in effect on the last Trading
Day of such period and (ii) at all times during
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the period beginning no later than 30 days prior to the Redemption Date and
ending no earlier than 45 days after the Redemption Date, there was an effective
registration statement with the SEC under the Securities Act covering the
Restricted Stock, subject to any Holder's right to first convert the Debentures
into Common Stock pursuant to Section 13.
5.2. Notice of Optional Redemption. The Company will give each holder of
any Debentures written notice of any optional redemption of Debentures under
Section 5.1 not less than 30 days and not more than 60 days prior to the
Redemption Date, such notice to specify the Redemption Date, the aggregate
amount of Debentures to be redeemed, the principal amount of each Debenture held
by such holder to be redeemed and the Conversion Price as of the date of such
notice. Such notice shall be accompanied by a certificate of the chief
financial officer of the Company certifying that the conditions of Section 5.1
have been fulfilled and specifying the particulars of such fulfillment.
5.3. Maturity; Surrender. With respect to a redemption of the Debentures
pursuant to Section 5.1, the principal amount of each Debenture shall mature and
become due and payable on the Redemption Date, together with interest on such
principal amount accrued and unpaid to the Redemption Date. From and after the
Redemption Date, unless the Company shall fail to pay such principal amount when
so due and payable, together with interest on such principal, as aforesaid,
interest on such principal amount shall cease to accrue. Any Debenture redeemed
shall, after such redemption, be surrendered to the Company and canceled.
6. CONDITIONS PRECEDENT.
6.1. Closing. Your obligation to purchase from the Company the principal
amount of Debentures specified opposite your name in the Schedule of Purchasers
at any Closing shall be subject to the following conditions precedent:
(a) Opinions of Company Counsel. You shall have received from ▇▇▇▇▇▇ ▇.
▇▇▇▇, counsel for the Company, an opinion, dated the First Closing Date and
updated each subsequent Closing Date, satisfactory in form and substance to you
to the effect that:
(i) the Company, and each Subsidiary of the Company, is a
corporation validly existing and in good standing under the laws of its
respective state of incorporation, has the corporate power to own its
properties and to carry on its business as now being conducted, and is duly
qualified to do business and is in good standing in each jurisdiction in
which its ownership or leasing of property requires such qualification;
(ii) the Company has full corporate power and authority to execute
and deliver this Agreement, to make and deliver the Debentures and to
perform and observe the terms and provisions of this Agreement and of the
Debentures;
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(iii) this Agreement has been duly authorized, executed, and
delivered by the Company and constitutes the legal, valid, and binding
obligation of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, rearrangement, moratorium,
reorganization, or similar debtor relief laws affecting the rights of
creditors generally from time to time in effect and except to the extent
that availability of equitable remedies are subject to the discretion of
the court before which any proceeding therefor may be brought and that
rights to indemnification may be limited by applicable law;
(iv) the Debentures sold to you on the Closing Date have been duly
authorized, executed, and delivered by the Company, constitute the valid
and legally binding obligations of the Company and are entitled to the
benefits of this Agreement, subject to applicable bankruptcy, insolvency,
rearrangement, moratorium, reorganization, or similar debtor relief laws
affecting the rights of creditors generally from time to time in effect and
except to the extent that availability of equitable remedies are subject to
the discretion of the court before which any proceeding therefor may be
brought;
(v) the Company has authorized 70,000,000 shares of Common Stock,
$0.0001 par value per share, of which 11,122,784 shares were outstanding on
the date of the Agreement and 30,000,000 shares of Preferred Stock, $0.0001
par value per share, none of which shares of Preferred Stock were
outstanding on the date of the Agreement. All of such shares have been
validly issued and are fully paid and nonassessable;
(vi) to the effect that 1,304,348 shares of the authorized and
unissued Common Stock of the Company, have been duly reserved for issuance
upon conversion of the Debentures and no further corporate action is
required for the valid issuance of any thereof; such shares are not subject
to preemptive rights of any present or future shareholder of the Company,
and upon the issuance of any such shares upon conversion of any such
Debenture in accordance with its terms, the shares so issued will be duly
authorized, validly issued, fully paid, and nonassessable;
(vii) neither the execution and delivery of this Agreement and the
Securities nor performance and observance of the terms and provisions
hereof and thereof violate or conflict with the Articles of Incorporation
or By-Laws of the Company, conflict with or result in any material breach
or contravention of any provision of any currently applicable statute or
regulation and existing interpretations thereof or governmental regulation,
or of any order, writ, injunction, decree, or award of any court,
arbitrator, or governmental authority known to such counsel so as to result
in a Material Adverse Change, or conflict with or result in any material
breach of any of the terms, conditions, or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge,
or encumbrance upon any of the properties or assets of the Company pursuant
to the terms of, any instrument evidencing any Senior Obligations;
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(viii) it is not necessary in connection with the issuance and
delivery of the Securities to you on the Closing Date under the
circumstances contemplated by, and in accordance with the terms of, this
Agreement to register the Securities under the Securities Act or to
register or qualify the Securities under any applicable state securities of
the States of [identify States where Securities are offered and sold] or to
qualify an indenture in respect of the Debentures under the Trust Indenture
Act; and
(ix) all approvals and authorizations by any state or federal agency
or body required for the issuance and sale of the Securities to you and for
the execution and delivery of this Agreement have been obtained or that no
such approvals of authorizations are required.
(b) Representations and Defaults. The representations and warranties made
by the Company herein shall be true and correct in all material respects on and
as of the Closing Date with the same effects as if they had been made on and as
of the Closing Date (except as to any changes resulting from transactions
expressly reflected herein or contemplated hereby) and no Event of Default (as
defined in Section 11), nor any condition or event which, after notice or lapse
of time, or both, would constitute such an Event of Default, shall exist; and
the Company shall deliver to you on the Closing Date a certificate of the
President and the Treasurer of the Company to the foregoing effects.
(c) Documents. All proceedings to be taken in connection with the
transactions contemplated by this Agreement to be consummated at or prior to the
Closing Date, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to you and you shall have received original
counterparts or certified or other copies of all documents which you may have
reasonably requested in connection with said transactions and of all corporate
proceedings in connection therewith, in form and substance reasonably
satisfactory to you and your counsel.
(d) Minimum Offering. The Company shall have received commitments for the
purchase of a minimum of $5,000,000 in original principal amount of the
Debentures.
(e) No Material Adverse Change. As of the Closing Date, no Material
Adverse Change has occurred in the business or financial condition of the
Company.
(f) Bank Consent. The Company shall have received the consent of its
lenders under the Senior Credit Agreement (as defined in Section 9.7) to the
issuance and sale of up to $15,000,000 in aggregate principal amount of the
Debentures, and the execution and performance of this Agreement and the
transactions contemplated hereby.
7. COVENANTS OF THE COMPANY. The Company covenants and agrees that, so
long as any of the Debentures are outstanding, it will comply with the following
provisions, subject to the provisions of Section 15:
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Affirmative Covenants
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7.1. Use of Proceeds. The Company will apply all proceeds (net of costs
directly related to the preparation and negotiation of this Agreement and the
offering and sale of the Debentures) derived from the sale of the Debentures to
acquisitions and for general corporate purposes.
7.2. Payment of Principal and Interest. The Company will make all
payments of principal of and interest on the Debentures at the time the same
shall become due thereunder or hereunder.
7.3. Taxes. The Company will, and will cause each Subsidiary to, promptly
pay and discharge all lawful taxes, assessments, and governmental charges or
levies (other than taxes, assessments, and other governmental charges imposed by
foreign jurisdictions or otherwise which in the aggregate are not material to
the business or assets of the Company on an individual or consolidated basis)
imposed on it or upon its income or profits, or upon any of its properties, real
or personal, before the same shall become in default, as well as all lawful
claims for labor, materials, and supplies or otherwise which, if unpaid, might
become a lien or charge upon its properties or any part thereof; provided,
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however, that neither the Company nor any Subsidiary shall not be required to
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pay or cause to be paid any such tax, assessment, charge, levy or claim prior to
institution of foreclosure proceedings if the validity thereof shall be
contested in good faith by appropriate proceedings and if the Company shall have
established reserves deemed by the Company adequate with respect to such tax,
assessment, charge, levy, or claim or as may be required by generally accepted
accounting principles consistently applied.
7.4. Insurance. The Company will, and will cause its Subsidiaries to,
maintain liability, property damage, and insurance on its insurable property
against fire and other hazards with financially sound and responsible insurance
carriers in the relative proportionate amounts usually carried by reasonable and
prudent companies conducting businesses similar to that of the Company.
7.5. Maintenance of Existence and Properties. The Company will keep its
corporate existence in full force and effect. The Company will, and will cause
its Subsidiaries to, keep its properties in good repair, working order, and
condition (ordinary wear and tear excepted), and from time to time will make all
needful and proper repairs, renewals, replacements, extensions, additions,
betterments, and improvements thereto, so that the business carried on may be
properly conducted at all times in accordance with prudent business management.
The Company will, and will cause each Subsidiary to, comply with all applicable
laws and regulations (including Environmental Laws), decrees, orders, judgments,
licenses and permits, including without limitation all environmental permits
("Applicable Laws"), except where noncompliance with such Applicable Laws would
not cause a Material Adverse Change.
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7.6. Financial Statements and Compliance Certificates. The Company will,
and will cause each Subsidiary to, keep books of record and account in which
full, true and correct entries in all material respects in accordance with
generally accepted accounting principles will be made of
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all dealings or transactions in relation to its business and activities. The
Company shall furnish to each holder of any of the Debentures:
(a) as soon as available and in any event within 47 days after the
close of each fiscal quarter, commencing with the fiscal quarter ending
September 30, 1999, an unaudited consolidated balance sheet of the Company
and its consolidated Subsidiaries as of the end of such quarter and
consolidated statements of income, stockholders' equity, and cash flows of
the Company and its consolidated Subsidiaries for such quarter and for the
expired portion of the then current fiscal year, setting forth comparable
figures for the same quarter and expired portion of the previous fiscal
year, and prepared and certified by the chief financial officer of the
Company, subject to year-end audit adjustment;
(b) as soon as available and in any event within 92 days after the
close of each fiscal year of the Company, a balance sheet of the Company as
of the end of such fiscal year and statements of income, stockholders'
equity, and cash flows of the Company for such fiscal year, setting forth
comparable figures for the previous fiscal year, all reported upon, and
certified, by PriceWaterhouseCoopers LLP or other independent certified
public accountants of nationally recognized standing;
(c) with each financial statement required to be delivered pursuant to
the provisions of paragraph (a) or (b) above, a certificate of the
President and the chief financial officer of the Company stating that to
their knowledge there does not exist any Event of Default or any condition
or event which after notice or lapse of time, or both, would constitute an
Event of Default, or specifying the nature and period of existence of each
such Event of Default, condition or event and the action the Company is
taking or proposes to take with respect thereto;
(d) copies of all financial statements and reports sent by the Company
to its shareholders and of all regular and periodic reports, if any, filed
by it with the SEC pursuant to any statute administered by the SEC; and
(e) such other information relating to the business and financial
condition of the Company as may from time to time be reasonably requested
by you.
