EXHIBIT 10.1
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OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
$25,000,000 SENIOR SUBORDINATED NOTES
DUE FEBRUARY 20, 2002
AND
WARRANTS
TO PURCHASE COMMON STOCK
OF
OUTSOURCE INTERNATIONAL, INC.
Dated as of February 21, 1997
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TABLE OF CONTENTS
PAGE
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1. PURCHASE AND SALE OF NOTES AND WARRANTS ........................ 1
1.1. Authorization of Issuance of Notes ....................... 1
1.2. Authorization of Issuance of Warrants .................... 2
1.3. Issuance and Sale of Notes and Warrants at the Closing ... 2
1.4. Closing Fees and Expenses ................................ 2
1.5. Allocation of Issue Price of Notes and Warrants 2
1.6. Use of Proceeds .......................................... 2
2. CLOSINGS OF THE SALES OF NOTES AND WARRANTS .................... 3
3. INTENTIONALLY OMITTED .......................................... 3
4. REPRESENTATIONS AND WARRANTIES, ETC ............................ 3
4.1. Organization and Qualification; Authority ................ 3
4.2 Subsidiaries ............................................. 4
4.3. Capitalization ........................................... 4
4.4. Shareholder List and Agreements .......................... 4
4.5. Licenses ................................................. 4
4.6. Corporate and Governmental Authorization; Noncontravention 5
4.7. Validity and Binding Effect .............................. 5
4.8. Litigation; Defaults ..................................... 6
4.9. Outstanding Debt ......................................... 6
4.10. No Material Adverse Change ............................... 6
4.11. Events Subsequent to September 30, 1996 Balance Sheet .... 7
4.12. Employee Programs ........................................ 7
4.13. Private Offerings ........................................ 9
4.14. Broker's or Finder's Commissions ......................... 9
4.15. Disclosure ............................................... 10
4.16. Intentionally Omitted .................................... 10
4.17. Federal Reserve Regulations and Other Matters ............ 10
4.18. Books and Records ........................................ 10
4.19. Environmental Matters .................................... 11
4.20. Properties and Assets .................................... 11
4.21. Insurance ................................................ 12
4.22. Employment Practices ..................................... 12
4.23. Financial Statements ..................................... 13
4.24. Intellectual Property .................................... 13
4.25. Taxes .................................................... 14
(i)
4.26. Transactions with Affiliates ............................. 14
4.27. Limitation on Subsidiary Payment Restrictions ............. 14
4.28. No Other Business ......................................... 15
4.29. Compliance with Laws ..................................... 15
4.30. Investment Company Act ................................... 15
4.31. Public Utility Holding Company Act ....................... 15
4.32. Interstate Commerce Act .................................. 15
4.33. Material Contracts and Obligations ....................... 15
5. REPRESENTATIONS OF THE PURCHASERS ............................. 16
5.1. Purchase for Investment .................................. 16
5.2. Corporate Authorization; Validity and Binding Effect ..... 16
5.3. Corporate and Governmental Authorization; Noncontravention 16
5.4. Broker's or Finder's Commissions ........................ 17
6. TERMS OF THE NOTES; PAYMENTS AND REDEMPTION;
REGISTRATION ................................................... 17
6.1. Maturity; Principal Amount .............................. 17
6.2. Interest ................................................ 17
6.3. Default Interest and Late Charges ........................ 17
6.4. Payments on the Notes ................................... 18
6.5. Optional Redemption ..................................... 18
6.6. Change of Control ........................................ 19
6.7. Registration and Exchange of Notes ...................... 20
7. COVENANTS OF THE COMPANY ...................................... 21
7.1. General Covenants of the Company ........................ 21
