Exhibit 10.9
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FINANCIAL PACIFIC COMPANY
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SUBORDINATED NOTE AGREEMENT
Dated as of January 23, 1998
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TABLE OF CONTENTS
Page
SUBORDINATED NOTE AGREEMENT .................................................... 1
BACKGROUND ..................................................................... 1
ARTICLE I
Definitions
SECTION 1.1. Interpretation ................................................ 2
SECTION 1.2. Definitions ................................................... 3
ARTICLE II
Successor Company
SECTION 2.1. When the Company May Merge or Transfer Assets ................. 22
ARTICLE III
Sale of the Notes and the Warrants
SECTION 3.1. Sale of the Notes and the Warrants ............................ 23
SECTION 3.2. Legend for the Notes .......................................... 27
SECTION 3.3. Mandatory Repayment of the Notes .............................. 27
SECTION 3.4. Optional Prepayment of the Notes .............................. 27
SECTION 3.5. Optional Prepayment of the Notes Following Public Offering .... 28
SECTION 3.6. Prepayment Right of Holders Upon Change of Control ............ 28
SECTION 3.7. Allocation of Prepayments ..................................... 29
SECTION 3.8. Notice of Prepayment of the Notes ............................. 30
SECTION 3.9. Restrictions on Optional Prepayments .......................... 30
SECTION 3.10. Method of Payment on the Notes; Secondary Notes ............... 30
ARTICLE IV
Covenants
SECTION 4.1. Payment of the Notes .......................................... 31
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SECTION 4.2. Limitation on Debt ............................................ 32
SECTION 4.3. Limitation on Restricted Payments ............................. 35
SECTION 4.4. Limitation on Restrictions on Distributions from Subsidiaries
of the Company ................................................ 39
SECTION 4.5. Limitation on Transactions with Affiliates .................... 40
SECTION 4.6. Foreign Investment in Real Property Tax Act of 1980
("FIRPTA") .................................................... 42
SECTION 4.7. Notice of Default ............................................. 42
SECTION 4.8. Authorizations and Approvals .................................. 42
SECTION 4.9. Provision of Periodic Financial Information ................... 42
ARTICLE V
Events of Default; Remedies
SECTION 5.1. Events of Default ............................................. 43
SECTION 5.2. Acceleration .................................................. 46
SECTION 5.3. Rights and Remedies Cumulative ................................ 46
SECTION 5.4. Delay or Omission Not Waiver .................................. 47
SECTION 5.5. Waiver of Stay or Extension Laws .............................. 47
SECTION 5.6. Waiver of Past Defaults ....................................... 47
SECTION 5.7. Rights of Holders To Receive Payment .......................... 47
ARTICLE VI
Subordination
SECTION 6.1. Agreement To Subordinate ...................................... 48
SECTION 6.2. Liquidation, Dissolution, Bankruptcy .......................... 48
SECTION 6.3. Default on Senior Debt ........................................ 49
SECTION 6.4. Acceleration on Payment of Notes and Exercise of Remedies ..... 50
SECTION 6.5. When Distribution Must Be Paid Over Subrogation ............... 51
SECTION 6.6. Subrogation ................................................... 51
SECTION 6.7. Relative Rights ............................................... 52
SECTION 6.8. Subordination May Not Be Impaired by Company .................. 52
SECTION 6.9. Reinstatement ................................................. 52
SECTION 6.10. Proofs of Claim ............................................... 53
SECTION 6.11. Non-Impairment ................................................ 53
SECTION 6.12. No Modification ............................................... 54
SECTION 6.13. Waivers; Reliance by Holders of Senior Debt ................... 54
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SECTION 6.14. Enforcement of Rights ......................................... 54
ARTICLE VII
Transfer of the Notes
SECTION 7.1. Registration of Transfer ...................................... 55
SECTION 7.2. Register ...................................................... 56
ARTICLE VIII
Termination
SECTION 8.1. Termination ................................................... 56
SECTION 8.2. Liability ..................................................... 56
ARTICLE IX
Amendments
SECTION 9.1. Amendments .................................................... 56
SECTION 9.2. Revocation and Effect of Consents and Waivers ................. 57
SECTION 9.3. Notation on or Exchange of Notes .............................. 58
SECTION 9.4. Payment for Consent ........................................... 58
ARTICLE X
Guarantee of Notes
SECTION 10.1. Guarantee ..................................................... 58
SECTION 10.2. Waiver of Notice and Demand ................................... 59
SECTION 10.3. Guarantor Obligations Not Affected ............................ 59
SECTION 10.4. Execution of Guarantee ........................................ 60
SECTION 10.5. Subrogation ................................................... 60
SECTION 10.6. Independent Obligations ....................................... 60
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ARTICLE XI
Subordination of Guarantee
SECTION 11.1. Subordination of Guarantee .................................... 61
SECTION 11.3. Default on Guarantor Senior Debt .............................. 61
SECTION 11.4. When Distribution Must Be Paid Over ........................... 63
SECTION 11.5. Subrogation ................................................... 63
SECTION 11.6. Relative Rights ............................................... 64
SECTION 11.7. Subordination May Not Be Impaired by Operating Subsidiary ..... 65
SECTION 11.8. Reinstatement ................................................. 65
SECTION 11.9. Non-Impairment ................................................ 65
SECTION 11.10. No Modification ............................................... 65
SECTION 11.11. Waivers; Reliance by Holders of Guarantor Senior Debt ......... 66
SECTION 11.12. Enforcement of Rights ......................................... 66
ARTICLE XII
Miscellaneous
SECTION 12.1. Notices ....................................................... 66
SECTION 12.2. Parties ....................................................... 68
SECTION 12.3. Governing Law ................................................. 68
SECTION 12.4. Replacement Note .............................................. 69
SECTION 12.5. Successors and Assigns ........................................ 69
SECTION 12.6. Severability Clause ........................................... 69
SECTION 12.7. Further Assurances ............................................ 69
SECTION 12.8. Entire Agreement .............................................. 69
SECTION 12.9. Headings ...................................................... 70
SECTION 12.10. Counterparts .................................................. 70
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ARTICLE XIII
Indemnification
SECTION 13.1. Indemnity of Holders of the Notes by the Company .............. 70
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SUBORDINATED NOTE AGREEMENT
SUBORDINATED NOTE AGREEMENT dated as of January 23, 1998 (this
"Agreement"), by and among Financial Pacific Company, a Washington corporation
(the "Company"), Financial Pacific Leasing, LLC, a Washington limited liability
company (the "Operating Subsidiary"), Windward/Merban, L.P., a Delaware limited
partnership ("Windward/Merban"), and The Northwestern Mutual Life Insurance
Company, a Wisconsin corporation ("Northwestern Mutual") (Windward/Merban and
Northwestern Mutual, each a "Purchaser" and, collectively, the "Purchasers").
BACKGROUND
WHEREAS, pursuant to the Recapitalization Agreement and Plan
of Merger, dated as of December 5, 1997 (the "Main Transaction Agreement"), by
and among the Company, Windward Capital Associates, L.P., a Delaware limited
partnership ("Windward"), Windward/Badger FPC, LLC, a Delaware limited liability
company ("Windward/Badger"), Windward/Merban, Windward/Merchant, L.P., a
Delaware limited partnership ("Windward/Merchant") (collectively, the "Windward
Entities"), Windward/FPC Merger, L.P., a Delaware limited partnership
("Windward/FPC"), and Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxx, Xxxxxxxx X.
XxXxxxxxxx and Xxxxxx X. Xxxxxxxxx, upon the terms and subject to the conditions
set forth therein, among other things, (a) Windward/FPC will merge with and into
the Company with the Company being the surviving corporation (sometimes referred
to herein as the "Surviving Corporation"), (b) shares of common stock and
preferred stock of the Company outstanding immediately prior to the Merger (as
defined herein) will be converted into the right to receive certain cash
consideration and the right to either receive or retain, as the case may be, an
aggregate number of shares of Class A Common (as defined herein) approximately
equal to 13.3% of the Surviving Corporation's outstanding shares of capital
stock (as defined herein) after the Merger, on the terms and conditions set
forth in Section 1.6.1(b)(i) of the Main Transaction Agreement and (c) limited
partnership interests in Windward/FPC will be converted into the right to
receive from the Surviving Corporation shares of certain classes of its common
stock in the amounts and to the entities set forth in Section 1.6.1(d) and on
Schedule 1.6.1(d) thereto;
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WHEREAS, as part of the closing of the transactions
contemplated in the Main Transaction Agreement and upon the terms and subject to
the conditions set forth herein and therein, the Company shall issue and sell to
the Purchasers $10,000,000 principal amount of its 12% Subordinated Notes Due
2008 (the "Notes"), and the Purchasers shall purchase the Notes from the
Company, on the terms and conditions set forth herein; and
WHEREAS, as part of the closing of the transactions
contemplated in the Main Transaction Agreement and upon the terms and conditions
set forth herein and therein, the Company shall issue and sell to the Purchasers
or their nominees warrants to acquire shares of Class A Common (the "Class A
Warrants") substantially in the form attached hereto as Exhibit B and warrants
to acquire shares of Class E Common (as defined herein) (the "Class E Warrants
and, together with the Class A Warrants, the "Mezzanine Warrants") substantially
in the form attached hereto as Exhibit C, on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and
agreements contained in this Agreement, and for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
ARTICLE I
Definitions
SECTION 1.1. Interpretation. For all purposes of this
Agreement and the Notes, except as otherwise expressly provided or unless the
context otherwise requires:
(a) the terms defined in this Article and elsewhere in
this Agreement include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally
accepted accounting principles that are consistently applied and,
except as otherwise herein expressly provided, the term "generally
accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such
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accounting principles as are generally accepted in the United States
as of the date hereof; and
(c) the words "herein, "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision.
SECTION 1.2. Definitions.
"Acquired Debt" means Debt of a Subsidiary of the Company
issued and outstanding on or prior to the date on which such Subsidiary was
acquired by either the Company or any other Subsidiary of the Company (other
than Debt issued as consideration in, or to provide all or any portion of the
funds or credit support utilized in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary of the Company became a
Subsidiary or was acquired by either the Company or any other Subsidiary of the
Company).
"Affiliate" of any specified Person means (i) any other Person
which, directly or indirectly, is in control of, is controlled by or is under
common control with such specified Person or (ii) any other Person who is a
director or officer (A) of such specified Person, (B) of any Subsidiary of such
specified Person or (C) of any Person described in clause (i) above. For
purposes of this definition, control of a Person means the direct or indirect
power to direct or cause the direction of the management and policies of such
Person whether through the ownership of Voting Stock, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" means this Subordinated Note Agreement among the
Company and the Purchasers and all Schedules and Exhibits attached hereto.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
shares of Capital Stock of a Subsidiary of the Company, property or other assets
(each referred to for the purposes of this definition as a "disposition") by the
Company or any of its Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction) other than
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(i) a disposition by any of the Company's Subsidiaries to the Company or by the
Company or any of its Subsidiaries to any of the Company's Wholly Owned
Subsidiaries, (ii) any sales or leases of assets in the ordinary course of
business consistent with past practices and (iii) a disposition subject to
Article II (except to the extent the Company disposes of substantially all (but
not all) of its assets, in which event the assets not so disposed of shall be
deemed as having been sold by the Company).
"Average Life" means, as of the date of determination, with
respect to any Debt or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled sinking fund, serial maturity or other
principal payment of such Debt or redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment by (ii) the sum of
all such payments.
"Bankruptcy Law" means Xxxxx 00, Xxxxxx Xxxxxx Code, or any
similar Federal or state law for the relief of debtors.
"Board of Directors" means, with respect to any Person, such
Person's Board of Directors or any committee thereof duly authorized to act on
behalf of such Board of Directors.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company, depending upon the
context in which such term is used, to have been duly adopted by such Board of
Directors of the Company and to be in full force and effect on the date of such
certification and delivered to the Purchasers.
"Business Day" means each day which is not a Saturday or
Sunday or a day on which banking institutions are not required to be open in the
State of New York.
"Capital Lease Obligations" means, with respect to any Person,
any lease of any property (whether real, personal or mixed) by such Person as
lessee that, in accordance with generally accepted accounting principles, either
would be required to be classified and accounted for as a capital lease (a
"Capital Lease") on a balance sheet of such Person or otherwise be disclosed as
such in a note to such balance sheet; the amount of such obligation shall be
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the capitalized amount thereof, determined in accordance with generally accepted
accounting principles; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, contingent share issuances,
participations or other equivalents of or interests in (however designated)
equity of such Person, including any Preferred Stock, but excluding any debt
securities convertible into or exchangeable for such equity.
"Change of Control" means any transaction or series of related
transactions in which all of the Company is sold to a third party unaffiliated
with the Company, the Windward Entities or any of their Affiliates (whether by
merger, consolidation, sale of securities, sale of all or substantially all of
the assets or any similar business combination) or in which the Windward
Entities and their Affiliates and their Permitted Transferees sell or otherwise
dispose of all of the Capital Stock of the Company held by such entities and
Persons (including, without limitation, pursuant to a Public Equity Offering).
Notwithstanding the foregoing, the term "Change of Control" shall not include
any sale or deemed sale or disposition of the Company to (A) any Affiliate of
the Windward Entities, (B) any entity or successor entity in which the Windward
Entities hold at least a majority of the total voting power of such entity or
successor entity (or retain the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the members of the
Board of Directors or other governing body of such entity or successor entity),
(C) any entity or successor entity in which no Person or entity holds a greater
percentage of the total voting power of such entity or successor entity than the
Shareholders, taken as a group, (D) any entity in which the Company, directly or
indirectly, owns a majority of the equity and voting interest (including,
without limitation, any Wholly Owned Subsidiary of the Company) or (E) any
entity formed at the direction of the Company in connection with obtaining
financing for the Company under an arrangement which provides the Company with
an option to reacquire its assets or other properties or other similar financing
arrangement.
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"Class A Common" means the Class A Common Stock, par value
$1.00 per share, of the Company.
"Class A Warrants" has the meaning specified in the third
Whereas clause hereof.
"Class E Common" means the Class E Common Stock, par value
$1.00 per share, of the Company.
"Class E Warrants" has the meaning specified in the third
Whereas clause hereof.
"Closing" shall have the meaning set forth in the Main
Transaction Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning specified in the first Whereas
clause hereof.