Except as and to the extent required by law or by any regulatory authority
having jurisdiction over you, and except for disclosures to prospective
transferees of any of your Debentures, you will not willfully disclose to others
information obtained from any such inspection or discussion which the Company
advises you is confidential in nature.
7.7. Notice of Default. The Company will within ten Business Days notify
you upon becoming aware of the occurrence of any Event of Default hereunder (or
the occurrence of any event or existence of any condition which with notice or
lapse of time, or both, would be reasonably likely to become an Event of
Default) or any event of default under any instrument evidencing Senior
Obligations.
14
7.8. Repurchase of the Debentures at the Option of the Holder Upon a
Change in Control.
(a) Upon the occurrence of a Change of Control, the Company shall make an
offer (subject only to conditions required by applicable law, if any) to each
Holder (the "Change of Control Offer"), to repurchase for cash all or any part
of such holder's Debentures on a date (the "Change of Control Purchase Date")
that is no later than 60 Business Days after the occurrence of such Change of
Control, at the Change of Control Purchase Price specified below, plus accrued
and unpaid interest to the Change of Control Purchase Date, and each Holder
shall have the right, at such Holder's option, to tender such Holder's
Debentures to the Company on the terms set forth in the Change of Control Offer.
The Change of Control Offer shall be made within 10 Business Days following a
Change of Control, and shall remain open for 20 Business Days following its
commencement (the "Change of Control Offer Period"). Upon expiration of the
Change of Control Offer Period, the Company promptly, but, in any event, no
later than 60 Business Days from the Change of Control, shall purchase all
Debentures properly tendered in response to the Change of Control Offer and each
Holder who has given a notice pursuant to this Section 7.8 that such Holder
desires to accept the Change of Control Offer for all or part of such Holder's
Debentures shall be obligated to tender and sell such Debentures to the Company
pursuant to such Offer.
(b) As used herein, a "Change of Control" means:
(i) any merger or consolidation of the Company with or into any
Person or any sale, transfer or other conveyance, whether direct or
indirect, of all or substantially all of the assets of the Company on a
consolidated basis, in one transaction or a series of related transactions,
if, immediately after giving effect to such transaction(s), any "person" or
"group" (as such terms are used for purposes of Sections 13(d) and 14(d) of
the Exchange Act, whether or not applicable), is or becomes the beneficial
owner (as such term is used in Rule 13d-3 of the Exchange Act or any
successor provision thereto), directly or indirectly, of more than 50% of
the total voting power in the aggregate normally entitled to vote in the
election of directors, managers or trustees, as applicable, of the
transferee(s) or surviving entity or entities,
(ii) any "person" or "group," becomes the beneficial owner, directly
or indirectly, of more than 50% of the total voting power in the aggregate
of all classes of capital stock of the Company then outstanding normally
entitled to vote in elections of directors, or
(iii) during any period of 12 consecutive months after the First
Closing Date, individuals, together with successors selected by such
individuals, who at the beginning of any such 12-month period constituted
the Board of Directors of the Company cease for any reason (other than a
planned retirement) to constitute a majority of the Board of Directors of
the Company then in office, as applicable;
15
provided, however, that any transaction that would otherwise fall within clause
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(i), (ii), or (iii) with respect to which discussions between the Company and
the other Person to such transaction were initiated prior to the date hereof and
with respect to which the Placement Agent is aware shall not be deemed to be a
Change in Control.
The "Change of Control Purchase Price" means
(i) 108.98 % of the principal amount of the Debentures, if a Change
of Control occurs on or prior to the second anniversary of the First
Closing Date;
(ii) 107.82% of the principal amount of the Debentures, if a Change
of Control occurs after the second anniversary and on or prior to the
fourth anniversary of the First Closing Date; and
(iii) 105.33% of the principal amount of the Debentures, if a Change
of Control occurs after the fourth anniversary of the First Closing Date.
(c) On or before the Change of Control Purchase Date, the Company will (i)
accept for payment the Debentures or portions thereof properly tendered pursuant
to the Change of Control Offer, (ii) promptly pay the Holders of Debentures so
accepted an amount equal to the Change of Control Purchase Price (together with
accrued and unpaid interest, if any), and (iii) authenticate and deliver to such
Holders a new Debenture equal in principal amount to any unpurchased portion of
the Debenture surrendered.
Negative Covenants
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7.9. Limitation on Consolidation, Merger and Sale. The Company shall not
consolidate with or merge with any other corporation or convey, transfer or
lease substantially all of its assets in a single transaction or series of
transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of such
merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the
case may be, shall be a solvent corporation organized and existing
under the laws of the United States or any State thereof (including
the District of Columbia), and, if the Company is not such
corporation, such corporation shall have executed and delivered to
each holder of any Debentures its assumption of the due and punctual
performance and observance of each covenant and condition of this
Agreement and the Debentures; and
(b) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of substantially all of the assets of
the Company shall have the effect of releasing the Company or any successor
corporation that shall theretofore have
16
become such in the manner prescribed in this Section 7.9 from its liability
under this Agreement, the Other Agreements to which the Company is a party or
the Debentures.
7.10 No Dividends. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly declare or pay any dividend or make any
distribution on account of the capital stock (including all shares, interests,
participations, rights or other equivalents of corporate stock) of the Company
or any of its Subsidiaries (other than dividends or distributions payable to the
Company or any of its Subsidiaries and other than dividends or distributions in
connection with a shareholder rights plan).
7.11. Forbearance from Restrictions on Rights of Holders of Debentures.
The Company will not enter into any agreement or instrument or otherwise agree
to any covenant that would in any way limit the right of the Holders to convert
the Debentures into Common Stock.
7.12 Other Subordinated Indebtedness. The Company shall not incur any
Indebtedness other than the Senior Obligations that is or purports to be senior
in right of payment to the Debentures without the written consent of Holders
holding a majority in principal amount of the Debentures.
80 PAYMENT, REGISTRATION AND TRANSFER OF DEBENTURES.
8.1. Place of Payment. The Company will promptly and punctually pay the
interest on the Debentures held by you without any presentment thereof; and the
Company will pay all amounts payable to you in respect of principal of and
interest on the Debentures to you or your nominees at the address specified in
Schedule 1, or at such other place as you may from time to time designate in
writing.
8.2. Registration and Transfer. The Company agrees to maintain an office
(or to appoint an agent having an office) in Dallas, Texas, or such other city
as the Company may designate by notice in writing to you, at which Debentures
may be surrendered for transfer and reissuance, for exchange, replacement,
conversion, or cancellation. The Company shall keep or cause to be kept, at the
office or agency so maintained, a register or registers in which the Company or
its agent shall register the names and addresses of the Holders and shall
transfer registered Debentures in accordance with this Agreement. Upon
surrender for transfer of any registered Debenture duly assigned by the
registered holder (or its duly authorized attorney) to the transferee(s) thereof
and subject to satisfaction of the requirements set forth in Section 12.4 if
such Debenture is then a Restricted Debenture, the Company shall execute and
deliver a new registered Debenture (or Debentures in appropriately subdivided
denominations of principal), dated the most recent date to which interest shall
have been paid on the surrendered Debenture, in an equal principal amount with
notation of payments of principal made thereon, or in a principal amount equal
to the original principal amount as reduced by payments of principal theretofore
made on the Debenture surrendered, in the name of, and payable to the order of,
the transferee(s) thereof. No service charge shall be assessed for any
transfer, registration, reissuance, exchange, conversion, or notation of payment
hereunder.
17
8.3. Interest. Interest on the Debentures shall be computed on the basis
of a 365-day
18
year at a rate of 10% per annum from the Closing Date, payable in equal
quarterly installments on each Interest Payment Date of each year (or such
prorated amount as may be applicable with respect to the first payment) until
the principal on the Debentures becomes due and payable. To the extent permitted
by law, interest on any overdue payment of principal or interest shall be
payable quarterly at a rate equal to 18% per annum.
Interest on the Debentures shall be payable as follows:
(a) From the Closing Date through and including the first Interest
Payment Date following the second anniversary of the Issue Date, interest
shall be paid on each Interest Payment Date by the issuance to the Holder
of additional Debentures in the principal amount of the interest payable on
such Interest Payment Date or, with the prior written consent of the
Designated Holders of the Senior Obligations, in cash;
(b) From the day after first Interest Payment Date following the
second anniversary of the Issue Date through and including the first
Interest Payment Date following the fourth anniversary of the Issue Date,
interest shall be paid on each Interest Payment Date in cash unless such
payment would cause a Senior Obligations Default, in which case interest
shall be paid by the issuance to the Holder of additional Debentures in the
principal amount of the interest payable on such Interest Payment Date; and
(c) From the day after the Interest Payment Date following the fourth
anniversary of the Issue Date, interest shall be paid on each Interest
Payment Date in cash.
8.4 Debentures Issued in Payment of Interest. Any Debentures issued
pursuant to Section 8.3 shall have the same terms and provisions as the
Debentures originally issued pursuant to this Agreement; provided, however, that
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such Debentures shall mature on October 31, 2006, and for purposes of Section
8.3, the Issue Date of such Debentures shall be deemed to be the Issue Date of
the Debenture with respect to which such Debentures were issued in payment of
interest.
90 SUBORDINATION OF DEBENTURES. The Company covenants and agrees, and
each holder of a Debenture, by acceptance thereof, likewise covenants and agrees
(i) that, to the extent and in the manner set forth in this Section 9, the
Company's Senior Obligations (as defined in Section 9.1), if any, will be senior
in right of payment to the Debentures, and (ii) that the subordination
provisions set forth in this Section 9 are, and are intended to be, an
inducement and a consideration to each holder of any Senior Obligations, whether
such Senior Obligation was created or acquired before or after the date of this
Agreement, to acquire and continue to hold, or to continue to hold, such Senior
Obligation, and each holder of Senior Obligations shall be deemed conclusively
to have relied on such subordination provisions in acquiring and continuing to
hold, or continuing to hold, such Senior Obligations.