7.2. Covenants of the Company Applicable to the Notes ......... 25
8. DEFAULTS AND REMEDIES ......................................... 32
8.1. Events of Default ........................................ 32
8.2. Remedies on Default, Etc ................................ 34
8.3. Waiver of Past Defaults .................................. 35
9. RESTRICTIONS ON TRANSFER ...................................... 35
9.1. Restrictive Legends ..................................... 35
9.2. Notice of Transfer; Opinions of Counsel ................. 36
10. SUBORDINATION ................................................. 37
10.1. Agreement to Subordinate ............................... 37
10.2. Liquidation; Dissolution; Bankruptcy .................... 37
10.3. Default on Senior Indebtedness .......................... 38
10.4. Limitations on Collection Action; Acceleration of Note
Indebtedness ............................................ 38
(ii)
10.5. When Distributions Must be Paid Over .................... 39
10.6. Notice .................................................. 40
10.7. Subrogation .............................................. 40
10.8. Relative Rights ......................................... 41
10.9. No Impairment of Subordination ......................... 41
10.10.Representatives of Holders of Senior Indebtedness ....... 42
10.11.Representative of the Holders of Note Indebtedness ....... 42
10.12.Payment .................................................. 42
10.13.When Consent of Holders of Designated Senior Debt Required 43
11. GUARANTY ....................................................... 43
11.1. Guaranty ................................................ 43
11.2. Execution and Delivery of Guaranty ...................... 45
11.3. Certain Bankruptcy Events ............................... 45
11.4. Release of Guarantor .................................... 45
12. DEFINITIONS .................................................... 45
13. MISCELLANEOUS ................................................. 62
13.1. Indemnification; Expenses, Etc .......................... 62
13.2. Survival of Representations and Warranties; Severability . 64
13.3. Amendment and Waiver .................................... 65
13.4. Notices, Etc ............................................ 65
13.5. Successors and Assigns ................................... 65
13.6. Descriptive Headings .................................... 66
13.7. Satisfaction Requirement ............................... 66
13.8. GOVERNING LAW .......................................... 66
13.9. Service of Process ...................................... 66
13.10.Counterparts ............................................ 67
00.00.Xx Adverse Interpretation of Other Agreements ........... 67
13.12.WAIVER OF JURY TRIAL ..................................... 67
(iii)
SCHEDULES
SCHEDULE 1.6 -- Use of Proceeds
SCHEDULE 4.1 -- Foreign Qualifications
SCHEDULE 4.2 -- Subsidiaries
SCHEDULE 4.3 -- Capitalization
SCHEDULE 4.4 -- List of Stockholders and Voting Agreement
SCHEDULE 4.9 -- Debt and Other Liabilities
SCHEDULE 4.10 -- Material Developments
SCHEDULE 4.11 -- Recent Events
SCHEDULE 4.12 -- Employee Programs
SCHEDULE 4.19 -- Environmental Matters
SCHEDULE 4.20 -- Liens
SCHEDULE 4.21 -- Insurance
SCHEDULE 4.22 -- Employment Matters
SCHEDULE 4.24 -- Intellectual Property
SCHEDULE 4.26 -- Transactions with Affiliates
SCHEDULE 4.27 -- Subsidiary Payment Restrictions
SCHEDULE 4.33 -- Material Contracts and Obligations
SCHEDULE 7.2(f) -- Shares to be Redeemed at Closing
SCHEDULE 12.1 -- Other Designated Debt
(iv)
EXHIBITS
EXHIBIT A -- Form of Senior Subordinated Note
EXHIBIT B -- Form of Warrant
EXHIBIT C -- Form of Escrow Agreement
(v)
SECURITIES PURCHASE AGREEMENT (the "Agreement") dated as of February
21, 1997, by and among OUTSOURCE INTERNATIONAL, INC., a Florida corporation (the
"Company"), the purchasers listed on the signature pages hereto (the
"Purchasers," and each a "Purchaser") and the guarantors listed on the signature
pages hereto (the "Guarantors," and each a "Guarantor"). Unless otherwise
defined, capitalized terms used in this Agreement are defined in Section 12
hereof; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement; references to
a "section," a "subsection," a "paragraph" or a "clause" are, unless otherwise
specified, to a section, a subsection, a paragraph or a clause of this
Agreement.