"Consolidated EBITDA Minus LOCC Coverage Ratio" as of any date
of determination means the ratio of (i) the aggregate amount of EBITDA Minus
LOCC for the period of the most recent four consecutive fiscal quarters ending
at least 45 days prior to the date of such determination to (ii) Consolidated
Interest Expense for such four fiscal quarters; provided that, and without
duplication, (A) if the Company or any of its Restricted Subsidiaries has issued
any Debt since the beginning of such period that remains outstanding (other than
Debt issued under a revolving credit or similar arrangement for working capital
purposes or for capital improvement purposes) on the last day of such period or
if the transaction giving rise to the need to calculate the Consolidated EBITDA
Minus LOCC Coverage Ratio is an issuance of Debt, or both, EBITDA Minus LOCC and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Debt as if such Debt had been issued on the
first day of such period; (B) if since the beginning of such period the Company
or .any of its Restricted Subsidiaries shall have made any Asset Disposition,
(x) the EBITDA Minus LOCC for such period shall be reduced by an amount equal to
the EBITDA Minus LOCC (if positive) directly attributable to the assets which
are the subject of such Asset Dispositions for such period, or increased by an
amount equal to the EBITDA Minus LOCC (if negative) directly attributable to the
assets which are the subject of such Asset Dispositions for such period and (y)
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Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any Debt of
the Company or any of its Restricted Subsidiaries repaid, repurchased, defeased
or otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Dispositions for such
period (or, if the Capital Stock of any of the Company's Restricted Subsidiaries
is sold, by an amount equal to the Consolidated Interest Expense for such period
directly attributable to the Debt of such Restricted Subsidiary to the extent
the Company and its continuing Restricted Subsidiaries are no longer liable for
such Debt after such sale); (C) if since the beginning of such period the
Company or any of its Restricted Subsidiaries (by merger or otherwise) shall
have made an Investment in any of the Company's Subsidiaries (or any Person
which becomes a Subsidiary of the Company) or an acquisition of assets,
including any acquisition of assets occurring in connection with a transaction
causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA Minus LOCC and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto (including the issuance of any Debt, but without regard
to clause (ii) of the proviso to the definition of "Consolidated Net Income") as
if such Investment or acquisition occurred on the first day of such period; (D)
if since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary of the Company or was merged with or into the Company or
any of its Restricted Subsidiaries since the beginning of such period) shall
have made any Asset Disposition or any Investment that would have required an
adjustment pursuant to clause (B) or (C) above if made by the Company or any of
its Restricted Subsidiaries during such period, EBITDA Minus LOCC and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition or Investment occurred on
the first day of such period; (E) there shall be excluded from Consolidated
Interest Expense any Consolidated Interest Expense related to any amount of Debt
that was outstanding during such four-fiscal-quarter period or thereafter but
that is not outstanding or is to be repaid on the date of determination, except
for Consolidated Interest Expense accrued during such four-fiscal-quarter period
under a revolving credit or similar arrangement; and (F) with respect to any
such four-fiscal quarter period commencing prior to the Merger, the Merger shall
be deemed to have taken place on the first day
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of such period. For purposes of this definition, whenever pro forma effect is to
be given to an acquisition of assets, the amount of income or earnings relating
thereto, and the amount of Consolidated Interest Expense associated with any
Debt issued in connection therewith, the pro forma calculations shall be
determined in good, faith by a responsible financial or accounting Officer of
the Company, which determination shall, if the Holders of a majority of the
principal amount of the Notes so request, be confirmed by the independent
accountants of the Company. If any Debt bears a floating rate of interest and is
being given pro forma effect, the interest on such Debt shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period taking into account any Interest Rate Agreement applicable
to such Debt if such Interest Rate Agreement has a remaining term in excess of
twelve months).
"Consolidated Income Tax Expense" means, for any period, the
consolidated provision for income taxes of the Company and its consolidated
Restricted Subsidiaries for such period determined in accordance with generally
accepted accounting principles.
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Restricted
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles, including (i) interest expense attributable to
capital leases, (ii) capitalized interest to the extent actually paid, (iii)
non-cash interest expense, (iv) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (v) interest actually paid by the Company or any such Restricted
Subsidiary under any guarantee of Debt or other obligation of any other Person,
(vi) net costs under Interest Rate Agreements (including amortization of fees),
(vii) Preferred Stock dividends in respect of all Preferred Stock of the
Company's Restricted Subsidiaries and Redeemable Stock of the Company held by
Persons other than the Company or a Wholly Owned Subsidiary of the Company and
(viii) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Company and its consolidated
Subsidiaries) in connection with loans incurred by such plan or trust to
purchase newly issued or treasury shares of the Company; provided that non-cash
interest
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expense accrued on unpaid dividends applicable to the Company's Preferred Stock
shall be excluded from the calculation of Consolidated Interest Expense;
provided further that the calculation of Consolidated Interest Expense shall
exclude (x) any amount of interest expense of any Restricted Subsidiary of the
Company if the net income (or loss) of such Restricted Subsidiary is excluded in
the calculation of Consolidated Net Income pursuant to clauses (i) or (iii) of
the definition thereof (but only in the same proportion as the net income (or
loss) of such Restricted Subsidiary is excluded from the calculation of
Consolidated Net Income pursuant to clauses (i) or (iii) of the definition
thereof) and (y) any premiums, fees and expenses (and any amortization thereof)
payable in connection with the Merger, all as determined on a consolidated basis
in conformity with generally accepted accounting, principles.
"Consolidated Net Income" means, for any period, the aggregate
net income (or loss) of the Company and its consolidated Restricted Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles (other than any net income (or loss) of any Unrestricted
Subsidiary); provided that there shall not be included in such Consolidated Net
Income (without duplication):
(i) any net income (or loss) of any Person if such Person
is not a Restricted Subsidiary of the Company, except that the
Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person during such period
to the Company or a Restricted Subsidiary of the Company as a dividend
or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary of the Company, to the
limitations contained in clause (iii) below); provided that such
limitation shall not apply to equity income in respect of investments
outstanding as of the date hereof;
(ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to Section 4.3 hereof,
any net income (or loss) of any Person acquired by the Company or a
Restricted Subsidiary of the Company in a pooling of interests
transaction for any period prior to the date of such acquisition;
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(iii) any net income of any Restricted Subsidiary of the
Company if such Restricted Subsidiary is subject to restrictions,
directly or indirectly, on the payment of dividends or the making of
distributions by such Restricted Subsidiary, directly or indirectly, to
the Company (other than general statutory limitations on the payment or
making of such dividends or distributions), except that (A) the
Company's equity in the net income of any such Restricted Subsidiary
for such period shall be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed or available for
distribution without restriction by such Restricted Subsidiary during
such period to the Company or another Restricted Subsidiary of the
Company as a dividend or other distribution (subject, in the case of a
dividend or other distribution to another Restricted Subsidiary of the
Company, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net
Income;
(iv) any gain (or loss) realized upon the sale or other
disposition of any property, plant or equipment of the Company or its
consolidated Restricted Subsidiaries (including pursuant to any
sale-and-leaseback arrangement) which is not sold or otherwise disposed
of in the ordinary course of business and any gain (or loss) realized
upon the sale or other disposition of any Capital Stock of any Person;
(v) the cumulative effect of a change in accounting
principles;
(vi) any extraordinary, non-recurring or unusual gains and
extraordinary, non-recurring or unusual losses;
(vii) any charges, expenses and amortizations which are
accelerated by reason of the payment prior to the maturity thereof of
any Debt;
(viii) any fees or expenses (and any amortization thereof)
incurred in connection with, or payable prior to or substantially
concurrently with the closing of the Merger (including, without
limitation, any fees or expenses related to the financing thereof, any
fees or expenses of attorneys, accountants, financial advisors,
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consultants and other similar persons incurred in connection therewith
and any other such fees and expenses relating thereto); and
(ix) any non-cash charges reducing the net income of the
Company or any Restricted Subsidiary that relate to the issuance,
granting or modification of Capital Stock, stock options, stock
warrants, stock appreciation rights or any other similar rights to the
directors, officers or employees of the Company or any of its
Restricted Subsidiaries, and any cash payments reducing net income of
the Company or any of its Restricted Subsidiaries that relate to stock
options, stock appreciation rights or any other similar rights, to the
extent such cash payments do not come within any of the Restricted
Payment exceptions set forth in Section 4.3(b) hereof.
In computing Consolidated Net Income of the Company, (1) the Company shall use
audited financial statements for the portions of the relevant period for which
audited financial statements are available on the date of determination and
unaudited financial statements and other current financial data based on the
books and records of the Company for the remaining portion of such period and
(2) the Company shall be permitted to rely in good faith on the financial
statements and other financial data derived from the books and records of the
Company that are available on the date of determination.
"Consolidated Net Worth" of any Person means the total of the
amounts shown on the balance sheet of such Person and its consolidated
Subsidiaries, determined on a consolidated basis in accordance with generally
accepted accounting principles, as of the end of the most recent fiscal quarter
of such Person ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated value
of all outstanding Capital Stock of such Person, plus (ii) paid-in capital or
capital surplus relating to such Capital Stock, plus (iii) any retained earnings
or earned surplus, less (A) any accumulated deficit, less (B) any amounts
attributable to Redeemable Stock and less (C) any amounts attributable to
Exchangeable Stock.
"Credit Agreements" means the Credit and Security Agreement,
dated as of January 27, 1993 (the "U.S. Bank Credit Agreement"), between U.S.
Bank of Washington, N.A.
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and the Company, and the 1996-1997 Credit Commitment and Loan Agreement, dated
as of February 21, 1996 (the "Seafirst Credit Agreement"), between Seattle-First
National Bank and the Company, each as amended, and as each may be amended,
restated, supplemented, modified, restructured, extended, renewed, refinanced,
replaced or otherwise modified from time to time, in whole or in part.
"Currency Agreement" means in respect of any Person any
foreign exchange contract, currency swap agreement or other similar agreement as
to which such Person is a party or a beneficiary.
"Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
"Debt" of any Person means, without duplication
(i) the principal of, premium (if any) and interest and
related fees and expenses (if any) in respect of (A) indebtedness of
such Person for money borrowed and (B) indebtedness evidenced by notes;
debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as
the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any
title retention agreement;
(iv) all obligations of such Person for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar
credit transaction;
(v) the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any
Redeemable Stock. (but excluding, in each case, any accrued dividends);
(vi) all obligations of the type referred to in clauses
(i) through (v) of other Persons and all dividends of other Persons for
the payment of which, in either case, such Person is responsible or
liable,
-12-
directly or indirectly, as obligor, guarantor or otherwise, including
any guarantees of such obligations and dividends but in each case, only
to the extent such Person is responsible or liable for such obligations
or dividends;
(vii) all obligations of the type referred to in clauses
(i) through (vi) of other Persons secured by any Lien on any property
or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets and the amount of the
obligation so secured; and
(viii) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
Notwithstanding any of the foregoing provisions of this definition of "Debt",
(1) the amount outstanding at any time of any Debt issued with original issue
discount is the face amount of such Debt less the remaining unamortized portion
of the original issue discount of such Debt at such time as determined in
conformity with generally accepted accounting principles, and (2) Debt shall not
include (A) any liability for federal, state, local or other taxes, (B) trade
accounts payable and other accrued expenses arising in the ordinary course of
business, or (C) with respect to the deferred purchase price of property,
obligations which are due within six months after the date of placing such
property in service or taking delivery and title thereto or (D) any obligation
of the Company pursuant to the Shareholders Agreement to purchase stock from any
Employee Shareholder upon the disability, death, or retirement of such Employee
Shareholder. The amount of Debt of any Person at any date shall be (x) the
outstanding balance at such date of all unconditional obligations as described
above, and (y) the maximum liability determined by such Person's Board of
Directors, in good faith, as reasonably likely to occur, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date. For purposes of determining any particular amount of Debt under
Section 4.2 hereof, (i) obligations of a Person with respect to letters of
credit, guarantees or security interests supporting or relating to any Debt
which is otherwise included in the determination of such particular amount shall
not be included, (ii) Debt permitted under Section 4.2 hereof need not be
permitted solely by reference to one provision permitting such Debt but may be
permitted in part
-13-
by reference to one such provision and in part by reference to one or more other
provisions of the covenant permitting such Debt, and (iii) in the event that an
item of Debt or portion thereof meets the criteria of more than one of the types
of Debt permitted under Section 4.2 hereof, the Company, in its sole discretion,
may classify such item of Debt or portion thereof in one of such provisions and
only be required to include the amount and type of such Debt or portion thereof
in one of such provisions.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"EBITDA Minus LOCC" for any period means the Consolidated Net
Income for such period (but without giving effect to adjustments, accruals,
deductions or entries resulting from gains or losses from any Asset
Dispositions), minus lease origination costs capitalized, plus the following to
the extent deducted in calculating such Consolidated Net Income: (i)
Consolidated Income Tax Expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense and (iv) amortization expense and other non-cash charges.
"Employee Shareholders" has the meaning given thereto in the
Shareholders Agreement.
"Equity Holding Company" means any company of which the
Company is a Wholly Owned Subsidiary substantially all of whose assets are
comprised of Capital Stock of the Company.
"Event of Default" has the meaning specified in Section 5.1
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchangeable Stock" means any Capital Stock which is
exchangeable or convertible into another security (other than Capital Stock of
the Company which is neither Exchangeable Stock nor Redeemable Stock).
"FIRPTA" means the Foreign Investment in Real Property Tax Act
of 1980.
-14-
"Financial Advisory Services Agreement" means the Financial
Advisory Services Agreement, dated of even date herewith, between Windward and
the Company.
"Guarantee" means the Guarantee by the Operating Subsidiary of
the Notes pursuant to this Agreement.
"Guarantee Payment Default Blockage Period" has the meaning
specified in Section 11.3 hereof.
"Guarantee Non-Monetary Default Blockage Period" has the
meaning specified in Section 11.3 hereof.
"Guarantor Senior Debt" means any Debt of the Operating
Subsidiary, whether incurred on or prior to the date of this Agreement or
thereafter incurred, unless, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
obligations are not Guarantor Senior Debt.
"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" means any of the Purchasers or any other Person in
whose name a Note or Notes are registered on the Note Register.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is a party or a
beneficiary.
"Investment" in any Person means any loan or advance to, any
guarantee of, any capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any acquisition of any Capital Stock, equity interest,
obligation or other security of, such Person. Investments shall exclude advances
to customers and suppliers in the ordinary course of business. For purposes of
the definition of "Unrestricted Subsidiary" and Section 4.3 hereof, (i)
"Investment" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets
-15-
of any Subsidiary of the Company at the time that such Subsidiary of the Company
is designated an Unrestricted Subsidiary, and shall exclude the fair market
value of the net assets of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary of the Company and
(ii) any property transferred to or from an Unrestricted Subsidiary shall be
valued at its fair market value at the time of such transfer, in each case as
determined by the Board of Directors of the Company in good faith.
"Lien" means any mortgage, pledge, security interest,
encumbrance, charge of any kind (including any conditional sale or other title
retention agreement) or other similar lien.
"Main Transaction Agreement" has the meaning specified in the
first Whereas clause hereof.
"Majority Roll-Over Shareholders" shall have the meaning set
forth in the Shareholders Agreement.
"Merger" shall have the meaning set forth in the Main
Transaction Agreement.
"Net Cash Proceeds" means, with respect to any issuance or
sale of Capital Stock of the Company, the cash proceeds of such issuance or sale
of Capital Stock, net of any underwriters' or placement agents' fees, discounts
or commissions related to such issuance or sale.
"Non-Convertible Capital Stock" means, with respect to any
corporation, any non-convertible Capital Stock of such corporation and any
Capital Stock of such corporation convertible solely into non-convertible
Capital Stock of such corporation; provided that Non-Convertible Capital Stock
shall not include any Redeemable Stock or Exchangeable Stock.
"Non-Monetary Default Blockage Period" has the meaning
specified in Section 6.3 hereof.