9.1. Subordination to Senior Obligations. As used herein, "senior in
right of payment to the Debentures" means that:
19
(a) no part of the Debt shall have any claim to the assets of the
Company on a parity with or prior to the claim of the Senior Obligations;
and
(b) unless and until the Senior Obligations have been paid in full,
without the express prior written consent of all holders of such Senior
Obligations, no Holder will take, demand (including by means of any legal
action) or receive from the Company, and the Company will not make, give or
permit, directly or indirectly, by set-off, redemption, purchase or in any
other manner, any cash payment of or security for the whole or any part of
the Debt; provided, however, that (x) so long as no default exists in the
-----------------
payment of any principal of or premium, if any, or interest on any Senior
Obligations, the Company may make, and the Holders may receive, scheduled
payments on account of the Debt in accordance with the terms hereof, except
if a default in the performance or observance of any term or condition
relating to any Senior Obligations (other than a default in the payment of
any principal of or premium, if any, or interest on the Senior Obligations)
has occurred and is continuing that permits the holders of the Senior
Obligations to declare such Senior Obligations to be due and payable, any
Designated Holder of Senior Obligations (as defined in Section 9.6) may
give notice (a "Senior Blockage Notice") to the Company (provided, however,
-----------------
no more than one Senior Blockage Notice may be given during any 360
consecutive day period) that until all Senior Obligations are paid in full,
no scheduled payments (whether in cash or securities, but excluding
additional Debentures) may be made by the Company on account of the Debt
during the period ("Senior Blockage Period") commencing on the date of such
Senior Blockage Notice and ending on the earliest of: (A) 180 days after
the date of such Senior Blockage Notice; (B) the date such default is cured
or waived; and (C) the date that the holders of the Senior Obligations
shall have given notice to the Company of termination of the Senior
Blockage Period, and except when a default in the payment of any principal
of, premium if any, or interest on the Senior Obligations has occurred and
is continuing or would result therefrom, (y) at any time Debentures may be
converted in accordance with the terms hereof, and (z) upon the
acceleration of the maturity of any Senior Obligations, the Holders may
accelerate the scheduled maturities of the Debentures if and to the extent
permitted hereby at such time but such acceleration shall not give (i) any
Holder any right to take, demand (including by means of any legal action)
or receive from the Company, or (ii) the Company the right to make, give or
permit, directly or indirectly, by set-off, redemption, purchase or in any
other manner, any cash payment of or security for the whole or any part of
the Debentures unless and until the Senior Obligations have been paid in
full.
9.2. Payments Due Holders of Senior Obligations. Any payment or
distribution by the Company to which any Holder would be entitled except for the
provisions hereof (whether in cash or securities, but excluding additional
Debentures) shall be paid or delivered by the Holder, or any receiver, trustee
in bankruptcy, liquidating trustee, disbursing agent or other Person making such
payment or distribution, to the holders of the Senior Obligations or their
representative, ratably in accordance with the amounts thereof, to the extent
necessary to pay in full all Senior Obligations, before any payment or
distribution shall be made to any Holder.
20
9.3. Meaning of Payment in Full. The expressions "prior payment in full,"
"payment in full," "paid in full" and any other similar terms or phrases when
used herein with respect to the Senior Obligations shall mean the payment in
full in cash of all of the Senior Obligations; and the expression "any cash
payment of or security for the whole or any part of the Debt" and any other
similar terms or phrases when used herein shall not be deemed to include a
payment or distribution of stock or securities of the Company provided for by a
plan of reorganization or readjustment authorized by an order or decree of a
court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy law, or of any other corporation provided for by such plan
of reorganization or readjustment, which stock or securities are subordinated in
right of payment to all then outstanding Senior Obligations to substantially the
same extent as the Debentures are so subordinated as provided in this Section
9.7. The consolidation of the Company with, or the merger of the Company into,
another Person or the liquidation or dissolution of the Company following the
conveyance or transfer of all or substantially all of its properties and assets
as an entirety to another Person upon the terms and conditions set forth in
Section 7.9 shall not be deemed a "proceeding" for the purposes of this Section
9.7 if the Person formed by such consolidation or into which the Company is
merged or the Person which acquires by conveyance or transfer such properties
and assets as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Section 7.9.
9.4. Meaning of Senior Obligations. As used herein, "Senior Obligations"
shall mean collectively all obligations of the Company (i) under or in
connection with the Senior Credit Agreement (as defined below) and the other
"Loan Documents" referred to in the S1enior Credit Agreement; (ii) to any Bank
(as defined below) or any affiliate of a Bank under or in connection with (x)
any interest rate, currency or commodity swap agreement, cap agreement or collar
agreement or any other agreement or arrangement designed to protect the Company
against fluctuations in interest rates, currency exchange rates or commodity
prices, or (y) any purchase card or credit card issued by such Bank or such
affiliate, (iii) to any Bank or any affiliate of any Bank under or in connection
with any other credit arrangement (including without limitation any lease by
such Bank or such affiliate, any guaranty issued by the Company in favor of such
Bank or such affiliate and any deposit account services (including in respect of
any overdraft) if such obligation is secured by the assets of the Company; and
(iv) under or in connection with any other secured Indebtedness of the Company
having an initial principal amount in excess of $5,000,000 which by its express
terms states that it is a "Senior Obligation"; in each case (a) whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, and (b) whether on account of principal, premium, interest
(including, without limitation, interest accruing after the maturity date of any
Senior Obligation and interest accruing after the commencement of any
bankruptcy, insolvency, reorganization or similar proceeding relating to the
Company, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), reimbursement obligations, fees, indemnities,
costs, expenses or otherwise. For purposes of the foregoing, "Senior Credit
Agreement" means the Credit Agreement dated as of June 26, 1998 among the
Company, various financial institutions and Bank of America, N.A., as Agent (as
defined below), as amended, restated or otherwise modified from time to time,
together with any replacement or refinancing
21
thereof; and "Bank" means any bank, insurance company, mutual fund or other
financial institution which from time to time is a party to the Senior Credit
Agreement.
9.5. Meaning of Debt. As used herein, "Debt" shall mean collectively the
unpaid principal of, premium, if any, and interest on (including, without
limitation, interest accruing after the maturity date of any Debenture and
interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Company, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding) and all other obligations in respect of the
Debentures, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter incurred, in each case whether on account of
principal, premium, interest, reimbursement obligations, rights to rescission,
fees, indemnities, costs, expenses or otherwise.
9.6. Meaning of Designated Holder of Senior Obligations. As used herein,
"Designated Holder of Senior Obligations" means (i) the Agent under the Senior
Credit Agreement or (ii) any holder of Senior Obligations (or representative of
holders of Senior Obligations) in an initial aggregate principal amount of
$20,000,000 or more (excluding Senior Obligations under the Senior Credit
Agreement).
9.7. Bankruptcy Proceedings. Any Designated Holder of Senior Obligations
is hereby authorized to (i) file an appropriate claim for and on behalf of any
Holder if such Holder does not file, and there is not otherwise filed on behalf
of such Holder, a proper claim or proof of claim in the form required in any
bankruptcy, insolvency, reorganization or similar proceeding with respect to the
Company at least 30 days before the expiration of the time to file such claim or
proof of claim and (ii) file an appropriate ballot for and on behalf of any
Holder if such Holder does not file, and there is not otherwise filed on behalf
of such Holder, a proper ballot in any such proceeding in the form required at
least 10 days before the expiration of the time to file such ballot.
9.8. Actions Following Default. If any Event of Default shall occur and
be continuing, the Holders shall not, without the prior written consent of the
agent under the Senior Credit Agreement (the "Agent"), accelerate the maturity
of any Debt, or institute proceedings to enforce or collect any Debt, or
commence or join with any other creditor of the Company in commencing any
bankruptcy, insolvency, reorganization or similar proceeding against the
Company, or otherwise exercise any right or remedy in respect of the Debt,
except after the first to occur of a Standstill Termination Event or the 30th
day following the giving of notice of such Event of Default to the Agent by a
Holder. For purposes of the foregoing, a "Standstill Termination Event" will be
deemed to occur upon (1) commencement of a bankruptcy, insolvency,
reorganization or similar proceeding by or against the Company (provided that if
such proceeding is instituted against the Company, a Standstill Termination
Event shall only be deemed to occur in respect thereof if such proceeding has
not been dismissed within 60 days of commencement thereof or if the Company
acquiesces thereto) or (2) the acceleration of the maturity of any Senior
Obligations.
22
9.9. No Modifications Without Consent of Designated Holders. The Holders
agree with and for the benefit of each holder of Senior Obligations that no
provision of this Section 9 may be amended or otherwise modified, and no other
provision of this Agreement may be amended or
23
otherwise modified in any manner which is adverse to the holders of the Senior
Obligations, without (in each case) the prior written consent of all Designated
Holders of Senior Obligations.
9.10. Obligations Unimpaired. Nothing contained in this Section 9 is
intended to or shall impair as between the Company, its creditors other than the
holders of Senior Obligations and the Holders, the obligation of the Company,
which shall be absolute and unconditional, to pay to the Holders the principal
of and interest on the Debentures, as and when the same will become due and
payable in accordance with the terms thereof, or to affect the relative rights
of the Holders and creditors of the Company other than the holders of Senior
Obligations, nor shall anything herein or therein prevent the holder of any
Debenture from exercising all remedies otherwise permitted by applicable law
upon default, subject to the rights, if any, under this Section 9 of the holders
of Senior Obligations in respect of any required notice of the exercise of any
such remedy or cash, property, or securities of the Company received upon the
exercise of any such remedy.
100 SUBSTITUTION OF DEBENTURES. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction, or mutilation of any
Debenture, and of indemnity satisfactory to it (which, in the case of any
original purchaser of the Debentures, shall be a contractual obligation of such
purchaser) and upon surrender, at the office or agency maintained in accordance
with Section 8, and cancellation of any Debenture, if mutilated, the Company
will execute and deliver a new Debenture of like tenor, in lieu of such
Debenture, dated the most recent date to which interest on such Debenture shall
have been paid.