W I T N E S S E T H
WHEREAS, the Company wishes to sell $25,000,000 aggregate principal
amount of its Notes (as defined below), in substantially the form of Exhibit A
hereto and to issue Warrants (as defined below) to purchase shares of Common
Stock in substantially the form of EXHIBIT B hereto;
WHEREAS, the Company has duly authorized the issuance of its Notes, the
issuance of the Warrants and the execution and delivery of this Agreement;
WHEREAS, the Guarantors have each duly authorized their respective
guaranties of the Company's obligations under the Notes;
WHEREAS, each of the Purchasers is willing to purchase the aggregate
principal amount of Notes and aggregate number of Warrants set forth opposite
its name on the signature pages hereof.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
1.1. AUTHORIZATION OF ISSUANCE OF NOTES . The Company has duly
authorized the issuance and sale of its Senior Subordinated Notes due
February 20, 2002 (the "Notes," such term to include any notes issued
in substitution therefor pursuant to the terms of this Agreement), in
the aggregate principal amount of $25,000,000, to be acquired by the
Purchasers in accordance with the terms of this Agreement. The
Guarantors have each duly authorized their respective guaranties of the
Company's obligations under the Notes. The Notes shall be substantially
in the form set out in EXHIBIT A hereto, with such changes thereto, if
any, as may be approved by the Purchasers and the Company.
1.2. AUTHORIZATION OF ISSUANCE OF WARRANTS . The Company has duly
authorized the issuance and sale of warrants (the "Warrants") to
purchase an aggregate number of shares of the Common Stock determined
in accordance with the terms of the Warrants, which will initially be
2,092,776, to be acquired by the Purchasers in accordance with the
terms of this Agreement. The Warrants shall be substantially in the
form set out in EXHIBIT B hereto, with such changes thereto, if any, as
may be approved by the Purchasers and the Company.
1.3. ISSUANCE AND SALE OF NOTES AND WARRANTS AT THE CLOSING . At
the Closing (as defined below), the Company shall issue and sell to the
Purchasers, and the Purchasers shall purchase from the Company, Notes
in the aggregate principal amount of $25,000,000 and Warrants (the
"Initial Warrants") to purchase an aggregate number of shares of the
Common Stock determined in accordance with the terms of the Warrants,
which number will initially be 1,210,025 at an aggregate purchase price
(the "Aggregate Closing Purchase Price") of $25,000,000 payable in cash
by wire transfer of immediately available funds.
1.4. CLOSING FEES AND EXPENSES . The Company agrees to pay, prior
to or on the Closing Date (as defined below), a closing fee (the
"Closing Fee") to the Purchasers in an amount equal to one and one-half
percent (1.5%) of the Aggregate Closing Purchase Price, and all fees,
expenses and disbursements of the Purchasers and the Purchasers'
Special Counsel reflected in statements of the Purchasers and such
counsel rendered prior to or on the Closing Date; PROVIDED, HOWEVER,
that such statements provided prior to or on the Closing Date may be a
good faith estimate of such expenses and the Purchasers and Purchasers'
Special Counsel reserve the right to balance such statement within a
reasonable time following closing.
1.5. ALLOCATION OF ISSUE PRICE OF NOTES AND WARRANTS . The Company
and the Purchasers agree that for federal income tax purposes,
including for purposes of determining original issue discount and the
issue price of the Notes under sections 1271-1275 of the Code, as
amended, and the regulations issued thereunder (including proposed
Treasury Regulations section 1.1273-2(g)(2)), the Closing Fee
referenced in Subsection 1.4 shall be treated as a reduction of the
issue price of the Notes and Warrants, and the remainder of the
Aggregate Closing Purchase Price, after giving effect to such
reduction, shall be allocated among the Notes and Warrants to be issued
and sold at the Closing as follows: $755 shall be allocated to each
$1,000 principal amount of Notes; and $3.17 shall be allocated to each
share of the Common Stock issuable upon the exercise of theWarrants.
The Company and the Purchasers agree that such allocation of the issue
price shall be binding on the Company and the Purchasers for purposes
of any determination by the Company of the issue price of the Notes and
the Initial Warrants pursuant to the first sentence of Treasury
regulations section 1.1273-2(h)(2).
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1.6. USE OF PROCEEDS. The proceeds from the issuance of the Notes
and Warrants shall be used by the Company in accordance with SCHEDULE
1.6 attached hereto. No part of such proceeds will be used to purchase
or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock. Neither the issuance of the
Notes or the Warrants nor the use of the proceeds thereof will violate
or be inconsistent with the provisions of Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System.