"Non-Recourse Debt" means, with respect to any Person, Debt of
such Person to the extent that, if such Person fails to pay such Debt when due
and the holder thereof obtains a judgment with respect thereto, the holder may
not collect by levy of execution against any general assets of such Person other
than assets securing such Debt;
-16-
provided, however, that Debt shall not fail to constitute Non-Recourse Debt by
reason of (i) provisions giving recourse to, or rights against, such Person or
any assets thereof upon the happening of certain specified events, including,
without limitation, intentional misrepresentation, regulatory noncompliance or
violation of law, or (ii) any rights the holder thereof may have under
bankruptcy, insolvency, receivership or other proceedings including by reason of
Section 1111(b) of the Federal Bankruptcy Code.
"Northwestern Mutual" has the meaning specified in the first
paragraph of this Agreement.
"Note Register" means the register maintained pursuant to
Section 7.3 hereof.
"Notes" means the $10,000,000 principal amount of the
Company's 12% Subordinated Notes Due 2008 to be purchased by the Purchasers from
the Company pursuant to this Agreement and the Secondary Notes. "Note" means all
or a part of the Notes.
"Officer" means the Chief Executive Officer, the President,
the Chief Financial Officer, any Executive Vice President, the Treasurer or the
Secretary of the Company, depending upon the context in which such term is used.
"Other Shareholders" has the meaning given thereto in the
Shareholders Agreement.
"Pari Passu", as applied to the ranking of any Debt of a
Person in relation to other Debt of such Person, means that each such Debt
,either (i) is not subordinated in right of payment to any Debt or (ii) is
subordinated in right of payment to the same Debt as is the other, and is so
subordinated to the same extent, and is not subordinated in right of payment to
such other Debt or to any Debt as to which the other is not so subordinated.
"Payment Default Blockage Period" has the meaning specified in
Section 6.3 hereof.
"Permitted Junior Securities" means: (a) debt securities of
the Company as reorganized or readjusted, or debt securities of the Company (or
any other company, trust or organization provided for by a plan of
reorganization or readjustment succeeding to the assets and liabilities of the
-17-
Company), that, in each case, are subordinated, to at least the same extent as
the Notes, to the payment of all Senior Debt that will be outstanding after
giving effect to such reorganization or readjustment, so long as (i) the spread
between the Treasury Yield and the yield on such debt securities as of the
issuance of such debt securities shall not exceed the spread between the
Treasury Yield and the yield on the Notes on the date hereof and (ii) such debt
securities shall not provide for amortization (including sinking fund and
mandatory prepayment provisions) commencing prior to the date one year following
the final scheduled maturity date of the Senior Debt (as modified by such
reorganization or readjustment) or (b) shares of stock of the Company as
reorganized or readjusted pursuant to a reorganization or readjustment;
provided, that, in each case with respect to clauses (a) and (b) above, (x) if a
new corporation results from any such reorganization or readjustment, such
corporation assumes all Senior Debt that will be outstanding after giving effect
thereto and (y) the rights of the holders of the Senior Debt are not, without
the consent of such holders, altered by any such reorganization or readjustment,
including, without limitation, such rights being impaired within the meaning of
Section 1124 of Title 11 of the United States Code, or any impairment of the
right to receive interest accruing during the pendency of a bankruptcy or
insolvency proceeding, including proceedings under Title 11 of the United States
Code.
"Permitted Transferees" has the meaning given thereto in the
Shareholders Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Prepayment Date" has the meaning specified in Section 3.8
hereof.
-18-
"Public Equity Offering" means an underwritten primary, or
combined primary and secondary, public offering of Capital Stock (other than
Redeemable Stock) of the Company (or any entity of which the Company is a
Subsidiary, to the extent the cash proceeds of such primary offering are
contributed to the Company or used to acquire Capital Stock (other than
Redeemable Stock) of the Company) pursuant to an effective registration
statement under the Securities Act, and any similar private placement of
securities effected substantially concurrently with any such offering.
"Purchasers" has the meaning specified in the first paragraph
of this Agreement.
"Redeemable Stock" means any Capital Stock that by its terms
or otherwise is required to be redeemed on or prior to the first anniversary of
the Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time on or prior to the first anniversary of the Stated Maturity
of the Notes.
"Restricted Payment" has the meaning specified in Section
4.3(a) hereof.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Secondary Notes" means the Notes issued in the manner
described in Section 3.10. hereof.
"Secured Debt" means any Debt of the Company or any Restricted
Subsidiary secured by a Lien on any assets of the Company or any Restricted
Subsidiary as any such Debt may be amended, restated, supplemented, modified,
restructured, extended, renewed, refinanced, replaced or otherwise modified from
time to time, in whole or in part.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Senior Debt" means any Debt of the Company whether incurred
on or prior to the date of this Agreement or thereafter incurred, unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are not superior in right of
payment to the Notes or to other Debt that is Pari Passu with, or subordinated
to, the Notes,
-19-
provided, however, the following shall not constitute Senior Debt: (i) any Debt
owed to a Person when such Person is a Subsidiary of the Company, (ii) any Debt
incurred in violation of this Agreement or (iii) any Debt which is subordinated
in right of payment in any respect to any other Debt of the Company.
"Shareholders" means, collectively, (i) each Windward Entity,
(ii) the Majority Roll-Over Shareholders, (iii) the Other Shareholders, (iv) the
Permitted Transferees and (v) any other Persons who or which become parties to
the Shareholders Agreement pursuant to the terms and conditions thereof.
"Shareholders Agreement" means that certain Shareholders
Agreement (including the Schedules and Exhibits attached thereto), dated of even
date herewith, among the Company, Windward, Windward/Merchant, Windward/Merban,
Windward/Badger, and the other shareholders party thereto, as such agreement may
be amended, supplemented or otherwise modified from time to time after the date
hereof.
"Significant Subsidiary" means, at any date of determination,
any Subsidiary of the Company that, together with its Subsidiaries, (i) for the
most recent fiscal year of the Company, accounted for more than ten percent
(10%) of the consolidated revenues of the Company or (ii) as of the end of such
fiscal year, was the owner of more than ten percent (10%) of the consolidated
assets of the Company, all as set forth on the most recently available
consolidated financial statements of the Company for such fiscal year.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which all of the
outstanding principal of such security is due and payable, including pursuant to
any mandatory redemption provision.
"Subordinated Obligation" means any Debt of the Company
(whether outstanding on the date hereof or hereafter incurred) which is
subordinate or junior in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, a corporation
or other entity (including a partnership or a limited liability company) of
which a majority of the Capital Stock or other voting interests having voting
power under ordinary circumstances to elect a majority of the
-20-
board of directors or otherwise control such corporation or other entity is
owned by (i) such Person, (ii) such Person and one or more of its Subsidiaries
or (iii) one or more I Subsidiaries of such Person.
"Treasury Yield" means the arithmetic mean of the rates
published as "Treasury Constant Maturities" as of 5:00 p.m., New York time, for
the five Business Days preceding the date of determination pursuant to this
Agreement, as shown on the USD screen of the Bloomberg service, or if such
service is not available, the Telerate service, or if neither the Bloomberg nor
the Telerate service is available, in the weekly statistical release designated
"H.15 (519)" (or any successor publication) published by the Board of Governors
of the Federal Reserve System, for "On the Run" U.S. Treasury obligations
corresponding to the remaining life to maturity of the Notes as of the date of
determination; if no such maturity shall so exactly correspond, yields for the
two most closely corresponding published maturities shall be calculated pursuant
to the foregoing sentence and the Treasury Yield shall be interpolated or
extrapolated (as applicable) from such yields on a straight-line basis
(rounding, in the case of relevant periods, to the nearest month).
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors of the Company in the manner provided below
and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of
the Company may designate any Subsidiary of the Company (including any newly
acquired or newly-formed Subsidiary of the Company) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, the Company or any other Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; provided that
either (A) the Subsidiary to be so designated has total assets of $250,000 or
less or (B) if such Subsidiary has assets greater than $250,000, that such
designation would be permitted under Section 4.3 hereof. The Board of Directors
of the Company may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Company; provided that immediately after giving effect to such
designation (x) the Company could issue $1.00 of additional Debt under Section
4.2(a) hereof and (y) no Default or Event of Default shall have occurred and be
continuing. Any Subsidiary of the Company may be designated
-21-
as an Unrestricted Subsidiary (or not so designated) for purposes of this
Agreement without regard to whether such Subsidiary is so designated (or not so
designated) for purposes of any other agreement relating to Debt of the Company
or any of its Subsidiaries. Notwithstanding anything in the foregoing to the
contrary, no Subsidiary of the Company may be designated an Unrestricted
Subsidiary if the Board of Directors of the Company has previously designated
such Subsidiary an Unrestricted Subsidiary and thereafter designated such
Subsidiary a Restricted Subsidiary under this Agreement more than one time.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Wholly Owned Subsidiary" means, with respect to any Person, a
Subsidiary of such Person all the Capital Stock of which (other than directors'
qualifying shares) is owned by such Person or another Wholly Owned Subsidiary of
such Person.
"Windward" has the meaning specified in the first Whereas
clause hereof.
"Windward/Badger" has the meaning specified in the first
Whereas clause hereof.
"Windward Entities" has the meaning specified in the first
Whereas clause hereof.
"Windward/FPC" has the meaning specified in the first Whereas
clause hereof.
"Windward/Merban" has the meaning specified in the first
paragraph of this Agreement.
"Windward/Merchant" has the meaning specified in the first
Whereas clause hereof.
ARTICLE II
Successor Company
SECTION 2.1. When the Company May Merge or Transfer Assets.
(a) The Company shall not consolidate, with or merge with or into, or convey or
transfer or lease all or
-22-
substantially all of its assets to, another Person unless (i) the resulting,
surviving or transferee Person (if not the Company) shall be a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia and such entity shall assume in writing in form and
substance satisfactory to the Holders of the Notes all the obligations of the
Company under the Notes and this Agreement, (ii) immediately after giving effect
to such transaction, no Default or Event of Default shall have occurred and be
continuing and either (A) the Company is able to incur at least $1.00 of
additional Debt pursuant to Section 4.2(a) hereof or (B) the resulting,
surviving or transferee Person shall have Consolidated Net Worth in an amount
which is not less than the result of (x) the Consolidated Net Worth of the
Company immediately prior to such transaction, minus (y) the aggregate amount of
Restricted Payments which could have been made by the Company pursuant to
Section 4.3(a) hereof immediately prior to such transaction, but which are not
being made as part of such transaction, and (iii) the Company shall have
delivered to the Holders a certificate of an Officer of the Company stating that
such consolidation, merger or transfer complies with this Agreement.
(b) Notwithstanding the provisions of Section 2.1(a), (i)
any Subsidiary of the Company with a positive net worth may consolidate with,
merge into or transfer all or part of its properties and assets to the Company;
provided that, in connection with any such transaction, no consideration (other
than common stock in the surviving Person or the Company) shall be issued or
distributed to the shareholders of the Company, and (ii) the provisions of
clause (ii) of Section 2.1(a) above shall not apply if, in the good faith
determination of the Board of Directors of the Company, whose determination
shall be evidenced by a Board Resolution, the principal purpose of such
transaction is to change the state of incorporation of the Company.
ARTICLE III
Sale of the Notes and the Warrants
SECTION 3.1. Sale of the Notes and the Warrants. (a)
Representations and Warranties of the Company and the Operating Subsidiary. To
induce the Purchasers to enter the into and perform this Agreement, the Company
and the
-23-
Operating Subsidiary represent and warrant to the Purchasers and their nominees,
if any, as of the date hereof as follows in this Section 3.1(a).
(i) The Company is a corporation duly organized and
validly existing under the laws of the state of Washington, and has all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as now being conducted. The Operating Subsidiary is
a limited liability company duly formed and validly existing under the laws of
the state of Washington, and has all requisite limited liability company power
and authority to own, operate and lease its properties and to carry on its
business as now being conducted.
(ii) All of the issued membership interests of the
Operating Subsidiary have been duly and validly authorized and issued, are fully
paid and non-assessable and are owned directly or indirectly by the Company,
free and clear of all Liens.
(iii) The Notes and the Warrants have been duly authorized
and, when issued and delivered pursuant to this Agreement, will have been duly
executed, issued and delivered and will be legal, valid and binding obligations
of the Company, entitled, in the case of the Notes, to the benefits provided by
this Agreement, under which they are to be issued; this Agreement constitutes a
legal, valid and binding instrument of the Company, enforceable against the
Company in accordance with its terms.
(iv) The issue and sale of the Notes and the Warrants and
the compliance by the Company with all of the provisions of the Notes, the
Warrants and this Agreement and the consummation of the transactions herein and
therein contemplated will not (a) constitute a violation (with or without the
giving of notice or lapse of time or both) of any provision of any domestic or
foreign law applicable to the Company, (b) require any consent, approval or
authorization of, or notice to, any person, corporation, partnership, domestic
or foreign governmental authority or other organization or entity, except as may
be required under the Credit Agreement and which consents have been obtained,
(c) result in a default under, an acceleration or termination of, or the
creation in any party of the right to accelerate, terminate, modify or cancel,
any material agreement, lease, note or other restriction, encumbrance,
obligation or liability to which the Company is a party or
-24-
by which the Company is bound or to which any of its assets are subject, (d)
result in the imposition or creation of any Lien upon any assets owned or used
by the Company or (e) conflict with or result in a breach of or constitute a
default under any provision of the Company's charter documents or bylaws.
(v) The shares of Class A Common and Class E Common
issuable upon exercise of the Warrants have been duly reserved for issuance by
the Company and have been validly authorized and, when delivered against payment
therefore pursuant to the terms of the Warrants, will be validly issued and
fully paid and nonassessable and will be free and clear of any liens and other
encumbrances.
(vi) The Guarantee has been duly authorized and, when
executed and delivered by the Operating Subsidiary pursuant to this Agreement,
will have been duly executed and delivered and will be a legal, valid and
binding obligation of the Operating Subsidiary, enforceable against the
Operating Subsidiary in accordance with its terms; this Agreement constitutes a
legal, valid and binding instrument of the Operating Subsidiary, enforceable
against the Operating Subsidiary in accordance with its terms.
(vii) The issuance by the Guarantor of the Guarantee, the
compliance by the Guarantor with all of the provisions of the Guarantee and this
Agreement and the consummation of the transactions herein and therein
contemplated will not (a) constitute a violation (with or without the giving of
notice or lapse of time or both) of any provision of any domestic or foreign law
applicable to the Company, (b) require any consent, approval or authorization
of, or notice to, any person, corporation, partnership, domestic or foreign
governmental authority or other organization or entity, except as may be
required under the Credit Agreements which consents have been obtained, (c)
result in a default under, an acceleration or termination of, or the creation in
any party of the right to accelerate, terminate, modify or cancel, any material
agreement, lease, note or other restriction, encumbrance, obligation or
liability to which the Operating Subsidiary is a party or by which the Operating
Subsidiary is bound or to which any of its assets are subject, (d) result in the
imposition or creation of any lien or encumbrance upon any assets owned or used
by the Operating Subsidiary, or (e) conflict with or result in a breach of or
constitute a
-25-
default under any provision of the Company's certificate of formation or limited
liability company operating agreement.