110 EVENTS OF DEFAULT. If any one or more of the following events (herein
called "Events of Default") shall occur and be continuing:
(a) default shall be made in the payment of principal of any of the
Debentures when and as the same shall become due and payable, either at
maturity or by acceleration or otherwise;
(b) default shall be made in the payment of interest on the
Debentures when the same becomes due and payable and the default continues
for a period of 30 days;
(c) default shall be made in the due performance or observance of
any other material covenant, agreement, or provision herein to be performed
or observed by the Company or a material breach shall exist in any
representation or warranty herein contained, and such default or material
breach shall have continued for a period of 30 days after written notice
thereof to the Company from any holder or Holders of Debentures aggregating
not less than 51% of the aggregate principal amount of the Debentures then
outstanding; provided, however, that if any such default or material breach
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shall be such that it cannot be cured or corrected within such 30-day
period, such period shall be extended for such additional period of time
(not exceeding 30 additional days) as shall be necessary to effect such
cure or correction if curative or corrective action is instituted within
said 30-day period and thereafter diligently pursued;
24
(d) the Company or any Subsidiary shall (i) apply for or consent to
the appointment of a receiver, trustee, or liquidator of the Company or
such Subsidiary or any of their respective assets, (ii) make a general
assignment for the benefit of creditors, (iii) be adjudicated a bankrupt or
insolvent or (iv) file a voluntary petition in bankruptcy, or a petition or
answer seeking reorganization or an arrangement with creditors to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of
debt, moratorium, dissolution, liquidation, or debtor relief law, or any
chapter of any such law, or an answer admitting the material allegations of
a petition filed against it in any proceeding under any such law or
chapter, or corporate action shall be taken by the Company or any
Subsidiary for the purpose of effecting any of the foregoing; or an order,
judgment, or decree shall be entered, without the application, approval, or
consent of the Company or a Subsidiary, by any court of competent
jurisdiction, approving a petition seeking liquidation or reorganization of
the Company or such Subsidiary, as applicable, of all or a substantial part
of the assets of the Company or such Subsidiary; and provided that such
order, judgment, or decree remains in effect for more than 30 days, whether
or not consecutive;
(e) a Senior Obligations Default shall occur and continue for a
period of 90 days;
(f) default shall occur with respect to any other Indebtedness for
borrowed money of the Company or any Subsidiary (other than the Debentures
or Senior Obligations) or under any agreement under which such Indebtedness
may be issued by the Company or such Subsidiary and such default shall
continue for more than the period of grace, if any, therein specified, if
the aggregate amount of such Indebtedness for which such default shall have
occurred exceeds $500,000; or
(g) final judgment for the payment of money in excess of $500,000
shall be rendered against the Company or any Subsidiary and the same shall
remain undischarged for a period of 60 days during which execution shall
not be effectively stayed;
then and in each and every such case the Holders of Debentures aggregating not
less than 51% of the aggregate principal amount of the Debentures then
outstanding may by notice in writing to the Company declare the unpaid principal
of the Debentures together with accrued interest thereon to be forthwith due and
payable and thereupon such principal and interest shall be due and payable
without presentment, protest, or further demand or notice of any kind, all of
which are hereby expressly waived.
This Section 11, however, is subject to the condition that, if at any time
after the principal of the Debentures shall have become so due and payable, and
before any judgment or decree for the payment of the moneys so due, or any
thereof, shall be entered and if all arrears of interest upon the Debentures and
all other sums payable under the Debentures (except the principal on the
Debentures which solely by reason of such declaration shall have become payable)
shall have been duly paid, then and in every such case the Holders of Debentures
aggregating not less than 66-
25
2/3% of the aggregate principal amount of the Debentures then outstanding may,
by written notice to the Company, either temporarily suspend or permanently
rescind and annul such declaration and its consequences; but no such suspension
or rescission and annulment shall extend to or affect any prior, concurrent, or
subsequent default or Event of Default (other than the ones identified by the
Holders declaring them due as the ones upon which such declaration was based) or
impair any right consequent thereon.
Notwithstanding anything to the contrary herein, if default shall be made
in the payment of any principal of, or interest on, any Debenture when and as
the same shall become due and payable, at maturity (but not merely by virtue of
an acceleration pursuant to the foregoing provisions of this Section 11), the
holder of such Debenture may by notice in writing to the Company declare the
unpaid principal of such Debenture, with accrued interest, to be forthwith due
and payable and thereupon such principal and interest shall be due and payable
without presentment, protest, or further demand or notice of any kind, all of
which are hereby expressly waived.
If any holder of a Debenture shall demand payment thereof or take any other
action (of which the Company has actual knowledge) in respect of an Event of
Default, the Company will forthwith give written notice thereof, specifying such
action and the nature of such event, to each holder of record of the Debentures
then outstanding. The Company will also give prompt written notice to each
holder of record of the Debentures at the time outstanding of any written notice
of suspension, rescission, or annulment given to it as aforesaid.
The Company covenants that, if default be made in any payment of principal
of or interest on any Debenture, it will pay to the holder thereof such further
amount as shall be reasonably sufficient to cover the cost and expense of
collection, including, without limitation, court costs and reasonable
compensation to the attorneys and counsel of the holder for all services
rendered in that connection.
No course of dealing between the Company and any holder of a Debenture or
any delay on the part of the holder of a Debenture in exercising any rights
thereunder or hereunder shall operate as a waiver of any rights of any such
holder.
120 SECURITIES ACT.
12.1. Investment Intent, etc. Each of you and each other Person who has
been designated by you as a registered holder to whom Securities will be
initially issued on a Closing Date, by acceptance of such Securities, represent
and in making this sale it is specifically understood and agreed that you and
each such other Person (a) are an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act and the rules and regulations
promulgated thereunder and was not organized for the specific purpose of
acquiring the Shares and (b) are acquiring the Securities to be purchased for
your, or such Person's, own account, or for the account of one or more trusts
which you, or such Person, manage, and not with a view to or
26
for sale in connection with any distribution thereof, provided that the
disposition of your, or such Person's, property shall at all times be and remain
within your, or such Person's, control.
27
12.2. Restrictions on Transferability. The Debentures shall not be
transferable except upon the conditions specified in this Section 12, which
conditions are intended to ensure compliance with the provisions of the
Securities Act in respect of the transfer of any Debenture.
12.3. Restrictive Legends. Each Debenture shall (unless otherwise
permitted by the provisions of Section 12.4) be stamped or otherwise imprinted
with a legend in substantially the following form:
"This Debenture has not been registered under the Securities Act of
1933, as amended, and is transferable only upon the conditions specified in
the Purchase Agreement referred to herein."
Each certificate for Common Stock issued upon conversion of a Debenture and each
certificate for Common Stock issued to a subsequent transferee shall (unless
otherwise permitted by the provisions of Section 12.4) be stamped or otherwise
imprinted with a legend in substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or any state securities act.
The shares have been acquired for investment and may not be sold,
transferred, pledged or hypothecated unless (i) they shall have been
registered under the Securities Act of 1933 and any applicable state
securities act, or (ii) the corporation shall have been furnished with an
opinion of counsel, satisfactory to counsel for the corporation, that
registration is not required under any such acts."
12.4. Notice of Proposed Transfers. (a) Except as otherwise provided in
paragraph (b) of this Section 12.4, prior to any transfer or attempted transfer
of any Restricted Debenture or Restricted Stock, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
transfer. Each such notice shall describe the manner and circumstances of the
proposed transfer and shall be accompanied by an opinion of counsel for such
holder satisfactory to the Company, to the effect that such transfer may be
effected without registration of such Restricted Debenture or Restricted Stock,
as the case may be, under the Securities Act. If such notice is accompanied by
such an opinion, such holder shall be entitled to transfer such security in
conformity with the terms of such notice, and, if the opinion of counsel so
specifies, the securities issued upon any such transfer shall not bear the
restrictive legend set forth in Section 12.3. Such holder shall indemnify the
Company for any transfer effected pursuant to this Section 12.4(a).
(b) The procedures set forth in paragraph (a) of this Section 12.4 shall
not apply to any transfer by you (or a transferee pursuant to this paragraph
(b)) of any Restricted Debenture or Restricted Stock to any of your Subsidiaries
or Affiliates; provided, however, that at the time of such transfer the
-----------------
transferee shall execute and deliver to the Company an "Investment Letter"
containing substantially the representations provided in Section 12.1 with
respect to the Debentures or Common Stock that are the subject of such transfer
and its agreement to be bound by the
28
provisions of this Section 12 and such transfer is otherwise exempt from
registration under the Securities Act and applicable state securities laws.
Debentures or Common Stock issued upon such transfer shall bear the appropriate
restrictive legend set forth in Section 12.3.
12.5. Required Registration. As soon as reasonably practicable after the
Final Closing Date, but in any event on or before the date 90 days subsequent to
the Final Closing Date, the Company shall effect the registration under the
Securities Act of the Conversion Shares and the shares of Restricted Stock.
12.6. Incidental Registration. Notwithstanding the provisions of Section
12.5 of this Agreement, if the Company at any time proposes to register any of
its Common Stock under the Securities Act (on a form appropriate for the
registration of Restricted Stock for public offering by the holders thereof
other than a registration on Form S-8, or any successor or similar forms or a
shelf registration under Rule 415 for the sole purpose of registering shares to
be issued in connection with the acquisition of stock or assets of another
person) , it will each such time give written notice to the Holders and any
holders of Restricted Stock (the holders of Restricted Stock are sometimes
referred to herein as the "Eligible Holders") of its intention so to do and,
upon written request from Eligible Holders given within 30 days after receipt of
any such notice (which request shall state the intended method of disposition of
such securities by such Eligible Holder), the Company will use its best efforts
to cause all or any (but not less than 1,000 shares if less than all) Conversion
Shares or Restricted Stock held by such Eligible Holder or which such Eligible
Holder is then entitled to acquire pursuant to a Debenture to be registered
under the Securities Act, all to the extent requisite to permit the sale or
other disposition (in accordance with the intended methods thereof, as aforesaid
by such Eligible Holder); provided, however, that the Company may at any time
------------------
withdraw or cease proceeding with any such registration if it shall at the same
time withdraw or cease proceeding with the registration of such other securities
originally proposed to be registered; provided, further, that if there is then
-----------------
an effective registration statement covering the Conversion Shares or Restricted
Stock (assuming for purposes of this Section 12.6 that all of the Debentures are
to be converted), any Conversion Shares or Restricted Stock proposed to be
registered pursuant to this Section 12.6 shall be withdrawn such registration
statement. If an offering pursuant to this Section 12.6 is to be made through
underwriters, the managing underwriter may, if in its reasonable opinion
marketing factors so require, limit (pro rata according to the market value of
securities proposed to be registered by each) the number of (or eliminate
entirely from the offering all of the) securities which Eligible Holders may
register pursuant to this Section 12.6.