2. CLOSINGS OF THE SALES OF NOTES AND WARRANTS.
The closing of the issuance and sale of Notes and Warrants pursuant to
Subsection 1.3 hereof and the other transactions contemplated hereby (the
"Closing") shall take place at the offices of Xxxxxxx, Procter & Xxxx LLP,
Exchange Place, Boston, Massachusetts, on such date as agreed upon by the
parties hereto (such date on which the Closing shall have actually occurred, the
"Closing Date"). At the Closing, the Company will deliver or cause to be
delivered to each of the Purchasers, a single Note in the principal amount
specified opposite such Purchaser's name on the signature pages hereto, and a
single Initial Warrant certificate to purchase the number of shares of Common
Stock specified opposite such Purchaser's name on the signature pages hereto, in
each case dated the Closing Date and registered in the Purchaser's name, against
payment of the purchase price therefor in the amount specified opposite such
Purchaser's name on the signature pages hereto. Concurrently with such delivery
at Closing, the Company will deliver or cause to be delivered to the Escrow
Agent, to be held in escrow pursuant to the terms of an escrow agreement in the
form of EXHIBIT C attached hereto, a single Warrant certificate, to purchase
882,751 shares of Common Stock (the "Additional Warrants"), dated the Closing
Date and registered in the name of the Escrow Agent.
3. INTENTIONALLY OMITTED.
4. REPRESENTATIONS AND WARRANTIES, ETC. In order to induce the
Purchasers to enter into this Agreement and to purchase the Notes and Warrants,
the Company represents and warrants that as of the date hereof:
4.1. ORGANIZATION AND QUALIFICATION; AUTHORITY . The Company is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Florida, has full corporate power and authority to
own and lease its properties and carry on its business as presently
conducted and as proposed to be conducted, is duly qualified, registered or
licensed as a foreign corporation to do business and is in good standing in
each other jurisdiction in which the ownership or leasing of its properties
or the character of its present operations makes such qualification,
registration or licensing necessary, except where the failure so to qualify
or be in good standing would not have a material adverse effect on the
condition (financial or otherwise), assets, business or results of
3
operations or prospects of the Company and its Subsidiaries as a whole (a
"Material Adverse Effect"). The Company has delivered to Purchasers'
Special Counsel complete and correct copies of its Articles of
Incorporation and By-laws, as amended to date and as presently in effect
(the "Charter Documents"). A list of all jurisdictions in which the Company
is qualified, registered or licensed to do business as a foreign
corporation is attached hereto as SCHEDULE 4.1.
4.2. SUBSIDIARIES . The Subsidiaries, their respective state of
incorporation and tax status (i.e., C corporation versus S corporation)
as of the Closing Date are set forth in SCHEDULE 4.2 attached hereto.
Each Subsidiary is duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has
full corporate power and authority to own and lease its properties and
carry on its business as presently conducted and as proposed to be
conducted. Each Subsidiary is duly qualified, registered or licensed as
a foreign corporation to do business and is in good standing in each
jurisdiction in which the ownership or leasing of its properties or the
character of its present operations makes such qualification,
registration or licensing necessary, except where the failure so to
qualify or be in good standing would not have a Material Adverse
Effect. A list of all jurisdictions in which each of the Subsidiaries
is qualified, registered or licensed to do business as a foreign
corporation is included as part of SCHEDULE 4.1 attached hereto. As of
the Closing Date, none of the Subsidiaries will be in violation of any
term of its organizational documents or of any term of any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary or to which such Subsidiary is
a party, except where any such violation would not have a Material
Adverse Effect on the Company or the applicable Subsidiary. As of the
Closing Date, the Company will own all of the outstanding shares of
Capital Stock of each of its Subsidiaries free of any Lien, restriction
(other than restrictions generally applicable to securities under
federal, provincial or state securities laws) or encumbrance, and said
shares will have been duly issued and will be validly outstanding. As
of the Closing Date, there will not be any outstanding subscriptions,
options, warrants, rights to purchase or acquire any of the shares of
Capital Stock or other equity ownership interest of any Subsidiary, any
outstanding securities convertible into such shares or outstanding
warrants, options or other rights to acquire any such convertible
securities, or other agreements or commitments of any character
obligating any Subsidiary to issue any securities.