(b) Sale of the Notes and the Warrants. Each of the
parties hereto acknowledges and agrees that, upon the terms and subject to the
conditions set forth herein, the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
that principal amount of the Notes set forth opposite such Purchaser's name in
Column 4 of Schedule 1 and Warrants registered in the name of such Purchaser or
its nominee to acquire that number of shares of Class A Common or Class E
Common, as the case may be, set forth opposite such Purchaser's name in Column 5
of Schedule 1, at the purchase price set forth in Column 6 of Schedule 1. The
Company and the Purchasers or the Purchasers' nominees, as the case may be,
shall not take any position on any tax return based on the purchase prices for
the Notes and the Warrants that is inconsistent with any of the purchase prices
set forth in Schedule 1. Simultaneously with the execution hereof, upon the
terms and subject to the conditions set forth herein, the Company shall deliver
to each of the Purchasers or such Purchasers' nominees, as the case may be, the
Note or Notes and the Warrants purchased by such Purchaser or such Purchaser's
nominee, as the case may be, registered, in the case of the Note or Notes, in
the name of such Purchaser and bearing the legend set forth in Section 3.2 and
substantially in the form attached hereto as Exhibit A and registered, in the
case of the Warrant or Warrants, in the name of such Purchaser or its nominee
and substantially in the form attached hereto as Exhibit B or Exhibit C, as the
case may be, against payment by such Purchaser of the purchase price for such
Note or Notes and Warrants by wire transfer of immediately available funds.
(c) Delivery of Opinion. Simultaneously with the
execution hereof, the Company and the Operating Subsidiary are delivering to the
Purchasers an opinion(s) of counsel to the Company and the Operating Subsidiary
substantially with respect to the matters set forth in Section 3.1(a).
(d) Representations and Warranties of the Purchasers. To
induce the Company and the Operating Subsidiary to enter into and perform this
Agreement, each of the Purchasers represents and warrants to the Company and the
Operating Subsidiary as of the date hereof that the Notes and the Warrants are
being acquired by such Purchaser hereunder for its own account and without a
view to
-26-
distribution of such Notes or Warrants in any transaction or series of
transactions in violation of applicable law.
SECTION 3.2. Legend for the Notes. The Notes will bear a
legend reading substantially as follows:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). NO SALE, HYPOTHECATION,
TRANSFER OR OTHER DISPOSITION OF THIS NOTE (OTHER THAN TO THE ISSUER
THEREOF) MAY BE MADE UNLESS EITHER (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B) PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
SECTION 3.3. Mandatory Repayment of the Notes. The aggregate
principal amount of the Notes (including all interest and other amounts owed
thereon at such time) shall be paid in full by the Company on January 23, 2008.
Notwithstanding the foregoing, $500,000 of the principal amount of the Notes
shall be paid by the Company on the ninth anniversary of the date hereof; the
Company will allocate the principal amount so to be paid among the Holders of
Notes in proportion, as nearly as may be, to the respective principal amounts of
the Notes held by them.
SECTION 3.4. Optional Prepayment of the Notes. (a) Subject to
the provisions of Article VI hereof, the Company may, at any time after the
fifth anniversary of the date hereof, prepay the Notes at any time in whole or
from time to time in part (any such partial prepayment to be made pro rata among
the Holders, and in a minimum aggregate amount of $l,000,000), at the redemption
prices (expressed as percentages of the principal amount of the Notes being
prepaid) set forth below, plus interest accrued thereon (if any) to the
Prepayment Date:
if redeemed during the 12-month period commencing January 24th of the
years set forth below:
Year Redemption Price
---- ----------------
2003 105.00%
2004 104.00%
2005 103.00%
2006 102.00%
2007 101.00%
2008 (until maturity) 100.00%
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(b) Subject to the provisions of Article VI hereof, the
Company may at any time prepay any outstanding Secondary Notes at any time in
whole or from time to time in part (any such partial prepayment to be made pro
rata among the Holders) at a prepayment price equal to the aggregate principal
amount of such Secondary Notes, plus interest accrued thereon (if any) to the
Prepayment Date.
SECTION 3.5 Optional Prepayment of the Notes Following Public
Offering. Subject to the provisions of Article VI hereof, the Company may, at
any time following the date hereof and up until the fifth anniversary of the
date hereof, prepay the Notes, either in whole or in part (any such partial
prepayment to be made pro rata among the Holders, and in a minimum aggregate
amount $l,000,000), with the Net Cash Proceeds of any Public Equity Offering at
the IPO Redemption Value (as defined below). The term "IPO Redemption Value"
shall mean (i) with respect to the first thirty percent (30%) of the principal
amount of the Notes being redeemed, a redemption price (expressed as a
percentage of the principal amount of the Notes being prepaid) equal to 100%,
plus accrued interest, if any, to the Prepayment Date and (ii) with respect to
the .remaining seventy percent (70%) of the principal amount of the Notes being
redeemed, a redemption price (expressed as a percentage of the principal amount
of the Notes being prepaid) equal to 105%, plus accrued interest, if any, to the
Prepayment Date.
SECTION 3.6 Prepayment Right of Holders Upon Change of
Control. (a) The Company covenants and agrees that, promptly after the
occurrence of a Change of Control but in any event within ten (10) days
thereafter, it shall give written notice thereof to each Holder of a Note. Such
notice shall (a) describe in reasonable detail the facts and circumstances
giving rise to such Change of Control and the effect thereof on the Company, (b)
offer to purchase, on a date (the "Change of Control Prepayment Date") which
shall, be not less than thirty (30) days nor more than sixty (60) days after the
date of such notice, all of the Notes held by such Holders, (c) request each
such Holder to notify the Company in writing, not less than twenty (20) days
prior to the Change of Control Prepayment Date, of its acceptance or rejection
of such offer and (d) inform each such Holder that, upon its receipt of such
notice by the Company, failure to reject such offer in writing on or before the
tenth day prior to the Change of Control Prepayment Date shall be deemed
acceptance of such offer. In the event that
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the Holders of seventy-five percent (75%) of the outstanding principal amount of
the Notes accept or fail to reject the prepayment offer, the Company may, but
shall not be obligated to, require the remaining Holders to sell all Notes held
by them to the Company as set forth in the prepayment offer and will notify the
remaining Holders of such compelled sale not less than five Business Days prior
to the Change of Control Prepayment Date. The Company covenants and agrees that
it will on the Change of Control Prepayment Date prepay all of the Notes held by
each Holder who has accepted the prepayment offer and each Holder who has been
deemed or compelled to accept the prepayment offer in accordance with this
Section 3.6, by payment of an amount equal to 100% of the principal amount of
the Notes being prepaid, together with interest accrued thereon (if any) to the
Change of Control Prepayment Date.
(b) On the Change of Control Prepayment Date, all Notes
purchased by the Company under this Section 3.6 shall be canceled, and the
Company shall pay 100% of the principal amount of such Notes plus accrued and
unpaid interest, if any, thereon to the Holders entitled thereto. The Company
shall comply with Rule 14e-1 under the Exchange Act (or any successor provision
thereof) and any other securities laws and regulations thereunder to the extent
such laws and regulations are applicable in the event that a Change of Control
occurs under this Section 3.6 and the Company is required to repurchase the
Notes as described above; provided that, notwithstanding anything to the
contrary contained in this Section 3.6, the Company may modify any of the
foregoing provisions of this Section 3.6 to the extent it is advised by
independent counsel that such modification is necessary or appropriate in order
to ensure any such compliance; provided, further, that, in the event that an
appropriate modification, based upon advice of legal counsel, is available which
would permit payments upon a Change of Control as contemplated above, the
Company shall use reasonable efforts to make such modification so as to permit
the foregoing payments.
SECTION 3.7 Allocation of Prepayments. In the event of any
prepayment of less than all of the outstanding Notes pursuant to Sections 3.4 or
3.5 hereof, the Company will allocate the principal amount so to be prepaid (but
only in units of $1,000) among the Holders of Notes in proportion, as nearly as
may be, to the respective unpaid principal amounts of the Notes held by them.
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SECTION 3.8 Notice of Prepayment of the Notes. In the event
that the Company intends to effect any prepayment pursuant to Section 3.4 or 3.5
hereof, the Company shall notify the Holders of the Notes being prepaid of any
date set for prepayment (each, a "Prepayment Date") at least five (5) days but
not more than thirty (30) days prior to such Prepayment Date. Once notice of
prepayment of a Note is sent or mailed, such Note shall become due and payable
on the relevant Prepayment Date. On the relevant Prepayment Date, such Note
shall be paid in full plus accrued interest, if any, to the Prepayment Date and
any premium required by Section 3.4 or 3.5, as applicable, and immediately after
such payment, each Holder shall surrender each of its prepaid Notes to the
Company and, if any portion of any such Note remains unpaid, the Company shall
issue to the Holder thereof a new Note representing such unpaid principal
amount.
SECTION 3.9 Restrictions on Optional Prepayments.
Notwithstanding anything in this Agreement to the contrary, the Company may not
make any optional prepayment on the Notes, whether pursuant to Section 3.4 or
3.5 or otherwise, and whether in whole or in part, if such prepayment would
result in a Default (as defined in the U.S. Bank Credit Agreement) or an Event
of Default or an "event of default" (each as defined in connection with the
Seafirst Credit Agreement) under the respective Credit Agreement.
SECTION 3.10. Method of Payment on the Notes; Secondary Notes.
(a) the principal of, premium, if any, and interest on the Notes shall be
payable by check in New York Clearing House Funds at the principal office of
each of the Holders or, at each Holder's option, by wire transfer in immediately
available funds to the account or accounts previously designated in writing by
each of the Holders at least three (3) Business Days prior to the due date.
(b) On any two interest payment dates with respect to the Notes (each
an "Interest Payment Date") (provided that either (i) at the time of such
Interest Payment Dates the Operating Subsidiary is unable to pay dividends to
the Company as a result of a default under any Debt of the Operating Subsidiary
or (ii) at the time of the notice contemplated in this paragraph (b) the Board
of Directors of the Company has a good faith belief that the Operating
Subsidiary will be unable to pay dividends to the Company as a result of a
default or an event that, with the lapse of time or the giving of notice or
both, would
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constitute a default under any Debt of the Operating Subsidiary) the Company
may, at its option, in lieu of the payment in cash of any portion of interest
due and payable on such Interest Payment Date, by giving notice to the Holders
not less than five (5) nor more than thirty (30) days prior to the regular
record date for such Interest Payment Date, execute and deliver to the Holders
of record on such regular record date secondary notes (the "Secondary Notes"),
and the due issuance of such Secondary, Notes shall constitute full payment of
such portion of interest. All Secondary Notes shall be issued in the same series
as the Notes, originally issued pursuant to this Agreement, and all Holders of
Secondary Notes shall be treated as Holders of Notes for any and all purposes of
any act of Holders or of other action of Holders or otherwise pursuant to this
Agreement except as may otherwise be required by law. Any such Secondary Notes
shall be governed by this Agreement and the terms of each such Secondary Note
shall be identical to the terms of the Notes originally issued pursuant to this
Agreement except as set forth in Section 3.4(b), except the date from which
interest accrues and except as may otherwise be required by law. Notwithstanding
the foregoing, Secondary Notes may be issued on any given Interest Payment Date
in separate series if such is required pursuant to a change in law after the
date hereof, and, in such event, the Holders of Secondary Notes shall continue
to be treated in all respects as Holders of Notes for all purposes of this
Agreement (including with respect to any act of Holders or any other action of
Holders or otherwise pursuant to this Agreement) except as required by such
change in law.
ARTICLE IV
Covenants
The Company covenants and agrees with each of the Holders as
follows:
SECTION 4.1. Payment of the Notes. (a) The Company shall
promptly pay the principal of and interest on the Notes on the date and in the
manner provided herein and in the Notes.
(b) The Company shall pay interest on overdue principal
of and on overdue installments of interest on the Notes in the manner provided
in the Notes.
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SECTION 4.2. Limitation on Debt. (a) The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, issue, directly or
indirectly, any Debt unless, after giving effect to the issuance of such Debt
and the receipt and application of the proceeds therefrom, the Consolidated
EBITDA Minus LOCC Coverage Ratio exceeds 1.0.
If the Company or any of its Restricted Subsidiaries proposes
to issue Debt (other than as provided under Section 4.2(b) or Section 4.2(c))
pursuant to this Section 4.2(a), it shall furnish to the Holders of the Notes at
least five days prior to such issuance a calculation in reasonable detail,
certified by the chief financial officer, treasurer or controller of the
Company, demonstrating compliance with this Section 4.2(a).
(b) Notwithstanding Section 4.2(a), the Company shall not
issue any Debt unless such Debt (i) specifically provides that such
Debt is expressly subordinated in right of payment to the Notes and
(ii) shall not mature prior to the Stated Maturity of the Notes;
provided, however, and notwithstanding Section 4.2(a), the Company may
issue prior to the first anniversary of the date hereof Debt in an
aggregate amount of $2,000,000 that does not comply with the
requirements set forth in Clauses (i) and (ii) above; and provided
further, notwithstanding Section 4.2(a) and in addition to Debt that
the Company may issue pursuant to the immediately preceding proviso of
this Section 4.2(b), the Company may issue Debt evidenced by the Notes
and Debt evidenced by any junior subordinated notes issued pursuant to
the terms of the Shareholders Agreement.
(c) Notwithstanding Section 4.2(a), but subject to
Section 4.2(d), the Restricted Subsidiaries of the Company may issue the
following Debt:
(i) Debt issued pursuant to the Credit Agreements, Debt
under the Interest Rate Agreements entered into for the purpose of
providing interest rate protection in respect of Debt under the Credit
Agreements, Secured Debt and Debt outstanding as of the date hereof;
(ii) In addition to refinancings or refundings with
respect to the Credit Agreements and any Secured Debt, Debt issued in
exchange for, or the net proceeds of which are used to refund or
refinance, any Debt permitted by this Section 4.2 (and any refunding or
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refinancings thereof); provided that (A) the principal amount of such
new Debt (or, if such new Debt provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, the original issue price of such new Debt) so
issued, shall not exceed the sum of (x) the aggregate principal amount
(plus premiums, accrued interest, fees and expenses and all other
amounts payable in connection therewith) of the Debt so exchanged,
refunded or refinanced, plus (y) $10,000,000 plus (z) any fees and
expenses incurred in connection with the issuance of such new Debt; (B)
such new Debt (other than any Debt issued in exchange for, or the net
proceeds of which are used to refund or refinance, any Secured Debt)
(1) shall not mature prior to the Stated Maturity of the Debt so
exchanged, refunded or refinanced, and (2) shall have an Average Life
equal to or greater than the remaining Average Life of the Debt so
exchanged, refunded or refinanced; (C) unless such new Debt is
Guarantor Senior Debt, such new Debt shall not expressly prohibit
mandatory payments of the Notes or distributions from any Subsidiary of
the Company to the Company to permit the Company to make such payments,
absent an event of default under the agreement governing such new Debt;
and (D) any Debt issued under this subsection in exchange for, or the
net proceeds of which are used to refund or refinance, any Non-Recourse
Debt must also be Non-Recourse Debt; provided, however, that the
foregoing proviso shall not apply to Debt issued to refund, refinance
or replace all Notes then outstanding;
(iii) Debt owed to and held by a Wholly Owned Subsidiary of
the Company, or Debt owed to and held by the Company; provided that any
subsequent issuance or transfer of any Capital Stock that results in
any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary of the Company or any subsequent transfer of such Debt
(other than to the Company or a Wholly Owned Subsidiary of the Company)
shall be deemed, in each case, to constitute the issuance of such Debt;
(iv) Debt (A) incurred in respect of performance, surety
or appeal bonds provided in the ordinary course of business, (B)
incurred under Hedging Obligations, provided that such agreements do
not increase the Debt of the obligor outstanding at any time other
than, as a result of fluctuations in foreign currency exchange
-33-
rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder, and (C) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any
Restricted Subsidiary of the Company pursuant to such agreements, in
any case issued in connection with the disposition of any business,
assets or Restricted Subsidiary of the Company (other than guarantees
of Debt issued by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary of the Company for the
purpose of financing such acquisition);
(v) Debt in respect of letters of credit and bankers'
acceptances incurred in the ordinary course of business;
(vi) Acquired Debt;
(vii) Debt issued to finance, directly or indirectly,
capital expenditures of the Company and its Restricted Subsidiaries in
an aggregate principal amount outstanding at any time not to exceed
$5,000,000;
(viii) Non-Recourse Debt in an aggregate principal amount
not in excess of $2,500,000; and
(ix) In addition to the Debt permitted by clauses (i)
through (viii) of this Section 4.2(c) and by Section 4.2(a) above, Debt
in an aggregate outstanding principal amount which is not at any time
in excess of $1,000,000.