12.7. Registration Procedures. If and whenever the Company is required by
the provisions of Section 12.5 or 12.6 to use its best efforts to effect the
registration of any of its securities under the Securities Act, the Company
will, as promptly as possible:
(a) prepare and file with the SEC a registration statement with
respect to such securities and use its best efforts to cause such
registration statement to become effective and, in the case of the
registration required by Section 12.5, remain effective for a period of at
least 36 consecutive calendar months following the date on which such
registration
29
statement is declared effective (or such shorter period that terminates on
the earlier of (i) the date on which at least two-thirds of the original
number of shares of Restricted Stock have
30
been issued by the Company upon the conversion or conversions of one or more of
the Debentures or (ii) the date all the securities covered by the statement have
been sold or withdrawn, but in no case prior to the 90-day period referred to in
Rule 174 under the Exchange Act);
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to
comply with the requirements of the Securities Act and the rules and
regulations promulgated by the SEC thereunder relating to the sale or other
disposition of the securities covered by such registration statement;
(c) furnish to each Eligible Holder selling securities in such
offering such numbers of copies of a prospectus, including a preliminary
prospectus, complying with the requirements of the Securities Act, and such
other documents as such Eligible Holder may reasonably request in order to
facilitate the public sale or other disposition of the securities owned by
such Eligible Holder; and
(d) use its best efforts to register or qualify the securities
covered by such registration statement under the securities or blue sky
laws of such states as each Eligible Holder selling securities in such
offering shall request, and do any and all such other acts and things as
may be necessary or advisable to enable such Eligible Holder to consummate
the public sale or other disposition in such jurisdictions of the
securities owned by you; provided, however, that the Company shall not be
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obligated to register or qualify such securities in any jurisdiction in
which such registration or qualification would require the Company to
qualify as a foreign corporation or file any general consent to service of
process where it is not then so qualified or has not theretofore so
consented; provided further, however, the Company shall not be obligated to
register or qualify such securities in any jurisdiction (other than a
jurisdiction in which a Purchaser is a resident on the Final Closing Date)
in which, in the reasonable opinion of the Company, the expense (both legal
and filing fees) and the registration requirements or restrictions imposed
by such jurisdiction outweigh the benefits to be received by the holder by
qualifying the issuance or resale of securities in such jurisdiction or in
which the expense incurred by the Company to register such shares would be
unreasonable.
12.8. Expenses; Conditions Precedent. Except as provided below in this
Section 12.8, all expenses incurred by the Company in connection with action
taken by the Company to comply with this Section 12, including, without
limitation, all registration and filing fees, printing expenses, accounting
fees, fees and disbursements of counsel and other experts, premiums for
liability insurance obtained in connection with a registration statement filed
to effect such compliance, and the expenses (including counsel fees) of
complying with securities or blue sky laws, shall be paid by the Company;
provided, however, that all such expenses in connection with any amendment or
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supplement to any registration statement filed by the Company hereunder or the
related prospectus which is required to be filed more than nine months after the
effective date of such registration statement because any seller or sellers of
securities of the Company covered thereby or any underwriter of such securities
has not effected the disposition of the securities
31
required to be registered shall be paid by such seller or sellers pro rata, in
the case of two or more such sellers, in accordance with the respective market
values of such securities. The Company shall not be obligated in any way in
connection with any registration pursuant to this Section 12 for any
underwriting discounts or commissions payable by any Eligible Holder to any
underwriter of securities to be sold by such Eligible Holder. It shall be a
condition precedent to the obligation of the Company to take any action under
Section 12.5 that the Company shall receive an undertaking satisfactory to it
from each Eligible Holder of securities registered or to be registered as herein
provided to pay all expenses required to be borne by such Eligible Holder and to
furnish or cause to be furnished to the Company specifically for use in the
preparation of the registration statement and prospectus written information
concerning the securities held by such Eligible Holder and also concerning any
underwriter of such securities and the intended method of disposition thereof as
the Company shall reasonably request and as may be required in connection with
the action to be taken by the Company hereunder.
12.9. Company Indemnification. In the event of any registration of any
securities under the Securities Act pursuant to this Section 12, the Company
will indemnify and hold harmless each offering Eligible Holder, each underwriter
of such securities and each other Person, if any, who controls such Eligible
Holder or such underwriter within the meaning of the Securities Act, against any
losses, claims, damages, or liabilities, joint or several, to which such
Eligible Holder, such underwriter or such controlling Person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or statement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and will reimburse such Eligible Holder, such underwriter and each such
controlling Person for any legal and any other expenses reasonably secured by
such Eligible Holder, such underwriter, or such controlling Person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
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to the extent that any such loss, claim, damage, or liability arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus, or said prospectus or said amendment or supplement in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by such Eligible Holder or such underwriter
specifically for use in the preparation thereof.
12.10. Your Indemnification. In the event of any registration of any
securities under the Securities Act pursuant to this Section 12, such Eligible
Holder will (or will furnish the written undertaking of such other Person or
Persons as shall be acceptable to the Company to) indemnify and hold harmless
the Company and each other Person, if any, who controls the Company within the
meaning of the Securities Act, against any losses, claims, damages, or
liabilities, joint or several, to which the Company or such controlling Person
may become subject under the
32
Securities Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise
33
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent that any such
loss, claim, damage, or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, said preliminary prospectus, or said prospectus or
said amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Eligible Holder or any underwriter of such Eligible Holder's securities
specifically for use in the preparation thereof, and such Eligible Holder will
(or will furnish the written undertaking of such other Person or Persons as
shall be acceptable to the Company to) reimburse the Company and each such
controlling Person for any legal and any other expenses reasonably incurred by
the Company or such controlling Person in connection with investigation or
defending any such loss, claim, damage, liability, or action.
12.11. Conduct of Litigation; Procedure. If an action is brought against
any Person entitled to indemnification under Section 12.9 or 12.10 above (the
"Indemnitee", the Indemnitee shall promptly notify the Person or Persons
obligated to indemnify the Indemnitee (whether one or more, the "Indemnitor") of
such action and the Indemnitor shall assume the defense of such action,
including the employment of counsel, reasonably satisfactory to Indemnitee, and
the payment of all court costs and other expenses. The Indemnitee shall have
the right to employ its own counsel in any such action, but the fees and
expenses of such counsel shall be at the Indemnitee's expense unless the
Indemnitor shall not have employed counsel to have charge of the defense of such
action or the Indemnitee shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the Indemnitor (in which case the Indemnitor shall not have the
right to direct the defense of such action on behalf of Indemnitee), in any of
which events such fees and expenses shall be borne by the Indemnitor.
Notwithstanding anything to the contrary in this Section 12.11, the Indemnitor
shall not be liable for any settlement of any claim or action effected without
its written consent. The Company covenants and agrees that it will not settle
any action against it involving possible claims against an Indemnitee without
also using its best efforts to settle the action against such Indemnitee.
12.12. Termination of Restrictions. The restrictions imposed by this
Section 12 upon the transferability of the Restricted Debentures and the
Restricted Stock, shall cease and terminate as to any particular Restricted
Debenture or share of Restricted Stock when such Debenture or share shall have
been effectively registered under the Securities Act and disposed of by the
holder thereof in accordance with the method of disposition described in the
registration statement or when opinions of counsel shall have been given
pursuant to Section 12.4 to the effect that the legend set forth in Section 12.3
is not required. Whenever the restrictions imposed by this Section 12 shall
terminate, as hereinabove provided, the holder of any Restricted Debenture or
Restricted Stock as to which such restrictions shall have terminated shall be
entitled to receive from the Company, without expense, a new Debenture or stock
certificate not bearing the restrictive legend
34
set forth in Section 11.3 and not containing any other reference to the
restrictions imposed by this Section 12.
12.13. Transfer of Your Rights. Your rights under this Section 12 shall
inure to the benefit of all Persons who shall at any time be the holders of
Restricted Debentures and/or Restricted Stock originally purchased by you
hereunder, pro rata in accordance with their respective interests, and each such
holder, by such holder's acceptance of such Restricted Debenture or Restricted
Stock, as the case may be, agrees to be and shall be deemed to be bound by all
of your covenants set forth in this Section 12, to the extent that such
covenants are applicable to such holder's Restricted Debentures and/or
Restricted Stock.
12.14. Sales Outside the United States. Notwithstanding the provisions
of Section 12.3 and 12.4 of this Agreement, with respect to Debentures issued to
a holder (a "Foreign Holder") who is not a U.S. Person (as defined in Regulation
S promulgated by the SEC under the Securities Act) and who acquired the
Debentures in an offshore transaction in accordance with the provisions of
Regulation S: (i) the Debentures issued to the Foreign Holder shall not bear the
restrictive legend set forth in the first sentence of Section 12.3 of this
Agreement and (ii) Section 12.4 of this Agreement shall not apply to the Foreign
Holder; provided, however, that prior to any transfer or attempted transfer of
------------------
any Debenture or Restricted Stock, a Foreign Holder shall given written notice
to the Company of such holder's intention to transfer and the name, address, and
nationality of the proposed transferee.
130 CONVERSION OF DEBENTURES
13.1. Conversion Privilege and Conversion Price. Subject to and upon
compliance with the provision of this Section, at the option of the holder of a
Debenture, any Debenture or any portion of the principal amount thereof which is
$1,000 or an integral multiple of $1,000 may be converted, at any time on or
prior to the close of business on October 31, 2006 (except that, in case any
Debenture shall have been called for redemption and the Company shall not
thereafter default on the payment due upon redemption thereof, such right to
convert shall terminate as to such Debenture at the close of business on the
Business Day immediately preceding the Redemption Date) at the principal amount
thereof, or of such portion thereof, into fully paid and nonassessable shares
(calculated as to each conversion to the nearest 1/100 of a share) of Common
Stock of the Company, at the Conversion Price, determined as hereinafter
provided, in effect at the time of conversion.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall be initially $11.50;
provided, however, that the Conversion Price shall be adjusted in certain
-----------------
instances as provided in Section 13.4.
13.2. Exercise of Conversion Privilege. In order to exercise the
conversion privilege, the holder of any Debenture to be converted shall
surrender such Debenture, duly endorsed or assigned to the Company or in blank,
at any office or agency of the Company maintained for that purpose pursuant to
Section 8, accompanied by a duly signed conversion notice substantially in
35
the form set forth on the Debenture to the Company at such office or agency that
the holder elects to convert such Debenture or, if less than the entire
principal amount thereof is to be converted, the portion thereof
36
to be converted. No payment or adjustment shall be made upon any conversion on
account of any interest accrued on the Debentures surrendered for conversion
after such surrender or on account of any dividends on the Common Stock issued
upon conversion.