4.3. CAPITALIZATION . The authorized, issued and outstanding
Capital Stock of the Company, immediately prior to the Closing Date,
will be as set forth on SCHEDULE 4.3 hereto. Except as set forth on
SCHEDULE 4.3, as of the Closing Date, there will not be any outstanding
subscriptions, options, warrants, rights, to purchase or acquire any of
the Capital Stock or other equity ownership of the Company, any
outstanding securities convertible or exchangeable into such Capital
Stock or outstanding warrants, options or other rights to acquire any
such convertible securities, or other agreements or commitments of any
character obligating the Company to issue any securities.
4
4.4. SHAREHOLDER LIST AND AGREEMENTS . Set forth on SCHEDULE 4.4
hereto is a true and complete list of the holders of Capital Stock of
the Company and the Capital Stock owned by each such holder as of the
Closing Date. Except as set forth on SCHEDULE 4.4 and in the Other
Transaction Documents, there are no agreements or understandings,
written or oral, to which the Company is a party with respect to the
acquisition, disposition or voting of the Capital Stock of the Company.
4.5. LICENSES . The Company and its Subsidiaries hold all material
licenses, franchises, permits, consents, registrations, certificates
and other approvals (including, without limitation, those relating to
environmental matters, public and worker health and safety, buildings,
highways or zoning) (individually, a "License" and collectively,
"Licenses") required for the conduct of its respective business as now
being conducted, and is operating in substantial compliance therewith,
except where the failure to hold any such License or to operate in
compliance therewith would not have a Material Adverse Effect. The
Company and its Subsidiaries are in substantial compliance with all
laws, regulations, orders and decrees applicable to them, except in
each case where the failure so to comply would not have a Material
Adverse Effect, or a material adverse effect on the ability of the
Company or any Subsidiary to perform on a timely basis any obligation
that it has or will have under any Transaction Document to which it is
a party.
4.6. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NONCONTRAVENTION .
The execution, delivery and performance by the Company and each of its
Subsidiaries of each of the Transaction Documents to which it is a
party and all other instruments or agreements to be executed in
connection herewith or therewith, and the issuance and sale to the
Purchasers of the Notes and Warrants pursuant to this Agreement and the
use of proceeds thereof as contemplated herein, are within the
Company's and such Subsidiaries' respective corporate powers, having
been duly authorized by all necessary corporate action on the part of
the Company or its Subsidiaries, as applicable; do not require any
License, authorization, approval, qualification or formal exemption
from, or other action by or in respect of, or filing of a declaration
or registration with, any court, Governmental Authority, agency or
official or other Person (except such as have been obtained or as may
be required under the Securities Act or state securities or Blue Sky
laws); do not and will not contravene or constitute a default under or
violation of (i) any provision of applicable law or regulation of any
Governmental Authority, including, without limitation, the Foreign
Assets Control Regulations and the Cuban Assets Control Regulations,
(ii) the respective Charter Documents of the Company or any of its
Subsidiaries, (iii) any agreement (or require the consent of any Person
under any agreement that has not been obtained or will not be obtained
prior to the Closing Date) to which the Company or any of its
Subsidiaries is a party, or (iv) any judgment, injunction, order,
decree or other instrument binding upon the Company or any of its
Subsidiaries or any of their respective properties, except where such
contravention, default or violation would not have a Material Adverse
Effect; and do not and will not result in the creation or imposition of
any Lien on any asset of the Company or any asset of any of the
Subsidiaries.
5
4.7. VALIDITY AND BINDING EFFECT . Each of the Transaction
Documents to which the Company or any of its Subsidiaries is a party
has been duly executed and delivered by the Company or such Subsidiary,
as applicable, and is a valid and binding agreement of the Company or
such Subsidiary, enforceable against the Company and such Subsidiary in
accordance with its terms, except for (a) the effect upon the
Transaction Documents of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the rights
of creditors generally and (b) limitations imposed by a court of
competent jurisdiction under general equitable principles upon the
specific enforceability of any of the remedies, covenants or other
provisions of the Transaction Documents and upon the availability of
injunctive relief or other equitable remedies.