For purposes of clause (ii), Debt may be incurred in exchange for, or to refund
or refinance, operating leases in existence on the date hereof, notwithstanding
the fact that such operating leases do not constitute "Debt", so long as the
incurrence of such Debt would have been permitted under such clause (ii) had the
operating lease in question been a Capital Lease.
(d) Notwithstanding the provisions of Section 4.2(c)
above, the Restricted Subsidiaries of the Company shall not issue any Debt
pursuant to Section 4.2(c)(ii) above if the proceeds thereof are used, directly
or
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indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any
Subordinated Obligations, unless the provisions of such Debt contain
subordination provisions which, in the aggregate, subordinate such Debt to the
Notes in substantially the same manner as such Subordinated Obligations were
subordinated to the Notes (or in a manner which is more subordinated than such
Subordinated Obligations). All references in this Section 4.2 to the principal
amount of any Debt shall be deemed, with respect to any Debt which is Preferred
Stock, to refer to the liquidation value of such Preferred Stock.
SECTION 4.3. Limitation on Restricted Payments. (a) The
Company shall not, and shall not permit any of its Restricted Subsidiaries to
directly or indirectly (i) declare or pay any dividend or make any distribution
on or in respect of its Capital Stock (including any payment in connection with
any merger or consolidation involving the Company) or to the direct or indirect
holders of its Capital Stock (except dividends or distributions payable solely
in its Non-Convertible Capital Stock or in options, warrants or other rights to
purchase its Non-Convertible Capital Stock and except dividends or distributions
payable to the Company or any of its Restricted Subsidiaries), (ii) purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the Company
from any shareholder of the Company (other than any Restricted Subsidiary of the
Company), (iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or scheduled
sinking fund payment any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition, and
other than the mandatory purchase, repurchase, redemption or acquisition of
Subordinate Obligations), or (iv) make any Investment in any Affiliate of the
Company, other than any of its Restricted Subsidiaries (after giving effect to
such Investment) and other than in any directors, officers or employees of the
Company or any of its Restricted Subsidiaries (any such dividend, distribution,
purchase, redemption, repurchase, defeasance, other acquisition, retirement or
Investment being herein referred to as a "Restricted Payment") if at the time of
and after giving effect to such Restricted Payment:
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(x) a Default or Event of Default shall have occurred and
be continuing (or would result therefrom), or
(y) the aggregate amount expended for all Restricted
Payments, other than those Restricted Payments permitted pursuant to clauses
(i), (ii), (iii), (vi), (viii), (ix)and (x) of Section 4.3(b) hereof (the amount
so expended, if other than in cash, to be determined in good faith by the Board
of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), after the date of this Agreement shall exceed
the sum, without duplication, of:
(1) fifty percent (50%) of the aggregate amount of the
Consolidated Net Income (or, if the Consolidated Net Income is a loss,
minus 100% of the aggregate amount of the Consolidated Net Income) of
the Company (determined by excluding income resulting from the
transfers of assets received by the Company or a Restricted Subsidiary
from an Unrestricted Subsidiary) accrued on a cumulative basis during
the period (taken as one accounting period) beginning on the first day
of the quarter immediately following the date hereof and ending on the
last day of the last fiscal quarter preceding the date of
determination; plus
(2) the aggregate net proceeds (including the fair market
value of noncash proceeds as determined in good faith by the Board of
Directors of the Company) received by the Company from the issuance and
sale permitted by this Agreement of the Capital Stock of the Company
(other than Redeemable Stock), except to the extent such proceeds are
applied pursuant to and in the manner provided in the provisions of
Section 4.3(b)(i) hereof, to a Person who is not a Restricted
Subsidiary of the Company or an Unrestricted Subsidiary of the Company,
including an issuance or sale permitted by this Agreement for cash or
other property upon the conversion of any Debt of the Company
subsequent to the date hereof, or from the issuance of any options,
warrants or other rights to acquire Capital Stock of the Company (in
each case, exclusive of any Redeemable Stock or any options, warrants
or other rights that are redeemable at the option of the holder, or are
required to be redeemed, prior to the Stated Maturity of the Notes),
plus
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(3) the amount by which Debt of the Company or any of its
Restricted Subsidiaries is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the issuance of Debt of the Company or any of its
Restricted Subsidiaries convertible or exchangeable for Capital Stock
(other than Redeemable Stock) (less the amount of any cash or the value
of any other property of the Company or any Restricted Subsidiary
distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange), plus
(4) an amount equal to the net reduction in Investments
in Unrestricted Subsidiaries (other than such Investments made pursuant
to clause (iii) of Section 4.3(b)) resulting from payments of interest
on Debt, dividends, repayments of loans or advances, or other transfers
of assets, in each case to the Company or any Restricted Subsidiary
from Unrestricted Subsidiaries, or from redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investments"), plus
(5) $1,000,000.
(b) The provisions of Section 4.3(a) shall not prohibit:
(i) any purchase, redemption or other acquisition of
Capital Stock or Debt of the Company or any of its Restricted
Subsidiaries made in exchange for, or out of the proceeds of a
substantially concurrent sale of, Capital Stock of the Company (other
than Redeemable Stock or Exchangeable Stock);
(ii) any purchase, redemption or other acquisition of Debt
of the Company or any of its Restricted Subsidiaries made in exchange
for, or out of the proceeds of a substantially concurrent sale of, Debt
of the Company which is permitted to be issued pursuant to Section 4.2;
(iii) the making of Investments in Unrestricted
Subsidiaries of the Company in an aggregate amount not to exceed
$250,000 in each fiscal year;
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(iv) dividends paid within sixty (60) days after the date
of declaration thereof if at such date of declaration such dividend
would have complied with this Section;
(v) provided that no Event of Default has occurred and is
continuing, the payment of dividends on the Capital Stock of the
Company, following any public offering of Capital Stock of the Company,
of up to six percent (6%) per annum of the net proceeds thereof
received by the Company (provided that the Company has prepaid or
acquired, either pursuant to the provisions of Section 3.5 hereof or
otherwise, at least thirty percent (30%) of the aggregate principal
amount of the Notes outstanding on the Closing Date);
(vi) payments to the Company in respect of Debt of any
Restricted Subsidiary of the Company owed to the Company, or payments
to any Restricted Subsidiary of the Company in respect of Debt of the
Company or another Restricted Subsidiary owed to such Restricted
Subsidiary;
(vii) any purchases of Capital Stock made by the Company
from employees or their legal representatives in connection with the
deaths, disabilities or retirements of, or terminations of employment
of, employees, and any other purchases of Capital Stock of the Company
by the Company contemplated by the Shareholders Agreement;
(viii) any purchases of Capital Stock of the Company from
the Company's employee stock ownership plan or the estate of any Person
who was a member of management or an employee of the Company with the
proceeds of life insurance purchased by the Company on the life of such
Person;
(ix) payments of principal of, and interest on, any junior
subordinated notes issued pursuant to the terms of the Shareholders
Agreement; and
(x) payments or distributions pursuant to or in
connection with a consolidation, merger or other transaction that
complies with the provisions of Article II hereof.
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SECTION 4.4. Limitation on Restrictions on Distributions from
Subsidiaries of the Company. The Company shall not, and shall not permit any of
its Restricted Subsidiaries to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or consensual restriction on the
ability of any such Restricted Subsidiary to (a) pay dividends or make any other
distributions on its Capital Stock or pay any Debt or other obligation owed to
the Company or any other Restricted Subsidiary of the Company, (b) make any
loans or advances to the Company or any other Restricted Subsidiary of the
Company or (c) transfer any of its property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an
agreement in effect at or entered into on the date hereof (including
those arising under or relating to the Credit Agreements) and any
refinancing or refunding thereof permitted pursuant to Section 4.2
hereof;
(2) any encumbrance or restriction with respect to a
Subsidiary of the Company pursuant to an agreement relating to any
Acquired Debt of such Subsidiary;
(3) any encumbrance or restriction pursuant to an
agreement effecting a refinancing of Debt issued pursuant to an
agreement referred to in clause (1) or (2) of this Section or contained
in any amendment to an agreement referred to in clause (1) or (2) of
this Section; provided that the encumbrances and restrictions contained
in any such refinancing agreement or amendment are, in the reasonable
determination of the Board of Directors of the relevant entity, not
likely to impair the ability of the Company to make payments of
principal and interest on the Notes when due;
(4) in the case of Section 4.4(c) above, any encumbrances
or restrictions (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the
Company or any of its Restricted Subsidiaries not otherwise prohibited
by this Agreement, (C) arising or agreed to in the ordinary course of
business and that do not,
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individually or in the aggregate, detract from the value of property or
assets of the Company or any of its Restricted Subsidiaries in any
manner material to the Company and its Restricted Subsidiaries taken as
a whole or (D) on any property or assets of any Restricted Subsidiary
substantially all of whose assets are secured by Liens not otherwise
prohibited by this Agreement;
(5) in the case of Section 4.4(c) above, any restrictions
contained in security agreements or mortgages securing Debt of a
Restricted Subsidiary to the extent such restrictions restrict the
transfer of the property subject to such security agreements or
mortgages; and
(6) any restriction with respect to a Restricted
Subsidiary of the Company imposed pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially
all of the Capital Stock of, or property and assets of, such Restricted
Subsidiary.
SECTION 4.5. Limitation on Transactions with Affiliates. (a)
The Company shall not, and shall not permit any of its Subsidiaries to, conduct
any business or enter into any transaction (including the purchase, sale, lease
or exchange of any property or the rendering of any service) or series of
related transactions with any Affiliate of the Company or any owner of five
percent (5%) or more of any class of Capital Stock of the Company or with an
Affiliate of any such owner (other than a Subsidiary of the Company or any
employee stock ownership plan for the benefit of the Company's or any of its
Subsidiaries, directors, officers or employees) unless the terms of such
business, transaction or series of transactions are (i) set forth in writing,
(ii) on terms and conditions that are not materially less favorable to the
Company or such Subsidiary than those terms and conditions that would be
obtainable at the time for a comparable transaction or series of similar
transactions in arm's-length dealings with an unrelated third Person and (iii)
if the amount involved in any transaction or series of similar transactions is
in excess of $500,000 in any one instance or are in excess of $1,000,000 in
aggregate over any one-year period, the disinterested members of the Board of
Directors have, by a Board Resolution, determined in good faith that the
criteria set forth in clause (ii) are satisfied.
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(b) The provisions of Section 4.5(a) shall not prohibit
(i) any Restricted Payment permitted to be paid pursuant to Section 4.3, (ii)
any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements,
stock options, stock appreciation rights, stock ownership and similar benefit
plans approved by the Board of Directors, (iii) compensation and benefit
arrangements, and loans and advances to officers and employees, in the ordinary
course of business based on past practice, (iv) the payment of reasonable fees
and expenses to directors of the Company or its Subsidiaries who are not
employees of the Company or its Subsidiaries, (v) any transaction between the
Company and a Wholly Owned Subsidiary of the Company or between Wholly Owned
Subsidiaries of the Company, (vi) any payments or other transactions pursuant to
any tax-sharing agreement between the Company and any other Person with which
the Company files a consolidated tax return or with which the Company is part of
a consolidate group for tax purposes, (vii) any transaction determined by a
nationally recognized investment banking firm or a nationally recognized
accounting firm to be reasonable or fair to the Company or any of its
Subsidiaries which is a party thereto, (viii) any fees, expenses or indemnities
payable by the Company to Windward pursuant to the terms of that certain letter
agreement, dated of even date herewith, between the Company and Windward, (ix)
any fees, expenses or indemnities payable by the Company to Windward pursuant to
the terms of the Financial Advisory Services Agreement or any similar agreement
entered into after the date of this Agreement between the Company and Windward,
(x) any provision by the Company or any of its Restricted Subsidiaries of
directors' and officers' insurance for the benefit of, or any indemnification by
the Company or any of its Restricted Subsidiaries of, their respective directors
and officers, (xi) any transactions, including without limitation
indemnification in the event of a Registration (as defined therein),
contemplated by the Shareholders Agreement, and (xii) any amendment,
modification, extension or renewal of any of the foregoing arrangements;
provided that the provisions of any such amendment, modification, extension or
renewal are (1) approved by the disinterested members of the Board of Directors
or (2) determined by a nationally recognized investment banking firm or a
nationally recognized accounting firm to be reasonable or fair to the Company or
any of its Subsidiaries which is a party thereto.
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SECTION 4.6. Foreign Investment in Real Property Tax Act of
1980 ("FIRPTA"). The Company shall not become a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code, except
where it has obtained the prior written consent of Windward/Merban.
SECTION 4.7. Notice of Default. The Company will furnish to
each of the Holders of the Notes, within thirty (30) days following the date in
which the Company becomes aware of the existence of any condition or event which
constitutes a Default or an Event of Default, written notice specifying the
nature and period of existence thereof and the action which the Company is
taking or proposes to take with respect thereto.
SECTION 4.8. Authorization and Approvals. The Company will
promptly make or obtain, from time to time at its own expense, all such
governmental notices, filings, licenses, authorizations, consents, permits and
approvals as may be required to enable it to comply with obligations hereunder
and under the Notes.