Debentures shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of such Debentures for conversion in
accordance with the foregoing provisions, and at such time the rights of the
Holders of such Debentures as Holders shall cease, and the person or Persons
entitled to receive the shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock at such time. As promptly as practicable on or after the
conversion date, the Company shall issue and shall deliver at such office or
agency a certificate or certificates for the number of full shares of Common
Stock issuable upon conversion, together with payment in lieu of any fraction of
a share, as provided in Section 13.3 and payment of interest accrued on the
Debenture or portion thereof converted from the last Interest Payment Date to
the effective date of conversion.
In the case of any Debenture that is converted in part only, upon such
conversion the Company shall execute and the Company shall deliver to the holder
thereof, at the expense of the Company, a new Debenture or Debentures of
authorized denominations in aggregate principal amount equal to the unconverted
portion of the principal amount of such Debenture.
13.3. Fractions of Shares. No fractional shares of Common Stock shall be
issued upon conversion of Debentures. If more than one Debenture shall be
surrendered for conversion at one time by the same holder, the number of full
shares which shall be issuable upon conversion thereof shall be computed on the
basis of the aggregate principal amount of the Debentures (or specified portions
thereof) so surrendered. Instead of any fractional share of Common Stock that
would otherwise be issuable upon conversion of any Debenture or Debentures (or
specified portions thereof), the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the market price per
share of Common Stock (as deemed by the Board of Directors or in any manner
prescribed by the Board of Directors) at the close of business on the day of
conversion.
13.4. Conversion Price Adjustments. (a) The Conversion Price shall be
subject to adjustment from time to time as follows:
(i) Issuances of Common Stock.
(x) If, at any time and from time to time during the period
beginning on the First Closing Date and ending on, and including, the day
547 days after the Final Closing Date, the Company shall issue any Common
Stock other than Excluded Stock (as hereinafter defined) without
consideration or for a consideration per share less than the Conversion
Price applicable immediately prior to such issuance, the Conversion Price
in effect immediately prior to each such issuance shall immediately be
adjusted by reducing
37
such Conversion Price to an amount equal to the greater of (A) the result
obtained by dividing (aa) the consid-
38
eration, if any, received by the Company upon such issuance, by (bb) the
total number of such shares of Common Stock issued by the Company and (B)
$0.0001;
(y) If, at any time after day 547 days after the Final Closing
Date, the Company shall issue any Common Stock other than Excluded Stock
without consideration or for a consideration per share less than the
Conversion Price applicable immediately prior to such issuance, the
Conversion Price in effect immediately prior to each such issuance shall
immediately (except as provided below) be reduced to a price equal to the
quotient obtained by dividing (A) an amount equal to the sum of (aa) the
number of shares of Common Stock outstanding immediately prior to such
issuance multiplied by the Conversion Price in effect immediately prior to
such issuance and (bb) the consideration, if any, received by the Company
upon such issuance, by (B) the total number of shares of Common Stock
outstanding immediately after such issuance.
For the purpose of any adjustment of the Conversion Price pursuant to
this clause (i) of Section 13.4(a), the following provisions shall be
applicable:
(A) Cash. In the case of the issuance of Common Stock for
----
cash, the amount of the consideration received by the Company shall
be deemed to be the amount of the cash proceeds received by the
Company for such Common Stock before deducting therefrom any
reasonable discounts, commissions, taxes or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(B) Consideration Other Than Cash. In the case of the
-----------------------------
issuance of Common Stock (otherwise than upon the conversion of
shares of capital stock or other securities of the Company) for a
consideration in whole or in part other than cash, including
securities acquired in exchange therefor (other than securities by
their terms so exchangeable), the consideration other than cash shall
be deemed to be the fair value thereof as determined by the Board of
Directors in good faith, irrespective of any accounting treatment;
provided, however, that such fair value as determined by the Board of
-----------------
Directors shall not exceed the aggregate Current Market Price of the
shares of Common Stock being issued as of the date the Board of
Directors authorizes the issuance of such shares.
(C) Options and Convertible Securities, etc. In the case of
---------------------------------------
(i) options, warrants or other rights to purchase or acquire Common
Stock (whether or not at the time exercisable) other than Excluded
Stock, (ii) securities by their terms convertible into or
exchangeable for Common Stock (whether or not at the time so
convertible into or exchangeable) other than Excluded Stock or (iii)
options, warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time exercisable):
39
(1) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options, warrants or
other rights to purchase or acquire Common Stock shall be
deemed to have been issued at the time such options, warrants
or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subclauses
(A) and (B) above), if any, received by the Company upon the
issuance of such options, warrants or rights plus the minimum
purchase price provided in such options, warrants or rights for
the Common Stock covered thereby;
(2) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities, or upon the
exercise of options, warrants or other rights to purchase or
acquire such convertible or exchangeable securities and the
subsequent conversion or exchange thereof, shall be deemed to
have been issued at the time such securities were issued or
such options, warrants or rights were issued and for a
consideration equal to the consideration, if any, received by
the Company for any such securities and related options,
warrants or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company upon the
conversion or exchange of such securities and the exercise of
any related options, warrants or rights (the consideration in
each case to be determined in the manner provided in subclauses
(A) and (B) above);
(3) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options, warrants or
rights or conversion of or exchange for such convertible or
exchangeable securities or any change in the consideration to
be received by the Company upon such exercise, conversion or
exchange, including, but not limited to, a change resulting
from the antidilution provisions thereof, the Conversion Price
as then in effect shall forthwith be readjusted to such
Conversion Price as would have been obtained had an adjustment
been made upon the issuance of such options, warrants or rights
not exercised prior to such change, or securities not converted
or exchanged prior to such change, on the basis of such change;
(4) on the expiration or cancellation of any such
options, warrants or rights, or the termination of the right to
convert or exchange such convertible or exchangeable
securities, if the Conversion Price shall have been adjusted
upon the issuance thereof, the Conversion Price shall forthwith
be readjusted to such Conversion Price as would have been
obtained had an adjustment been made upon the issuance of such
options, warrants, rights or securities on the basis of the
issuance of only the number
40
of shares of Common Stock actually issued upon the exercise of
such options, warrants or rights, or upon the conversion or
exchange of such securities; and
(5) if the Conversion Price shall have been adjusted upon
the issuance of any such options, warrants, rights or
convertible or exchangeable securities, no further adjustment
of the Conversion Price shall be made for the actual issuance
of Common Stock upon the exercise, conversion of exchange
thereof;
provided, however, that no increase in the Conversion Price shall be
------------------
made pursuant to this subclause (C) (except as necessary to reverse a
decrease in the Conversion Price under the circumstances described in
subparagraph (C)(4)).
(ii) Excluded Stock. "Excluded Stock" shall mean only those shares
of Common Stock issued or reserved for issuance by the Company (A) upon
conversion of the Debentures, (B) pursuant to the anti-dilution provisions
or rights with respect to any other securities of the Company convertible
into, exchangeable for, or giving the holder thereof the option or right to
purchase, shares of Common Stock, (C) upon exercise of any options or
warrants outstanding on October 15, 1999, (D) in connection with any bona
fide, third party merger, consolidation or acquisition of assets or
securities approved by the Company's Board of Directors, (E) upon exercise
of the Warrant issued to the Placement Agent on or about the date of
issuance of the Debentures, (F) shares of Common Stock and/or options,
warrants or other Common Stock purchase rights, and the Common Stock issued
pursuant to such options, warrants or other rights (as adjusted for any
stock dividends, combinations, splits, recapitalizations) after the First
Closing Date to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary pursuant to the Company's and its
predecessor's stock incentive plans or other arrangements that are approved
by the Company's Board of Directors, (G) pursuant to a stock dividend,
subdivision, or split-up covered by clause (iii) of this Section 13.4(a),
or (H) shares of Common Stock and/or warrants issued to lenders pursuant to
credit facilities or equipment leasing agreements; provided, that the
aggregate number of shares of Common Stock issuable pursuant to clauses (F)
and (H) shall not exceed in the aggregate 15% of the shares of Common Stock
issued and outstanding at any date of determination.
(iii) Stock Dividends. In case the Company shall, at any time after
the First Closing Date, pay or make an extraordinary dividend or other
distribution payable in shares of Common Stock on any class of capital
stock of the Company, the Conversion Price in effect at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall
be reduced (calculated to the nearest cent) by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for
such determination and the denominator shall be the sum of such number of
shares and the total number of shares
41
constituting such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day following
the date fixed for such determination. For the purposes of this paragraph,
the number of shares of Common Stock at any time outstanding shall not
include
42
shares held in the treasury of the Company. The Company will not pay any
dividend or make any distribution on shares of Common Stock held in the treasury
of the Company.
(iv) Rights Offering. In case the Company shall, at any time after
the First Closing Date, issue rights or warrants to all holders of its
Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Current Market Price per share of
the Common Stock on the date fixed for the determination of stockholders
entitled to receive such rights or warrants, the Conversion Price in effect
at the opening of business on the day following the date fixed for such
determination shall be reduced (calculated to the nearest cent) by
multiplying such Conversion Price by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase
would purchase at such Current Market Price and the denominator shall be
the number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination plus the number of shares of
Common Stock so offered for subscription or purchase, such reduction to
become effective immediately after the opening of business on the day
following the date fixed for such determination; provided, however, that if
------------------
such rights or warrants are only exercisable upon the occurrence of certain
triggering events, then the Conversion Price will not be adjusted until
such triggering events occur. For the purposes of this Section 13.4(a)(iv),
the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company. The Company will not
issue any rights or warrants in respect of shares of Common Stock held in
the treasury of the Company. If any such rights or warrants shall expire
without having been exercised, the Conversion Price shall thereupon be
readjusted to eliminate the amount of its adjustment due to their issuance.
(v) Stock Splits, Etc. In case outstanding shares of Common Stock
shall, at any time after the First Closing Date, be subdivided into a
greater number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced (calculated
to the nearest cent), and, conversely, in case outstanding shares of Common
Stock shall each be combined (calculated to the nearest cent) into a
smaller number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(vi) Distributions. In case the Company shall, at any time after the
First Closing Date, by dividend or otherwise, distribute to all holders of
its Common Stock evidences of its Indebtedness or assets or shares of
capital stock other than Common Stock (excluding any dividend or
distribution paid in cash out of the retained earnings of the Company or
43
any dividend or distribution referred above), the Conversion Price shall be
adjusted (calculated
44
to the nearest cent) so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of stockholders entitled to
receive such distribution by a fraction of which the numerator shall be the
Current Market Price per share of the Common Stock on the date fixed for such
determination less the then fair market value of the portion of the assets or
evidences of Indebtedness so distributed applicable to one share of Common Stock
and the denominator shall be such Current Market Price per share of the Common
Stock, such adjustment to become effective immediately prior to the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution.