4.8. LITIGATION; DEFAULTS . There is no action, suit, proceeding
or investigation pending or, to the best of the Company's knowledge,
threatened against or affecting the Company or any of its Subsidiaries
or any of their respective properties, or to the best of the Company's
knowledge, against or affecting any officer, director or key employee
of the Company or any of its Subsidiaries, before or by any court or
arbitrator or any Governmental Authority or official, which questions
the validity or might hinder the validity of the Agreement or any other
Transaction Document, or which might impair the ability of the Company
or any Subsidiary to perform fully on a timely basis any obligation
which the Company or such Subsidiary has or will have under this
Agreement or any other Transaction Document to which the Company or
such Subsidiary is a party, or which (individually or in the aggregate)
could reasonably be expected to have a Material Adverse Effect. The
Company and each of its Subsidiaries are not in violation of, or in
default under (and there does not exist any event or condition which,
after notice or lapse of time or both, would constitute such a default
under), any term of its respective Charter Documents, or of any term of
any agreement, instrument, judgment, decree, order, statute,
injunction, governmental regulation, rule or ordinance (including
without limitation, those relating to zoning, city planning or similar
matters) applicable to the Company or any of its Subsidiaries or to
which the Company or any of its Subsidiaries is bound, or to any
properties of the Company or any of its Subsidiaries, except in each
case to the extent that such violations or defaults, individually or in
the aggregate, could not have a Material Adverse Effect.
4.9. OUTSTANDING DEBT . Except as set forth on SCHEDULE 4.9
hereto, at and as of the date hereof, neither the Company nor any of
its Subsidiaries will have outstanding any debt for borrowed money, or
obligations or liabilities evidenced by bonds, debentures, notes or
other similar instruments or under capital leases other than short-term
debt incurred in the ordinary course of business. SCHEDULE 4.9 contains
a complete and accurate list of all material guaranties, assumptions,
purchase agreements and similar agreements and arrangements whereby the
Company or any of its Subsidiaries is or may become directly or
indirectly liable or responsible for the indebtedness or other
obligations of another Person, except for negotiable instruments
endorsed for collection or deposit in
6
the ordinary course of its business, identifying, with respect to each
of the respective parties, amounts and maturities.
4.10. NO MATERIAL ADVERSE CHANGE . Except as set forth on SCHEDULE
4.10, since December 31, 1995, there has been (i) no material adverse
change in the condition (financial or other), assets, business, or
results of operations of the Company or any of its Subsidiaries, (ii)
no obligation or liability (contingent or other) incurred by the
Company or any of its Subsidiaries, other than obligations and
liabilities incurred in the ordinary course of business, and no
mortgage, encumbrance or Lien placed on any of the properties of the
Company or any of its Subsidiaries which remains in existence on the
date hereof, other than Permitted Liens and Liens described on SCHEDULE
4.20 hereto, and (iii) no acquisition or disposition of any material
assets by the Company or any of its Subsidiaries (or any contract or
arrangement therefor), or any other material transaction, otherwise
than for fair value in the ordinary course of business.
4.11. EVENTS SUBSEQUENT TO SEPTEMBER 30, 1996 BALANCE SHEET .
Except as set forth on SCHEDULE 4.11 hereto, since September 30, 1996,
the Company and each of its Subsidiaries have not (i) issued any stock,
bond or other corporate security, (ii) borrowed any amount or incurred
or become subject, to any liability (absolute, accrued or contingent),
except current liabilities incurred and liabilities under contracts
entered into in the ordinary course of business, (iii) incurred or paid
any obligation or liability (absolute, accrued or contingent) other
than current liabilities shown on the Financial Statements and current
liabilities incurred since the date of the Financial Statements in the
ordinary course of business, (iv) declared or made any payment or
distribution to shareholders or purchased or redeemed any share of its
capital stock or other security, (v) mortgaged, pledged or subjected to
lien any of its assets, tangible or intangible, other than liens or
current taxes not yet due and payable, (vi) sold, assigned or
transferred any of its tangible assets except in the ordinary course of
business, or canceled any debt or claim, (vii) sold, assigned,
transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service xxxx, copyright, trade secret or
other intangible asset, (viii) suffered any loss of property or waived
any right of substantial value other than in the ordinary course of
business, (ix) made any material change in the manner of business or
operations of the Company or any of its Subsidiaries, (x) entered into
any transaction except in the ordinary course of business or as
otherwise contemplated hereby or (xi) entered into any commitment
(contingent or otherwise) to do any of the foregoing, if any of the
foregoing would have a Material Adverse Effect.