SECTION 4.9. Provision of Periodic Financial Information. The
Company shall keep adequate records and books of account with respect to its
business activities in which proper entries are made in accordance with
generally accepted accounting principles reflecting its financial transactions;
and cause to be prepared and furnished to the Holders of the Notes the following
(all to be prepared in accordance with generally accepted accounting principles
applied on a consistent basis, unless the Company's certified public accountants
concur in any change therein and such change is consistent with generally
accepted accounting principles):
(a) not later than 120 days after the close of each
fiscal year of the Company, audited financial statements of the Company and its
Subsidiaries as of the end of such year, on a consolidated and consolidating
basis, certified, in the case of the consolidated statements; by Deloitte &
Touche LLP or another firm of independent certified public accountants of
recognized standing selected by the Company;
(b) not later than sixty (60) days after the end of each
quarterly accounting period of the Company, unaudited interim financial
statements of the Company and its Subsidiaries as of the end of such period and
of the
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portion of the Company's financial year then elapsed, on a consolidated basis,
certified by the chief financial officer or treasurer of the Company (or by any
Officer of the Company if at such time there is no chief financial officer or
treasurer of the Company) as prepared in accordance with generally accepted
accounting principles and fairly presenting in all material respects the
consolidated financial position and results of operations of the Company and its
Subsidiaries for such period subject only to changes from audit and year-end
adjustments and except that such statements need not contain notes;
(c) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or reports
which the Company has made available to its shareholders generally and copies of
any regular, periodic and special reports or registration statements which the
Company files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or any national securities
exchange;
(d) concurrently with the delivery of the financial
statements described in clauses (a) and (b) of this Section 4.9, a certificate
of the Company's chief financial officer, treasurer or controller certifying as
to the Company's compliance with each of the provisions of this Article IV and
illustrating such compliance, with such calculations and other details as may be
reasonably requested by any Holder; and
(e) such other information as any Holder, from time to
time, may reasonably request, relating to the Company or its Subsidiaries.
ARTICLE V
Events of Default; Remedies
SECTION 5.1. Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in the payment of any interest
on any of the Notes when the same becomes due and payable, whether or
not such payment shall be prohibited by Article VI, and such default
continues for five (5) days; or
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(b) the Company defaults in the payment of the principal
of any of the Notes when the same becomes due and payable at the Stated
Maturity thereof, upon redemption, upon acceleration or otherwise,
whether or not such payment shall be prohibited by Article VI; or
(c) the Company fails to comply with any of the
provisions applicable to it under Article II of this Agreement; or
(d) the Company fails to comply with any of the other
provisions applicable to it under the Notes or as otherwise set forth
in this Agreement (other than as specifically provided in the other
clauses of this Section 5.1) and in each case the failure continues
.for thirty (30) days; or
(e) an event of default occurs under any instrument under
which there may be issued, or by which there may be secured or
evidenced, any Debt of the Company or any of its Restricted
Subsidiaries which is a Significant Subsidiary resulting in the
acceleration of such Debt, or any default occurs in payment of any such
Debt on the final maturity date thereof, including pursuant to any
mandatory redemption or prepayment provision, beyond any applicable
grace period, if the total of all such Debt which has been so
accelerated and any additional Debt which has not been paid on the
final maturity date thereof shall exceed $5 million, and there shall
have been a failure to obtain rescission or annulment of all such
accelerations or to pay in full the amount in default (together with
any applicable interest); or
(f) (i) the Company or any of its Significant
Subsidiaries shall commence any case, proceeding or other action (A)
under any existing or future law or any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief
of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for its or for all or any
substantial part of its assets, or the Company or any, of its
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Significant Subsidiaries shall make a general assignment for the
benefit of it creditors; or (ii) there shall be commenced against the
Company or any of its Significant Subsidiaries any case, proceeding or
other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a
period of sixty (60) days; or (iii) there shall be commenced against
the Company or any of its Significant Subsidiaries any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its
assets which results in the entry of any order for any such relief
which shall not have been vacated, discharged or stayed or bonded
pending appeal within sixty (60) days from the entry thereof; or (iv)
the Company or any of its Significant Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) the Company or any of its Significant Subsidiaries
shall generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they become due; or
(g) any judgment or decree for the payment of money in
excess of $5 million or its foreign currency equivalent at the time is
entered against the Company or any of its Significant Subsidiaries and
is not discharged and either (i) an enforcement proceeding has been
commenced by an creditor upon such judgment or decree or (ii) there is
a period of sixty (60) days following the entry of such judgment or
decree during which such judgment or decree is not discharged, waived
or the execution thereof stayed; or
(h) the Company, at any time, fails to comply with
Section 4.6 hereof.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
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A default under clauses (c) or (d) above shall not constitute
an Event of Default until the Holders of a majority in principal amount of the
Notes notify the Company of the default and the Company does not cure the
default within thirty (30) days after receipt of such notice. The notice must
specify the Default and demand that it be remedied.
SECTION 5.2. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 5.1(f)(i) or (ii) with respect to the
Company) occurs and is continuing, the Holders of a majority of the principal
amount of the Notes at the time outstanding, by notice to the Company, may
declare the principal of and accrued interest on all the Notes to be due and
payable. Subject to the provisions of Article VI, upon such a declaration such
principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 5.1(f)(i) or (ii) with respect to the Company
occurs and is continuing, then the principal of all of the Notes shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of any Holder of the Notes. The Holders of a majority in
principal amount of the Notes by notice to the Company may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of acceleration. In the event of a declaration of acceleration because
an Event of Default set forth in clause (e), (g) or (h) above has occurred and
is continuing, such declaration of acceleration shall be automatically rescinded
and annulled if the event of default triggering such Event of Default pursuant
to clause (e), (g) or (h) shall be remedied, cured by the Company or waived by
the holders of the relevant Debt within sixty (60) days after the declaration of
acceleration with respect thereto.
SECTION 5.3. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Holders of the Notes is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent or subsequent
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assertion or employment of any other appropriate right or remedy.
SECTION 5.4. Delay or Omission Not Waiver. No delay or
omission of the Holders of the Notes to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and
remedy given by this Article V or by law to the Holders of the Notes may be
exercised from time to time, and as often as may be deemed expedient, by the
Holders of the Notes.
SECTION 5.5. Waiver of Stay or Extension Laws. The Company covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of any
Note; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Holder but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 5.6. Waiver of Past Defaults. The Holders of a
majority of the principal amount of the Notes then outstanding by notice to the
Company may waive any existing Default or Event of Default and its consequences
except a Default or Event of Default arising out of or related to Section
5.1(a), (b) or (f); provided that Windward/Merban or any Affiliate thereof may
by itself waive any existing Default or Event of Default arising out of or
relating to Section 5.1(h) hereof and its consequences. A Default or Event of
Default and its consequences arising out of or related to Section 5.1(a) or (b)
may be waived only by the Holders of seventy-five percent (75%) of the principal
amount of the Notes then outstanding by notice to the Company. When a Default or
Event of Default is waived, it is deemed cured, but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any consequent
right.
SECTION 5.7. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Agreement or the Notes other than
Article VI hereof, the
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right of any Holder to receive payment of principal of, premium, if any, and
interest on the Notes held by such Holder, on or after the respective due dates
expressed in the Notes, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be affected without the consent of
such Holder.
ARTICLE VI
Subordination
SECTION 6.1. Agreement To Subordinate. The Company agrees, and
each Holder of the Notes by accepting a Note agrees, that the indebtedness and
other payment obligations incurred under this Agreement or evidenced by the
Notes, including without limitation all indemnification obligations of the
Company under Article XIII, are subordinated in right of payment, to the extent
and in the manner provided in this Article VI, to the prior payment in full in
cash of all Senior Debt, and that the subordination is for the benefit of the
holders of Senior Debt, and only indebtedness of the Company and of any of its
Subsidiaries which is Senior Debt shall rank senior to the Notes (and in such
case only to the extent and on the terms and conditions set forth herein).
SECTION 6.2. Liquidation, Dissolution, Bankruptcy. Upon any
distribution to creditors of the Company in a liquidation or a total or partial
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property:
(1) holders of Senior Debt shall be entitled to receive
payment in full in cash of the Senior Debt or provisions satisfactory
to the holders of Senior Debt shall be made for such payment before the
Holders of the Notes shall be entitled to receive any payment of
principal of or interest on the Notes or in respect of any other
obligation arising under this Agreement; and
(2) until the Senior Debt is paid in full, in cash, any
distribution to which the Holders of the Notes would be entitled but
for this Article VI shall be made to holders of Senior Debt as their
interests may appear, except that the Holders of the Notes may receive
Permitted Junior Securities.
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SECTION 6.3. Default on Senior Debt. If any Senior Debt is not
paid when due and such default is not cured or waived in writing and the holder
of such Senior Debt has not waived in writing the benefits of this sentence, the
Company may not pay principal of or interest on the Notes or make any payment in
respect of any other obligation arising under this Agreement or acquire or
redeem any Notes for cash, property or securities (other than Permitted Junior
Securities) unless and until such default shall have been cured or waived in
writing or shall have ceased to exist or such Senior Debt shall have been
discharged in accordance with its terms or the holders of such Senior Debt shall
have waived in writing the benefit of this sentence, after which the Company
shall resume making any and all required payments in respect of the Notes
including any missed payments; provided, however, that nothing in this Section
shall prevent the issuance of Secondary Notes in lieu of a cash payment of any
or all interest due on any Interest Payment Date. (Such period during which such
payments, acquisitions and redemptions are prohibited being hereinafter referred
to as a "Payment Default Blockage Period"). In addition, during the continuance
of any other event of default with respect to any Senior Debt pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, upon the receipt by the Company of
written notice thereof from or on behalf of the holders of at least a majority
of the principal amount of such Senior Debt (taken together as one class), the
Company may not pay principal of or interest on the Notes or make any payment in
respect of any other obligation arising under this Agreement or acquire or
redeem any Notes for cash, property or securities (other than the Permitted
Junior Securities) for a period (the "Non-Monetary Default Blockage Period")
commencing on the date of receipt of such notice until the earliest of (x) 180
days thereafter (or, if the holders of the Senior Debt are then stayed from
exercising remedies under the applicable instruments evidencing such Senior Debt
until the earlier of 240 days thereafter or the expiration of such stay (for the
avoidance of doubt, if such stay expires prior to 180 days after the receipt of
such notice, this parenthetical shall not be applicable)), (y) the date, if any,
on which the Senior Debt to which such event of default relates is discharged in
accordance with its terms or such event of default is waived in writing by the
holders of such Senior Debt or otherwise cured and (z) the date, if any, on
which such Non-Monetary
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Default Blockage Period shall have been terminated by written notice to the
Company from or on behalf of such holders of such Senior Debt, after which, in
the case of clause (x), (y) or (z), the Company shall, subject to the first
sentence of this Section 6.3, resume making any and all required payments in
respect of the Notes, including any missed payments; provided that nothing in
this Section shall have any effect on the rights of the Holders of the Notes to
accelerate the maturity of the Notes pursuant to Section 5.2 (except to the
extent otherwise provided in Section 6.4 below); provided, further, that,
subject to the first sentence of this Section 6.3, nothing in this sentence
shall prevent payment by the Company on the Notes after 180 days (or up to 240
days, in the circumstances described above) have passed following notice in
writing to the holders of Senior Debt of such acceleration pursuant to Section
6.4; and provided, further, that nothing in this Section shall prevent the
issuance of Secondary Notes in lieu of a cash payment of any and all interest
due on any Interest Payment Date. No more than one notice of a Non-Monetary
Default Blockage Period may be given by or on behalf of the holders of any
Senior Debt in any 365 day period and no more than four (4) such notices in the
aggregate may be given by or on behalf of such holders after the date hereof.
Notwithstanding anything in this Agreement to the contrary, there must be 120
consecutive days in any 365-day period in which no Non-Monetary Default Blockage
Period is in effect. No event of default that existed or was continuing (it
being acknowledged that any subsequent action that would give rise to an event
of default pursuant to any provision under which an event of default previously
existed or was continuing shall constitute a new event of default for this
purpose) on the date of commencement of any Non-Monetary Default Blockage Period
with respect to the Senior Debt initiating such Non-Monetary Default Blockage
Period shall be, or shall be made, the basis for the commencement of a second
Non-Monetary Default Blockage Period by the representative for, or the holders
of, such Senior Debt whether or not within a period of 365 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than ninety (90) consecutive days.
SECTION 6.4. Acceleration of Payment of Notes and Exercise of
Remedies. Until the Senior Debt shall have been paid in full in cash, in the
event that, and during the continuance of any Event of Default described in
Article V hereof, all or any portion of the unpaid principal amount of the Notes
shall have been declared due and payable pursuant
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to the provisions of Article V hereof, such declarations shall not be effective
until the earliest of (i) the date on which an Event of Default under Section
5.1(f)(i) or (ii) with respect to the Company has occurred, or (ii) the date on
which the maturity of any Senior Debt under either of the Credit Agreements is
accelerated, or (iii) one hundred and twenty (120) days after the date of such
declaration.
SECTION 6.5. When Distribution Must Be Paid Over. In the event
that any Note is declared due and payable before its Stated Maturity, then no
payment or distribution of any kind or character shall be made in respect of
such Note and the holders of the Senior Debt outstanding at the time of such
declaration shall be entitled to receive payment in full in cash of all amounts
due (including by reason of acceleration), or appropriate provision satisfactory
to the holders of such Senior Debt shall be made for such payment, before the
Holder of any Note is entitled to receive any payment or distribution of any
kind or character (including any payment which may be payable by reason of the
payment of any other Debt of the Company being subordinate to the payment of the
Notes by the Company). Notwithstanding the foregoing, if a distribution is made
to the Holders of the Notes that pursuant to this Article VI should not have
been made to them, the Holders of the Notes who receive the distribution shall
hold it in trust for holders of Senior Debt and pay it over to them as their
interests may appear, provided that the holders of Senior Debt seeking such
payment notify the Holders within sixty (60) days after obtaining actual
knowledge of the Holders' receipt thereof that such payment should not have been
made.
SECTION 6.6. Subrogation. After all Senior Debt is paid in
full in cash and until the Notes are paid in full, the Holders of the Notes
shall be subrogated (pro rata with the holders of all Debt of the Company and
its Subsidiaries which, by its express terms, ranks Pari Passu with the Notes
and is entitled to like rights of subrogation) to the rights of holders of
Senior Debt to receive the payments or distributions applicable to the Senior
Debt. Any payment or distribution made under this Article VI to holders of
Senior Debt which otherwise would have been made to the Holders of the Notes
except for the provisions of this Article VI shall, as between the Company, its
creditors (other than the holders of the Senior Debt) and the Holders of the
Notes, be deemed to be a payment by the Company to or on account of the Senior
Debt, and no
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payments or distributions to the holders of the Notes of cash, property or
securities by virtue of the subrogation herein provided shall, as between the
Company, its creditors (other than the holders of the Senior Debt) and the
Holders of the Notes, be deemed to be a payment to or on account of the Notes,
it being understood that the provisions of this Article VI are and are intended
solely for the purpose of defining the relative rights of the holders of the
Notes on the one hand and the holders of Senior Debt on the other.
SECTION 6.7. Relative Rights. This Article VI defines the
relative rights of the Holders of the Notes and holders of Senior Debt. Nothing
in this Agreement shall:
(1) impair, as between the Company and the Holders of the
Notes, the obligations of the Company, which are absolute and
unconditional, to pay principal of and interest on the Notes in
accordance with their terms (provided, however, that this provision is
not intended to limit the restrictions on payments on the Notes set
forth in Section 6.3 hereof); or
(2) prevent any Holder of the Notes from exercising its
available remedies upon a Default or an Event of Default, subject to
the rights of holders of Senior Debt to receive distributions otherwise
payable to the Holders of the Notes (provided, however, that this
provision is not intended to limit the provisions of Section 6.4).