(vii) Reclassifications. The reclassification of Common Stock into
securities other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 13.4(i) applies) shall be deemed
to involve (i) a distribution of such securities other than Common Stock to
all holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the
determination of stockholders entitled to receive such distribution" and
"the date fixed for such determination" within the meaning of Section
13.4(a)(vi), and (ii) a subdivision or combination, as the case may be, of
the number of shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification
shall be deemed to be "the day upon which such subdivision becomes
effective" or "the day upon which such combination becomes effective", as
the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of Section 13.4(a)(v).
(viii) Failure to File or Maintain Effectiveness of Registration
Statement. If the Company shall fail to effect the registration under the
Securities Act of the Conversion Shares and the shares of Restricted Stock
within 120 days after the Final Closing Date or the Registration Statement
filed by the Company to effect the registration of the Conversion Shares
and the shares of Restricted Stock pursuant to Section 12.1 is not
effective for at least three months each year following effectiveness, the
Conversion Price shall be reduced by $0.575 for each month or part thereof
that the Company fails to effect such registration or maintains such
registration in effect for less than three months; provided that the
maximum reduction in the Conversion Price pursuant to this Section
13.4(a)(viii) shall be $2.875.
(ix) Adjustment of Conversion Price Between First Closing Date and
Final Closing Date. The Company and the Placement Agent may mutually agree
to reduce the initial Conversion Price specified in Section 13.1 between
the First Closing Date and the Final Closing Date. Upon such agreement,
all references in this Agreement to an initial Conversion Price of $11.50
shall be deemed to refer to the new Conversion Price agreed to by the
Company and the Placement Agent and such agreed Conversion Price shall
apply to all Debentures issued in the First Closing.
45
(x) Rounding of Calculations; Minimum Adjustment. All calculations
under this Section 13.4(a) shall be made to the nearest $.05 or to the
nearest one hundredth (1/100th) of a share, as the case may be. Any
provision of this Section 13.4 to the contrary notwithstanding, no
adjustment in the Conversion Price shall be made if the amount of such
adjustment would be less than one percent, but any such amount shall be
carried forward and an adjustment with respect thereto shall be made at the
time of and together with any subsequent adjustment which, together with
such amount and any other amount or amounts so carried forward, shall
aggregate one percent or more.
(xi) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. In any case in which the provisions of this Section 13.4(a)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Company may defer until the occurrence of
such event issuing to the holder of any Debenture converted after such
record date and before the occurrence of such event the additional shares
of Common Stock or other property issuable or deliverable upon such
conversion by reason of the adjustment required by such event over and
above the shares of Common Stock or other property issuable or deliverable
upon such conversion before giving effect to such adjustment; provided,
---------
however, that the Company upon request shall deliver to such holder a due
--------
▇▇▇▇ or other appropriate instrument evidencing such holder's right to
receive such additional shares or other property, and such cash, upon the
occurrence of the event requiring such adjustment.
(b) Statement Regarding Adjustments. Whenever the Conversion Price shall
be adjusted as provided in Section 13.4, the Company shall forthwith file, at
the office of any transfer agent for the Debentures and at the principal office
of the Company a statement showing in detail the facts requiring such adjustment
and the Conversion Price that shall be in effect after such adjustment, and the
Company shall also cause a copy of such statement to be sent by mail, first
class postage prepaid, to each holder of the Debentures at its address appearing
on the Company's records. Where appropriate, such copy may be given in advance
and may be included as part of a notice required to be mailed under the
provisions of Section 13.6.
(c) Notice to Holders. In the event the Company shall propose to take any
action of the type described in clause (i) (but only if the action of the type
described in clause (i) would result in an adjustment in the Conversion Price),
(iii), (iv) or (v) of Section 13.4(a), the Company shall give notice to each
holder of the Debentures, in the manner set forth in Section 13.4(b), which
notice shall specify the record date, if any, with respect to any such action
and the approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the Conversion Price and the number,
kind or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of the Debentures. In the case of any action which would require
the fixing of a record date, such notice shall be given at least 10 days prior
to the date so fixed, and in case of all other action, such notice shall be
given at least 15 days prior to the taking of such proposed action.
46
(d) Treasury Stock. For the purposes of this Section 13.4, the sale or
other disposition of any Common Stock of the Company theretofore held in its
treasury shall be deemed to be an issuance thereof.
(e) Costs. The Company shall pay all documentary, stamp, transfer or
other transactional taxes attributable to the issuance or delivery of shares of
Common Stock of the Company or other securities or property upon conversion of
any Debentures: provided, however, that the Company shall not be required to pay
-----------------
any taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificate for such shares or securities in the
name other than that of the holder of the Debentures in respect of which such
shares are being issued.
(f) Reservation of Shares. The Company shall reserve at all times so long
as any Debentures remain outstanding, free from preemptive rights, out of its
treasury stock or its authorized but unissued shares of Common Stock, or both,
solely for the purpose of effecting the conversion of the Debentures, sufficient
shares of Common Stock to provide for the conversion of all outstanding
Debentures and set aside and keep available any other property deliverable upon
conversion of all outstanding Debentures.
(g) Approvals. If any shares of Common Stock or other securities to be
reserved for the purpose of conversion of the Debentures require registration
with or approval of any governmental authority under any Federal or state law
before such shares or other securities may be validly issued or delivered upon
conversion, then the Company and the Holders will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be.
(h) Valid Issuance. All shares of Common Stock or other securities which
may be issued upon conversion of the Debentures will upon issuance by the
Company be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof and the
Company shall take no action which will cause a contrary result (including,
without limitation, any action which would cause the Conversion Price to be less
than the par value, if any, of the Common Stock).
(i) Provisions in Case of Consolidation, Merger, or Sale of Assets. In
case of any consolidation of the Company with, or merger of the Company into,
any other Person, any merger of another Person into the Company (other than a
merger which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Company) or any sale
or transfer of all or substantially all of the assets of the Company, the Person
formed by such consolidation or resulting from such merger or which acquires
such assets, as the case may be, shall execute and deliver a supplement to this
Agreement providing that the holder of each Debenture then outstanding shall
have the right thereafter, during the period that such Debenture shall be
convertible as specified in Section 13.1, to convert such Debenture into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares
(including fractional shares) of
47
Common Stock of the Company into which such Debenture might have been converted
immediately prior to such
48
consolidation, merger, sale or transfer. Such supplement to this Agreement shall
provide for adjustments which, for events subsequent to the effective date of
the event which triggers the requirement of such supplement to this Agreement,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 13. The above provisions of this Section 13.4(i) shall
similarly apply to successive consolidations, mergers, sales or transfers.
14. DEFINITIONS.
"Affiliates" of any Person shall mean any Person directly or indirectly
----------
controlling, controlled by or under direct or indirect common control with such
Person. A Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such corporation, whether through the ownership
of voting securities, by contract or otherwise.
"Applicable Law" shall have the meaning given such term in Section 7.5.
--------------
"Bank" shall have the meaning given such term in Section 9.4
----
"Business Day" shall mean any day that the Nasdaq Stock Market is open for
------------
trading.
"Change of Control" shall have the meaning given such term in Section 7.8.
-----------------
"Change of Control Offer" shall have the meaning given such term in Section
-----------------------
7.8.
"Change of Control Offer Period" shall have the meaning given such term in
------------------------------
Section 7.8.
"Change of Control Purchase Date" shall have the meaning given such term in
-------------------------------
Section 7.8.
"Change of Control Purchase Price" shall have the meaning given such term
--------------------------------
in Section 7.8.
"Closing" shall have the meaning given such term in Section 3.
-------
"Closing Date" shall have the meaning given such term in Section 3.
------------
"Common Stock" shall mean the Company's presently authorized Common Stock,
------------
$0.0001 par value per share.
"Company" means EarthCare Company, a Delaware corporation.
-------
"Conversion Price" shall have the meaning given such term in Section 13.1.
----------------
49
"Conversion Shares" shall mean shares of Common Stock issuable or issued
-----------------
on conversion of the Debentures.
"Current Market Price" shall mean, as of any date, 5% of the sum of the
--------------------
average, for each of the 20 consecutive Trading Days prior to such date, of the
Market Price on such Trading Day.
"Debentures" shall have the meaning given such term in Section 1.
----------
"Debt" shall have the meaning given such term in Section 9.5.
----
"Designated Holder of Senior Obligations" shall have the meaning given such
---------------------------------------
term in Section 9.6.
"Eligible Holder" shall have the meaning given such term in Section 12.6.
---------------
"Environmental Law" shall mean all federal, state, local and foreign laws
-----------------
and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
"Event of Default" shall have the meaning given such term in Section 11.
----------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
------------
"First Closing Date" shall have the meaning given such term in Section 3.
------------------
"Form 10-K" shall mean the Company's Annual Report Pursuant to Section 13
---------
or Section 15(d) of the Securities Exchange Act of 1934 for the fiscal year
ended December 31, 1998.
"Form 10-Q" shall mean the Company's Quarterly Report Pursuant to Section
---------
13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal quarter ended
June 30, 1999.
"Guaranty" shall mean, with respect to any Person, any obligation (except
--------
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
50
(b) to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any
51
income statement condition of any other Person or otherwise to advance or make
available funds for the purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Holder" or "Holders" shall mean, with respect to any Debenture, the Person
------ -------
in whose name such Debenture is registered in the register maintained by the
Company pursuant to Section 8.
"Indebtedness" shall mean, with respect to any Person means, at any time,
------------
without duplication,
(a) its liabilities for borrowed money and its redemption obligations
in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising under
any conditional sale or other title retention agreement with respect to any
such property);
(c) all liabilities appearing on its balance sheet in accordance with
generally accepted accounting principles leases with respect to which the
lessee is required concurrently to recognize the acquisition of an asset
and the incurrence of a liability;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed
or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or instruments
serving a similar function issued or accepted for its account by banks and
other financial institutions (whether or not representing obligations for
borrowed money); and
(f) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (e) hereof.
52
"Interest Payment Date" shall mean the date an installment of interest
---------------------
becomes due and payable on the Debentures in accordance with Section 1.