4.12. EMPLOYEE PROGRAMS . SCHEDULE 4.12 sets forth a list of every
Employee Program (as defined below) maintained by the Company, any of
its Subsidiaries or any Current Affiliate (as defined below) at any
time during the six-year period ending on the Closing Date or with
respect to which a liability of the Company, any of its Subsidiaries or
an ERISA Affiliate (as defined below) exists. Except as set forth on
SCHEDULE 4.12, each Employee Program (other than a Multiemployer Plan
(as defined below)) which has
7
been maintained by the Company during the six-year period ending on the
Closing Date and which has been intended to qualify under Section
401(a) or Section 501(c)(9) of the Code has received a favorable
determination or approval letter from the IRS regarding its
qualification under such section or the remedial amendment period under
Section 401(b) of the Code has not yet expired with respect to such
Employee Program and, to the knowledge of the Company, nothing has
occurred that would adversely affect such qualification since the date
of such letter or application for a determination or approval letter
has been timely made and to the knowledge of the Company, no reason
exists why a favorable determination or approval shall not be granted.
Except as set forth on SCHEDULE 4.12, the Company does not know of any
failure of any party to comply with any laws applicable with respect to
the Employee Programs that have been maintained by the Company, any of
its Subsidiaries or any Current Affiliate or any ERISA Affiliates, and
no such failure will result from completion of the transactions
contemplated hereby. Except as set forth on SCHEDULE 4.12, with respect
to any Employee Program ever maintained by the Company, any of its
Subsidiaries or an ERISA Affiliate, there has been no "prohibited
transaction," as defined in Section 406 of ERISA or Code Section 4975,
or breach of any duty under ERISA or other applicable law or any
agreement which in any such case could subject the Company or any of
its Subsidiaries to material liability either directly or indirectly
(including, without limitation, through any obligation of
indemnification or contribution) for any damages, penalties, or taxes,
or any other loss or expense. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other
than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program (other than a
Multiemployer Plan).
None of the Company, its Subsidiaries, or its Current Affiliates
or any ERISA Affiliates have incurred any liability under Title IV of
ERISA which has not been paid in full prior to the Closing. None of the
Company, any of its Subsidiaries or any of its Current Affiliates or
any ERISA Affiliates participates currently or has during the six-year
period ending on the Closing Date participated in or is required
currently or has during the six-year period ending on the Closing Date
been required to contribute to or otherwise participate in any plan,
program or arrangement subject to Title IV of ERISA. None of the
Company, its Subsidiaries, or its Current Affiliates or any ERISA
Affiliates participates currently or has during the six-year period
ending on the Closing Date participated in or is required currently or
has during the six-year period ending on the Closing Date been required
to contribute to or otherwise participate in any Multiemployer Plan (as
defined below). Except as disclosed on SCHEDULE 4.12, none of the
Employee Programs which is a welfare plan maintained by the Company,
any of its Subsidiaries or any ERISA Affiliate provides health care or
any other non-pension benefits to any employees after their employment
is terminated (other than as required by Part 6 of Subtitle B of Title
I of ERISA or comparable statutes or regulations) or has ever promised
to provide such post-termination benefits.
For purposes of this subsection:
8
(a) "EMPLOYEE PROGRAM" means (A) any employee benefit plan
within the meaning of Section 3(3) of ERISA and employee benefit
plans (such as foreign or excess benefit plans) which are not
subject to ERISA, and (B) any stock option plans, bonus or
incentive award plans, severance pay policies or agreements,
deferred compensation arrangements, supplemental income
arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (A) above,
and (C) any trust used to fund benefits under the foregoing
maintained by the Company, any of its Subsidiaries or any ERISA
Affiliate.