If the Company fails because of this Article VI to pay
principal of or interest on a Note on the due date, the failure is still an
Event of Default (subject, in the case of failures to pay interest, to the
expiration of the five (5) day grace period, in accordance with Section 5.l(a)).
SECTION 6.8. Subordination May Not Be Impaired by Company. No
right of a holder of Senior Debt to enforce the subordination of the
indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or by its failure to comply with this Agreement.
SECTION 6.9. Reinstatement. If, at any time, all or part of
any payment with respect to Senior Debt previously made by the Company or any
other Person is rescinded for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of the Company or such
other Person), the subordination
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provisions set forth herein shall continue to be effective or be reinstated, as
the case may be, all as though such payment had not been made.
SECTION 6.10. Proofs of Claim. If, while any Senior Debt is
outstanding, any Event of Default under Section 5.1(f)(i) or (ii) of this
Agreement, with respect to the Company only, occurs each Holder of a Note shall,
to the extent permitted by applicable law, duly and promptly take such action as
any representative of the Senior Debt may reasonably request to collect any
payment hereunder to which the holders of Senior Debt may be entitled hereunder
or under the Notes, and to file appropriate claims or proofs of claim in respect
of this Agreement and the Notes. Upon the failure of any Holder of a Note to
take any such action, any representative of the Senior Debt is hereby
irrevocably authorized and empowered (in its own name or otherwise and to the
extent permitted by applicable law), but shall have no obligation, to demand,
use, collect and receive every payment or distribution referred to hereunder and
under any such Note and to file claims and proofs of claim with respect to this
Agreement and the Notes and the Holders of the Notes hereby appoint any
representative of the Senior Debt as attorney-in-fact for such Holders of the
Notes to take any and all actions permitted by this paragraph to be taken by
such Holders of the Notes; provided, however, that the representatives of the
Senior Debt shall only be permitted to file such proofs of claim upon notice to
each Holder and to the extent that the Holders have failed to make such filings
by the date which is ten (10) days prior to the last date on which such Holders
are permitted to make such filings as a matter of applicable Bankruptcy Law.
SECTION 6.11. Non-Impairment. The Holders of the Notes agree
and consent that, without notice to or assent by them, and without affecting the
liabilities and obligations of the Company and the rights and benefits of the
holders of the Senior Debt set forth in this Article VI:
(1) the obligations and liabilities of the Company and
any other party or parties for or upon the Senior Debt may, from time
to time, be increased, renewed, refinanced, extended, modified,
amended, restated, compromised, supplemented, terminated, waived or
released;
(2) the holders of Senior Debt, and any representative or
representatives acting on behalf
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thereof, may exercise or refrain from exercising any right, remedy or
power granted by or in connection with any agreements relating to the
Senior Debt; and
(3) any balance or balances of funds with any holder of
Senior Debt at any time outstanding to the credit of the Company may,
from time to time, in whole or in part, be surrendered or released, all
as the holders of any Senior Debt, or any representative or
representatives acting on behalf thereof, may deem advisable, and all
without impairing, abridging, diminishing, releasing or affecting the
subordination of the Notes to the Senior Debt.
SECTION 6.12. No Modification. The provisions of this Article
VI and the defined terms used in this Article VI are for the benefit of the
holders from time to time of Senior Debt and, so long as any Senior Debt or any
commitments with respect thereto remain outstanding, such provisions and defined
terms may not be modified, rescinded or canceled in whole or in part; provided
that the provisions of this Article VI and the defined terms used in this
Article VI may be modified, amended or supplemented by the parties to this
Agreement upon obtaining the prior written consent of the holders of a majority
in principal amount of the Senior Debt (or representatives acting on their
behalf) (taken as one class).
SECTION 6.13. Waivers; Reliance by Holders of Senior Debt. To
the extent permitted by applicable law, the Holders of the Notes and the Company
hereby waive (A) notice of acceptance hereof by the holders of the Senior Debt
and (B) all diligence in the collection or protection of or realization upon the
Senior Debt. Each Holder, by accepting any Note, acknowledges and agrees that
the subordination provisions in this Article VI are, and are intended to be, an
inducement and a consideration to each holder of any Senior Debt, whether such
Senior Debt was created or acquired before or after the issuance of the Notes,
to acquire and continue to hold, or to continue to hold, such Senior Debt and
such holder of Senior Debt shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Debt.
SECTION 6.14. Enforcement of Rights. The Company and the
Holders of the Notes hereby expressly agree that the holders of Senior Debt may
enforce any and all rights
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derived herein by suit, either in equity or at law, for specific performance of
any agreement contained in this Article VI or for judgment at law and any other
relief whatsoever appropriate to such action or procedure.
ARTICLE VII
Transfer of the Notes
SECTION 7.1. Registration of Transfer. Subject to compliance
with applicable law, upon surrender of any Note for registration of transfer,
the Company will execute and deliver in exchange therefor a new Note registered
as such Holder may request. The Company may require payment by such Holder of a
sum sufficient to cover any stamp tax or governmental charge imposed in respect
of any such transfer. Notwithstanding anything to the contrary contained in this
Agreement, no Holder shall be permitted to transfer any Note or assign any of
its rights or obligations under this Agreement or the Notes, unless in each case
(i) each such transferor or assignor has obtained the prior written consent of
the Company (which consent shall not be withheld by the Company unless, in the
opinion of the Company, such transfer or assignment together with all other such
transfers or assignments made after the Closing could result in or create a
significant risk (as defined below) that the Company may become subject to, or
after any public offering of the Company will continue to be subject to, the
informational requirements of the Exchange Act), (ii) each such transferee or
assignee (other than the Company) has agreed in writing to be bound by the terms
and conditions of this Agreement and the Note in question to the same extent and
in the same manner as the transferor or assignor thereof, and (iii) the transfer
to any such transferee or assignee is in compliance with all applicable federal,
state and foreign securities laws. For the purposes of this Section 7.1, a
"significant risk" shall be deemed to arise when the number of "holders of
record" (as determined in accordance with the Exchange Act) is greater than 80%
of the number of "holders of record" that would cause the application or
continued application of the informational requirements of the Exchange Act
under the then existing circumstances; provided that no transfer or assignment
to or from any Affiliate of a Holder shall be deemed to have created any such
significant risk.
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SECTION 7.2. Register. The Company shall maintain a register
of the Holders of all the Notes issued pursuant to this Agreement. The Company
will allow any Holder of a Note to inspect and copy such list at the Company's
principal place of business during normal business hours. The Company may refuse
to effect any transfer of any Note on such register, and may refuse to recognize
any transferee of such Note for all purposes hereunder and under such Note, if
the Company determines in good faith that the transferor and/or transferee of
such Note have not complied with the provisions of Section 7.1 above.
ARTICLE VIII
Termination
SECTION 8.1. Termination. This Agreement may be terminated by
the mutual written agreement of each of the parties hereto.
SECTION 8.2. Liability. If this Agreement is terminated
pursuant to this Article, such termination shall be without liability of any
party to any other party, except for any breach by such party of this Agreement
or the Notes prior to the date of such termination.
ARTICLE IX
Amendments
SECTION 9.1. Amendments. Subject to Section 6.12, the Company
may amend this Agreement or the Notes with the written consent of the Holders of
at least a majority of the principal amount of the Notes, except that, without
the consent of Holders of at least 75% of the principal amount of outstanding
Notes, an amendment may not:
(1) reduce the amount of Notes whose Holders must consent
to an amendment;
(2) reduce the rate of or extend the time for payment of
interest on any Note;
(3) reduce the principal of or extend the Stated Maturity
of any Note; or
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(4) make any Note payable in a currency other than that
stated in the Note;
and that, without the consent of Windward/Merban, an amendment may not
eliminate, amend, or otherwise modify the provisions of Section 4.6 or 5.1(h).
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the
Company shall mail to each of the Holders of Notes a notice briefly describing
such amendment. The failure to give such notice to all Holders of Notes, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.2. Revocation and Effect of Consents and Waivers.
Any amendment to this Agreement or the Notes shall become effective in
accordance with its terms when executed and delivered by the Company provided
that the Company has received the requisite consents prior thereto. The Company
shall not be obligated to execute any such amendment regardless of whether such
consents have been received. Any waiver shall become effective when the
requisite consents have been received or such later time as the Company may
elect. A consent to an amendment or a waiver by a Holder of a Note shall bind
the Holder and every subsequent Holder of that Note or portion of the Note that
evidences the same Debt as the consenting Holder's Note, even if notation of the
consent or waiver is not made on the Note. However, any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Note or
portion of the Note if the Company receives the notice of revocation before the
date the amendment or waiver becomes effective. After an amendment or waiver
becomes effective, it shall bind every Holder of a Note.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders of Notes entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Agreement. If a record date is fixed, then,
notwithstanding the immediately preceding paragraph, those persons who were
Holders of Notes at such record date (or their duly designated proxies), and
only those persons,
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shall be entitled to give such consent or to revoke any consent previously given
or to take any such action, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 120 days after such record date.
SECTION 9.3. Notation on or Exchange of Notes. If an amendment
changes the terms of a Note, the Company may require the Holder of the Note to
deliver it to the Company. The Company may place an appropriate notation on the
Note regarding the changed terms and return it to the Holder. Alternatively, if
the Company so determines, the Company in exchange for the Note shall issue a
new Note that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Note shall not affect the validity of such amendment.
SECTION 9.4. Payment for Consent. Neither the Company, any
Affiliate of the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Agreement
or the Notes unless such consideration is offered to be paid or agreed to be
paid to all Holders which so consent, waive or agree to amend in the time frame
set forth in solicitation documents relating to such consent, waiver or
agreement.
ARTICLE X
Guarantee of Notes
SECTION 10.1. Guarantee. Subject to Article XI, the Operating
Subsidiary hereby fully and unconditionally guarantees to each Holder of a Note
the due and punctual payment of the principal (including any amount due in
respect of original issue discount) of and any premium, if any, and interest on
such Note, when and as the same shall become due and payable, whether at the
Stated Maturity, by declaration of acceleration, call for redemption or
otherwise, in accordance with the terms of such Note and of this Agreement,
regardless of any defense, right of set-off or counterclaim that the Operating
Subsidiary may have or assert, except the defense of payment.
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SECTION 10.2. Waiver of Notice and Demand. The Operating Subsidiary
hereby waives notice of acceptance of this guarantee and of any liability to
which it applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the Company or any other Person before
proceeding against the Operating Subsidiary, protest, notice of nonpayment,
notice of dishonor, notice of redemption and all other notices and demands.
SECTION 10.3. Guarantor Obligations Not Affected. The obligations,
covenants, agreements and duties of the Operating Subsidiary under this Article
X shall in no way be affected or impaired by reason of the happening from time
to time of any of the following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the Company of any
express or implied agreement, covenant, term or condition relating to
the Notes to be performed or observed by the Company;
(b) the extension of time for the payment by the Company
of all or any portion of the interest on the Notes, the redemption
price or any other sums payable under the terms of the Notes or the
extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Notes;
(c) any failure, omission, delay or lack of diligence on
the part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Notes, or any action on the part of the Company granting
indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Company or any of the assets of the Company;
(e) any invalidity of, or defect or deficiency in, the
Notes;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
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(g) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a
guarantor (other than payment of the underlying obligation), it being
the intent of this Article X that the obligations of the Operating
Subsidiary hereunder shall be absolute and unconditional under any and
all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Operating Subsidiary with respect to the happening of any of the
foregoing.
SECTION 10.4. Execution of Guarantee. To evidence its guarantee to the
Holders specified in Section 10.1 hereof, the Operating Subsidiary hereby agrees
to execute the notation of the Guarantee in substantially the form set forth in
the form of Note attached hereto as Exhibit A. The Operating Subsidiary hereby
agrees that its Guarantee set forth in Section 10.1 shall remain in full force
and effect notwithstanding any failure to endorse on each Note a notation of
such Guarantee. Each such notation of the Guarantee shall be signed on behalf of
the Operating Subsidiary.
SECTION 10.5. Subrogation. The Operating Subsidiary shall be subrogated
to all rights (if any) of the Holders against the Company in respect of any
amounts paid to the Holders by the Operating Subsidiary under this Article X
with respect to the Notes; provided, however, that the Operating Subsidiary
shall not (except to the extent required by mandatory provisions of law) be
entitled to enforce or exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Article X with respect to the Notes if, at the
time of any such payment, any amounts are due and unpaid under the Notes. If any
amount shall be paid to the Operating Subsidiary in violation of the preceding
sentence, the Operating Subsidiary agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.
SECTION 10.6. Independent Obligations. The Operating Subsidiary
acknowledges that its obligations hereunder are independent of the obligations
of the Company with respect to the Notes and that the Operating Subsidiary shall
be liable as principal and as debtor hereunder to make payments pursuant to the
terms of the Notes notwithstanding the
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occurrence of any event referred to in subsections (a) through (g), inclusive,
of Section 10.3 hereof.
ARTICLE XI
Subordination of Guarantee
SECTION 11.1. Subordination of Guarantee. The Operating Subsidiary
agrees, and each Holder of the Notes by accepting a Note agrees, that all
payments in respect of the Guarantee are subordinated in right of payment, to
the extent and in the manner provided in this Article XI, to the prior payment
in full in cash of all Guarantor Senior Debt, and that the subordination is for
the benefit of the holders of Guarantor Senior Debt.
SECTION 11.2. Liquidation, Dissolution, Bankruptcy. Upon any
distribution to creditors of the Operating Subsidiary in a liquidation or a
total or partial dissolution of the Operating Subsidiary or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Operating Subsidiary or its property:
(1) holders of Guarantor Senior Debt shall be entitled to
receive payment in full in cash of the Guarantor Senior Debt or
provisions satisfactory to the holders of Guarantor Senior Debt shall
be made for such payment before the Holders of the Notes shall be
entitled to receive any payment or distribution in respect of the
Guarantee; and
(2) until the Guarantor Senior Debt is paid in full, in
cash, any payment or distribution to which the Holders of the Notes
would be entitled with respect to the Guarantee but for this Article XI
shall be made to holders of Guarantor Senior Debt as their interests
may appear.