"Lien" shall mean, with respect to any Person, any mortgage, lien, pledge,
----
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or capital lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Market Price" for any day shall mean (i) if the Common Stock is listed or
------------
admitted for trading on any national securities exchange registered under
Section 6 of the Exchange Act the last sale price, or the closing bid price if
no sale occurred, of such class of stock on the principal national securities
exchange on which such class of stock is listed, or (ii) if not listed or traded
as described in clause (i), the last reported sale price of Common Stock on the
Nasdaq National Market tier of the Nasdaq Stock Market, if so quoted, (iii) if
not quoted as described in clause (ii), the average of the bid and asked price
on the Nasdaq Smallcap Market tier of the Nasdaq Stock Market or any similar
system of automated dissemination of quotations of securities prices then in
common use, if so quoted, or (iv) if not quoted as described in clause (iii),
the mean between the high bid and low asked quotations for Common Stock as
reported by the OTC Bulletin Board Service or National Quotation Bureau
Incorporated if at least two securities dealers have inserted both bid and asked
quotations for such class of stock on at least five of the ten preceding days.
If the Common Stock is quoted on a national securities or central market system,
in lieu of a market or quotation system described above, the closing price shall
be determined in the manner set forth in clause (i) of the preceding sentence if
actual transactions are reported and in the manner set forth in clause (iii) of
the preceding sentence if bid and asked quotations are reported but actual
transactions are not. If none of the conditions set forth above is met, the
closing price of Common Stock on any day or the average of such closing prices
for any period shall be the fair market value of such class of stock as
determined by a member firm of the New York Stock Exchange, Inc. selected by the
Company. If the Market Price cannot be determined under any of the foregoing
methods, Market Price shall mean the fair value per share of Common Stock on
such date determined by the Board of Directors of the Company in good faith,
irrespective of any accounting treatment; provided, however, if Holders of 51%
------------------
or more in aggregate principal amount of the Debentures disagree with the
Board's determination of the fair value per share of the Common Stock, such fair
value shall be determined by an investment banking firm, which as part of its
business engages in the valuation of businesses and their securities in
connection with mergers and acquisitions, underwritings, distributions, and
private placements, jointly selected by the Company and the Holders. If the
Company and the Holders shall not be able to agree on an investment banking firm
to provide such valuation, then each of the Company and the Holders shall select
an investment banking firm to provide a determination of such fair value and the
average of such determinations shall be the fair value per share of the Common
Stock. The Company shall pay the fees and expenses of any such investment
banking firms retained to provide such valuations.
53
"Material Adverse Change" shall mean any single circumstance or event (or
-----------------------
series of circumstances or events) having a material adverse effect on the
assets, properties, financial
54
condition, business operations or prospects of the Company or on the Company and
the Subsidiaries, on a consolidated basis.
"Materials of Environmental Concern" shall mean chemicals, pollutants,
----------------------------------
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products.
"Memorandum" shall mean the Private Placement Memorandum dated October __,
----------
1999, relating to the offering and sale of the Debentures, together with all
amendments and supplements thereto.
"Nasdaq Stock Market" shall mean The Nasdaq Stock Market, Inc.
-------------------
"Person" shall mean and include an individual, a partnership, a
------
corporation, a trust, a joint venture, an unincorporated organization, a
government or any department or agency thereof, and any other entity.
"Placement Agent" shall mean ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Inc., a Texas
----------------
corporation.
"Redemption Date" shall mean the date fixed for redemption of the
---------------
Debentures pursuant to Section 5.1.
"Restricted Debenture" shall mean any Debenture bearing the restrictive
--------------------
legend set forth in Section 12.3.
"Restricted Stock" shall mean shares of Common Stock issued pursuant to
----------------
this Agreement upon conversion of the Debentures and evidenced by a certificate
bearing the restrictive legend set forth in Section 12.3.
"SEC" shall mean the Securities and Exchange Commission, or any other
---
federal agency at the time administering the Securities Act.
"Securities" shall mean the Debentures and the Common Stock as the same may
----------
be respectively amended and supplemented from time to time.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
--------------
similar federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time.
"Senior Blockage Notice" shall have the meaning given such term in Section
----------------------
9.1.
"Senior Credit Agreement" shall have the meaning given such term in Section
-----------------------
9.4.
"Senior Obligations" shall have the meaning given such term in Section 9.4.
------------------
55
"Senior Obligations Default" shall mean a default in payment of the
--------------------------
principal of or sinking fund installments, if any, due with respect to, fees in
respect of or interest on, any Senior Obligations, or any default, or any event
which, with notice or lapse of time or both, would constitute a default, in any
other agreement, term or condition contained in any agreement under which any
Senior Obligations is issued.
"Subsidiaries" shall mean any Person of which at the time of determination
------------
the Company and/or one or more Subsidiaries owns or controls directly or
indirectly more than 50% of the shares of voting stock of such Person.
"Trading Day" shall mean a day on which an amount greater than zero can be
-----------
calculated with respect to the Common Stock under any one or more of the clauses
(i), (ii), or (iii) under the definition of "Market Price" below.
"Year 2000 Compliant" shall mean means that the computer systems (1) are
-------------------
capable of recognizing, processing, managing, representing, interpreting, and
manipulating correctly date related data for dates earlier and later than
January 1, 2000, including, but not limited to, calculating, comparing, sorting,
storing, tagging and sequencing, without resulting in or causing logical or
mathematical errors or inconsistencies in any user-interface functionalities or
otherwise, including data input and retrieval, data storage, data fields,
calculations, reports, processing, or any other input or output, (2) have the
ability to provide date recognition for any data element without limitation
(including, but not limited to, date-related data represented without a century
designation, date-related data whose year is represented by only two digits and
date fields assigned special values), (3) have the ability to automatically
function into and beyond the year 2000 without human intervention and without
any change in operations associated with the advent of the year 2000, (4) have
the ability to correctly interpret data, dates and time into and beyond the year
2000, (5) have the ability not to produce noncompliance in existing information,
nor otherwise corrupt such data into and beyond the year 2000, (6) have the
ability to correctly process after January 1, 2000 data containing dates before
that date, (7) have the ability to recognize all "leap years," including
February 29, 2000.
15. WAIVERS; MODIFICATIONS OF AGREEMENT. Any provision in this Agreement
to the contrary notwithstanding, changes in or additions to this Agreement may
be made, and compliance with any covenant or condition herein set forth may be
omitted, if the Company (a) shall obtain from the holders of record of
Debentures aggregating not less than 66-2/3% of the aggregate principal amount
of the Debentures at the time outstanding (and, in the case of any such change,
addition, or omission adversely affecting the rights pursuant to Section 12 of
any holder of record of Restricted Stock or Debentures, additionally from the
Holders of not less than 100% of the number of shares of Restricted Stock or
Debentures at the time outstanding) their consent thereto in writing and (b)
shall deliver copies of such consent in writing to any such Holders of record
who did not execute the same; provided, however, that without the consent in
-------- -------
writing of the holder of each Debenture (or, in the case of any change,
addition, or omission adversely affecting the rights pursuant to Section 12 of
any holder of record of Restricted Stock
56
or Debentures, as aforesaid, of each share of Restricted Stock or Debentures)
affected thereby, no such consent shall be effective
57
to reduce the principal of or rate of interest payable on, or to postpone any
date fixed for the payment of principal of or any installment of interest on,
any Debenture, to increase the percentage specified in Section 11 of the
principal amount of the Debentures the Holders of which may, in accordance with
the provisions of such Section 11, accelerate the maturity of the Debentures
upon an Event of Default or to reduce the percentage of the principal amount of
the Debentures (or Restricted Stock) the consent of the Holders of which shall
be required under this Section 15.
16. SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
representations, and warranties made herein and in the Debentures and in any
certificate delivered pursuant hereto shall survive any investigation made by
you and the execution and delivery to you of the Debentures to be purchased by
you and your payment therefor.
17. BROKERS; ISSUANCE TAXES. The Company will hold you free and harmless
from any (a) claim, demand, liability for, or expense in connection with, any
brokers' or finders' fees or commissions claimed by any Person asserted to be
acting on behalf of the Company in connection with this Agreement or the
transactions contemplated herein and (b) taxes, if any, payable upon, or on
account of, issuance of the Debentures or the Common Stock.
18. GOVERNING LAW. This Agreement and the Debentures are being delivered
in Texas and shall be governed by and construed according to the laws of the
State of Texas without consideration of its conflict of law provisions.
19. NOTICES. Any notice, consent, request, or other communication
required or permitted hereunder shall be in writing and shall be deemed given
when either (a) personally delivered to the intended recipient or (b) sent, by
certified or registered mail, return-receipt requested, addressed to the
intended recipient as follows:
if to the Company, to:
EarthCare Company
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
; if to any of you, to the address given for such of you on Schedule 1 hereto;
if to any other holder of a Debenture to the address of such holder given to the
Company in accordance with Section 8; and if to any other holder of Restricted
Stock, to the address of such holder as set forth in the stock transfer records
of the Company. Any Person (other than the Company) may change the address to
which notice is to be sent pursuant to the preceding sentence by giving notice
of such new address to the Company in accordance with this Section 19. The
Company may change the address to which notice is to be sent hereunder by giving
notice of such change, in accordance with this Section 19, to each Person
against whom such change shall be effective. Any notice mailed as aforesaid
shall, unless otherwise provided herein, be deemed given on the fifth day after
deposited in the Unites States mail in accordance with the first sentence of
this Section 19.
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20. PARTIES IN INTEREST. All of the terms and provisions of this
Agreement shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns.
21. BUSINESS DAYS. Should any installment of the principal of or interest
on any Debenture become due and payable upon a day other than a day on which
national banks located in Texas, are open for the conduct of banking business,
the maturity thereof shall be extended to the next succeeding day upon which
such banks are open for the conduct of banking business and, in the case of an
installment of principal, interest shall be payable thereon at the rate per
annum specified in such Debenture during such extension.
22. HEADINGS. The headings of the various sections and subsections hereof
have been inserted for convenience of reference only and shall not be deemed to
in any way modify any of the terms or provisions hereof.
23. COUNTERPARTS. This Agreement may be signed by each party hereto upon
a separate copy, in which event all of said copies shall constitute a single
counterpart of this Agreement. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
If the foregoing is in accordance with your understanding, please sign the
form of confirmation and acceptance on the enclosed counterpart of this
Agreement and return the same to the Company, whereupon this Agreement shall be
a binding agreement between you and the Company.
Very truly yours,
EARTHCARE COMPANY
By:________________________________
▇▇▇▇▇ ▇▇▇▇▇▇, President
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The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Inc., as agent
and attorney-in-fact for the persons
named on Schedule I attached hereto.
____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President
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