SECTION 11.3. Default on Guarantor Senior Debt. If any Guarantor Senior
Debt is not paid when due and such default is not cured or waived in writing and
the holder of such Guarantor Senior Debt has not waived in writing the benefits
of this sentence, the Operating Subsidiary may not make any payments or
distributions with respect to the Guarantee unless and until such default shall
have been cured or waived in writing or shall have ceased to exist or such
Guarantor Senior Debt shall have been discharged in
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accordance with its terms or the holders of such Guarantor Senior Debt shall
have waived in writing the benefit of this sentence, after which the Operating
Subsidiary shall resume making any and all required payments in respect of the
Guarantee. (Such period during which such payments, acquisitions and redemptions
are prohibited being hereinafter referred to as a Guarantee Payment Default
Blockage Period). In addition, during the continuance of any other event of
default with respect to any Guarantor Senior Debt pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, upon the receipt by the Operating Subsidiary of
written notice thereof from or on behalf of the holders of at least a majority
of the principal amount of such Guarantor Senior Debt (taken together as one
class), the Operating Subsidiary may not make any payment or other distribution
with respect to the Guarantee for a period (the Guarantee Non-Monetary Default
Blockage Period) commencing on the date of receipt of such notice until the
earliest of (x) 180 days thereafter (or, if the holders of the Guarantor Senior
Debt are then stayed from exercising remedies under the applicable instrument
evidencing such Guarantor Senior Debt until the earlier of 240 days thereafter
or the expiration of such stay (for the avoidance of doubt, if such stay expires
prior to 180 days after the receipt of such notice, this parenthetical shall not
be applicable)), (y) the date, if any, on which the Guarantor Senior Debt to
which such event of default relates is discharged in accordance with its terms
or such event of default is waived in writing by the holders of such Guarantor
Senior Debt or otherwise cured and (z) the date, if any, on which such Guarantee
Non-Monetary Default Blockage Period shall have been terminated by written
notice to the Operating Subsidiary from or on behalf of such holders of such
Guarantor Senior Debt, after which, in the case of clause (x), (y) or (z), the
Operating Subsidiary shall, subject to the first sentence of this Section 11.3,
resume making any and all required payments in respect of the Guarantee;
provided, that, subject to the first sentence of this Section 11.3, nothing in
this sentence shall prevent payment by the Operating Subsidiary on the Guarantee
after 180 days (or up to 240 days, in the circumstances described above) have
passed following notice in writing to the holders of Guarantor Senior Debt of
acceleration pursuant to Section 6.4. No more than one notice of a Guarantee
Non-Monetary Default Blockage Period may be given by or on behalf of the holders
of any Guarantor
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Senior Debt in any 365 day period and no more than four (4) such notices in the
aggregate may be given by or on behalf of such holders after the date hereof.
Notwithstanding anything in this Agreement to the contrary, there must be 120
consecutive days in any 365-day period in which no Guarantee Non-Monetary
Default Blockage Period is in effect. No event of default (other than an event
of default arising under either of the Credit Agreements) that existed or was
continuing (it being acknowledged that any subsequent action that would give
rise to an event of default pursuant to any provision under which an event of
default previously existed or was continuing shall constitute a new event of
default for this purpose) on the date of commencement of any Guarantee
Non-Monetary Default Blockage Period with respect to the Guarantor Senior Debt
initiating such Guarantee Non-Monetary Default Blockage Period shall be, or
shall be made, the basis for the commencement of a second Guarantee Non-Monetary
Default Blockage Period by the representative for, or the holders of, such
Guarantor Senior Debt whether or not within a period of 365 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than ninety (90) consecutive days.
SECTION 11.4. When Distribution Must Be Paid Over. In the
event that any Note is declared due and payable before its Stated Maturity, then
no payment or distribution of any kind or character shall be made in respect of
the Guarantee and the holders of the Guarantor Senior Debt outstanding at the
time of such declaration shall be entitled to receive payment in full in cash of
all amounts due (including by reason of acceleration), or appropriate provision
satisfactory to the holders of such Guarantor Senior Debt shall be made for such
payment, before the Holder of any Note is entitled to receive any payment or
distribution of any kind or character with respect to the Guarantee.
Notwithstanding the foregoing, if a distribution is made to the Holders of the
Notes that pursuant to this Article XI should not have been made to them, the
Holders of the Notes who receive the distribution shall hold it in trust for
holders of Guarantor Senior Debt and pay it over to them as their interests may
appear, provided that the holders of Guarantor Senior Debt seeking such payment
notify the Holders within sixty (60) days after obtaining actual knowledge of
the Holders' receipt thereof that such payment should not have been made.
SECTION 11.5. Subrogation. After all Guarantor Senior Debt is
paid in full in cash and until the Notes are
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paid in full, the Holders of the Notes shall be subrogated (pro rata with the
holders of all Debt of the Operating Subsidiary and its Subsidiaries which, by
its express terms is subordinated to the Guarantor Senior Debt to substantially
the same extent as the Guarantee is subordinated to the Guarantor Senior Debt)
to the rights of holders of Guarantor Senior Debt to receive the payments or
distributions applicable to the Guarantor Senior Debt. Any payment or
distribution made under this Article XI to holders of Guarantor Senior Debt
which otherwise would have been made to the Holders of the Notes except for the
provisions of this Article XI shall, as between the Operating Subsidiary, its
creditors (other than the holders of the Guarantor Senior Debt) and the Holders
of the Notes, be deemed to be a payment by the Operating Subsidiary to or on
account of the Guarantor Senior Debt, and no payments or distributions to the
holders of the Notes of cash, property or securities by virtue of the
subrogation herein provided shall, as between the Operating Subsidiary, its
creditors (other than the holders of the Guarantor Senior Debt) and the Holders
of the Notes, be deemed to be a payment to or on account of the Notes, it being
understood that the provisions of this Article XI are and are intended solely
for the purpose of defining the relative rights of the holders of the Notes on
the one hand and the holders of Guarantor Senior Debt on the other.
SECTION 11.6. Relative Rights. This Article XI defines the
relative rights of the Holders of the Notes and holders of Guarantor Senior
Debt. Nothing in this Agreement shall:
(1) impair, as between the Operating Subsidiary and the
Holders of the Notes, the obligations of the Operating Subsidiary,
which are absolute and unconditional, to pay all amounts payable in
respect of the Guarantee; or
(2) prevent any Holder of the Notes from exercising its
available remedies upon a Default or an Event of Default, subject to
the rights of holders of Guarantor Senior Debt to receive distributions
otherwise payable to the Holders of the Notes.
SECTION 11.7. Subordination May Not Be Impaired by Operating
Subsidiary. No right of a holder of Guarantor Senior Debt to enforce the
subordination of the indebtedness evidenced by the Guarantee shall be impaired
by any act or
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failure to act by the Operating Subsidiary or by its failure to comply with this
Agreement.
SECTION 11.8. Reinstatement. If, at any time, all or part of
any payment with respect to Guarantor Senior Debt previously made by the
Operating Subsidiary or any other Person is rescinded for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy or reorganization of
the Operating Subsidiary or such other Person), the subordination provisions set
forth herein shall continue to be effective or be reinstated, as the case may
be, all as though such payment had not been made.
SECTION 11.9. Non-Impairment. The Holders of the Notes agree
and consent that, without notice to or assent by them, and without affecting the
liabilities and obligations of the Operating Subsidiary and the rights and
benefits of the holders of the Guarantor Senior Debt set forth in this Article
XI:
(1) the obligations and liabilities of the Operating
Subsidiary and any other party or parties for or upon the Guarantor
Senior Debt may, from time to time, be increased, renewed, refinanced,
extended, modified, amended, restated, compromised, supplemented,
terminated, waived or released;
(2) the holders of Guarantor Senior Debt, and any
representative or representatives acting on behalf thereof, may
exercise or refrain from exercising any right, remedy or power granted
by or in connection with any agreements relating to the Guarantor
Senior Debt; and
(3) any balance or balances of funds with any holder of
Guarantor Senior Debt at any time outstanding to the credit of the
Operating Subsidiary may, from time to time, in whole or in part, be
surrendered or released, all as the holders of any Guarantor Senior
Debt, or any representative or representatives acting on behalf
thereof, may deem advisable, and all without impairing, abridging,
diminishing, releasing or affecting the subordination of the Guarantee
to the Guarantor Senior Debt.
SECTION 11.10. No Modification. The provisions of this Article
XI and the defined terms used in this Article XI are for the benefit of the
holders from time to time of
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Guarantor Senior Debt and, so long as any Guarantor Senior Debt or any
commitments with respect thereto remain outstanding, such provisions and defined
terms may not be modified, rescinded or canceled in whole or in part; provided
that the provisions of this Article 11.10 and the defined terms used in this
Article XI may be modified, amended or supplemented by the parties to this
Agreement upon obtaining the prior written consent of the holders of a majority
in principal amount of the Guarantor Senior Debt (or representatives acting on
their behalf) (taken as one class).
SECTION 11.11. Waivers; Reliance by Holders of Guarantor
Senior Debt. To the extent permitted by applicable law, the Holders of the Notes
and the Operating Subsidiary hereby waive (A) notice of acceptance hereof by the
holders of the Guarantor Senior Debt and (B) all diligence in the collection or
protection of or realization upon the Guarantor Senior Debt. Each Holder, by
accepting any Note, acknowledges and agrees that the subordination provisions in
this Article XI are, and are intended to be, an inducement and a consideration
to each holder of any Guarantor Senior Debt, whether such Guarantor Senior Debt
was created or acquired before or after the issuance of the Notes, to acquire
and continue to hold, or to continue to hold, such Guarantor Senior Debt and
such holder of Guarantor Senior Debt shall be deemed conclusively to have relied
on such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Guarantor Senior Debt.
SECTION 11.12. Enforcement of Rights. The Operating Subsidiary
and the Holders of the Notes hereby expressly agree that the holders of
Guarantor Senior Debt may enforce any and all rights derived herein by suit,
either in equity or at law, for specific performance of any agreement contained
in this Article XI or for judgment at law and any other relief whatsoever
appropriate to such action or procedure.
ARTICLE XII
Miscellaneous
SECTION 12.1. Notices. All notices and other communications
pertaining to this Agreement or any Note shall be in writing and shall be deemed
to have been duly given upon the receipt thereof by the other party. Such
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notices shall be in writing and delivered by hand, confirmed facsimile
transmission, or mailed, certified or registered mail with postage prepaid, or
sent by overnight courier:
If to the Company, to it at:
Financial Pacific Company
0000 Xxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
With a copy to:
Xxxxxxx Coie
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
If to Northwestern Mutual, to:
The Northwestern Mutual Life Insurance Company
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
The Northwestern Mutual Life Insurance Company
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
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If to Windward/Merban, to:
Windward Capital Partners, L.P.
Americas Tower
0000 Xxxxxx xx xxx Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxxx
Xxxx Xxxxxx
Facsimile No: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
or to such other Person or address as shall be furnished to the other party in
writing.
SECTION 12.2. Parties. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, each subsequent Holder of a
Note and each of their respective successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
Person, firm or corporation, other than the parties hereto and their respective
successors and, with respect to Articles VI and XI, the holders of Senior Debt
and the holders of Guarantor Senior Debt, respectively, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the parties hereto, any
subsequent Holder of a Note and their respective successors and assigns, and,
with respect to Articles VI and XI, the holders of Senior Debt and the holders
of Guarantor Senior Debt, respectively, and for the benefit of no other Person,
firm or corporation.
SECTION 12.3. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THE PARTIES SUBJECT HERETO SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF
OTHER THAN SECTION 51401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
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SECTION 12.4. Replacement Note. If any Note becomes mutilated
and is surrendered by the Holder thereof to the Company, or if the Holder
thereof claims that any Note has been lost, destroyed or wrongfully taken, the
Company will execute a replacement note and the Operating Subsidiary will
execute the notation of the Guarantee set forth in such replacement note and the
Company will deliver to such Holder such replacement note, upon the affidavit of
the Holder thereof attesting to such loss, destruction or wrongful taking with
respect to such Note. Such affidavit shall be accepted as satisfactory evidence
of the loss, wrongful taking or destruction thereof and no indemnity shall be
required as a condition of the execution and delivery of a replacement Note and
the execution of the notation of the Guarantee set forth therein.
SECTION 12.5. Successors and Assigns. All covenants and
agreements of the Company and the Operating Subsidiary in this Agreement or any
Note shall bind their respective successors and assigns.
SECTION 12.6. Severability Clause. In case any provision in
this Agreement or any Note shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby and such provision shall be ineffective
only to the extent of such invalidity, illegality or unenforceability.
SECTION 12.7. Further Assurances. Each party hereto or person
or entity subject hereto shall do and perform or cause to be done and performed
all such further acts and things and shall execute and deliver all such other
agreements, certificates, instruments and documents as any other party hereto or
person or entity subject hereto may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
SECTION 12.8. Entire Agreement. This Agreement, together with
all exhibits and schedules hereto, and the Notes are intended by the parties to
be a final expression of their agreement in respect of the subject matter
contained herein and therein, and supersede all prior agreements and
understandings between the parties with respect to such subject matter.
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SECTION 12.9. Headings. The headings of the Articles and the
sections in this Agreement are for convenience of reference only and shall not
be deemed to alter or affect the meaning or interpretation of any provisions
hereof.
SECTION 12.10. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
ARTICLE XIII
Indemnification
SECTION 13.1. Indemnity of Holders of the Notes by the
Company. Subject to Article VI, the Company agrees to (i) reimburse the
Purchasers for any costs and expenses (including, without limitation, attorneys'
and paralegals' fees and expenses, including allocated in-house counsel fees)
incurred by the Purchasers in defending any suit brought against the Purchasers
by the Company or any other Person in connection with the transactions
contemplated by this Agreement, and (ii) indemnify and hold the Purchasers and
their respective officers, directors, trustees, employees, partners, Affiliates,
attorneys and agents (collectively, the indemnities) harmless from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgements, suits, costs, expenses or disbursements of any kind or nature
whatsoever, incurred by the Indemnitees, whether direct, indirect or
consequential, as a result of or arising from or relating to any proceeding by
any Person, whether threatened or initiated, asserting any claim for legal or
equitable remedy against any Person under any statute or regulation (including,
without limitation, any federal or state securities or commercial laws or under
any common law or equitable cause or otherwise) or common law principles arising
from or in connection with the past, present or future operations of the
Company, its Subsidiaries or their respective predecessors in interest, in any
way arising from or in connection with the negotiation, preparation, execution,
delivery, enforcement, performance and administration of this Agreement or any
other document executed in connection herewith, provided that the Company shall
have no obligation hereunder with respect to indemnified liabilities arising
from the gross negligence or willful misconduct of any
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Indemnitee seeking such indemnification. To the extent that the indemnity set
forth in this Section may be unenforceable because it is violative of any law or
public policy, the Company shall pay the maximum portion which it is permitted
to pay under applicable law. Any Indemnitee will promptly notify the Company of
the commencement of any legal proceeding which may give rise to any indemnified
liability under the foregoing indemnity and shall permit the Company to
participate in the defense of such Indemnitee in any such proceeding; provided,
however, that if any Indemnitee fails to provide prompt notice to the Company of
any legal proceeding, such Indemnitee shall nevertheless be entitled to be
indemnified under this Article XIII to the extent (but only to the extent) that
the Indemnitee can establish that the Company has not been materially prejudiced
by the time elapsed. The foregoing indemnity shall survive the repayment of the
Notes and the termination of this Agreement.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
FINANCIAL PACIFIC COMPANY
By: /s/ XXXXXXX X. XXXXX
------------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
FINANCIAL PACIFIC LEASING, L.L.C.
By: /s/ XXXXX X. XXXXXXXX
------------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Manager
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ XXXX X. XXXXXXX
------------------------------------------------
Name: Xxxx X. Xxxxxxx
Its authorized representative
WINDWARD/MERBAN, L.P.
By: Windward Capital Associates, Inc.,
its general partner
By: /s/ XXXXX XXXXX XXXXXXXXX
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Name: Xxxxx Xxxxx Xxxxxxxxx
Title: Authorized Signatory