(b) An entity is an "ERISA AFFILIATE" of the Company if it
would have ever been considered a single employer with the Company
under ERISA Section 4001(b) or part of the same "CONTROLLED GROUP"
as the Company for purposes of ERISA Section 302(d)(8)(C); and an
entity is a "CURRENT AFFILIATE" if it currently would be
considered a single employer with the Company under ERISA Section
4001(b) or part of the same "CONTROLLED GROUP" as the Company for
purposes of ERISA Section 302(d)(8)(C).
(c) An entity "MAINTAINS" an Employee Program if such entity
sponsors, contributes to, or provides benefits under such Employee
Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or
otherwise covers employees of such entity (or, in respect of such
employees, their spouses, dependents, or beneficiaries).
(d) "MULTIEMPLOYER PLAN" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes
and which is maintained pursuant to one or more collective
bargaining agreements.
4.13. PRIVATE OFFERINGS . No form of general solicitation or general
advertising including, but not limited to, advertisements, articles,
notices or other communications, published in any newspaper, magazine
or similar medium or broadcast over television or radio, or any seminar
or meeting whose attendees have been invited by any general
solicitation or general advertising, was used by the Company or any of
its Subsidiaries or any of their respective representatives, or, to the
knowledge of the Company, any other Person acting on behalf of the
Company or any of its Subsidiaries in connection with the offering of
the Notes and Warrants being purchased under this Agreement or under
any other Transaction Document. Neither the Company or any of its
Subsidiaries nor any Person acting on the Company's or any such
Subsidiaries' behalf, as applicable, has directly or indirectly offered
the Notes or the Warrants, or any part thereof or any other similar
securities or the securities being purchased under any other
Transaction Document, for sale to, or sold or solicited any offer to
buy any of the same from, or otherwise approached or negotiated in
respect thereof with any Person or Persons other than the
9
Purchasers and other investors who the Company reasonably believed had
such knowledge and experience in financial and business matters that
they were capable of evaluating the merits and risks of purchasing the
Notes and the Warrants. The Company further represents to the
Purchasers that, assuming the accuracy of the representations of the
Purchasers as set forth in Section 5 hereof, neither the Company or any
of its Subsidiaries nor any Person acting on the Company's or any such
Subsidiaries' behalf, as applicable, has taken or will take any action
which would subject the issue and sale of the Notes and the Warrants to
the provisions of Section 5 of the Securities Act, except as
contemplated by the Registration Rights Agreement. The Company and its
Subsidiaries have not sold the Notes or the Warrants to anyone other
than the Purchasers designated in this Agreement. No securities of the
same class or series as any of the Notes or Warrants have been issued
and sold by the Company or any of its Subsidiaries prior to the date
hereof other than issuances of Common Stock or Senior Indebtedness
contemplated hereby or in any of the Transaction Documents and the
granting of stock options to directors or employees.
4.14. BROKER'S OR FINDER'S COMMISSIONS . In addition to and not in
limitation of any other rights hereunder, the Company agrees that it
will indemnify and hold harmless the Purchasers from and against any
and all claims, demands or liabilities for broker's, finder's,
placement agent's or other similar fees or commissions and any and all
liabilities with respect to any taxes (including interest and
penalties) payable or incurred or alleged to have been incurred by the
Company, any of its Subsidiaries or any Person acting or alleged to
have been acting on the Company's or any of such Subsidiaries' behalf,
as applicable, in connection with this Agreement, the issuance or sale
of the Notes or the Warrants, or any other transaction contemplated by
any of the Transaction Documents.
4.15. DISCLOSURE .
(a) There is no untrue statement of material fact in this
Agreement or in any of the other Transaction Documents, and no
omission of a material fact necessary in order to make the
statements contained herein and therein, taken as a whole, not
materially misleading in light of the circumstances in which such
statements were made.
(b) There is no material fact known to the Company which the
Company has not disclosed to the Purchasers or the Purchasers'
Special Counsel in writing which has or, insofar as the Company
can reasonably foresee, may have or will have a Material Adverse
Effect, or a material adverse effect on the ability of the Company
or any of the Subsidiaries to perform its respective obligations
under any of the Transaction Documents to which it is a party or
in respect of the Notes or the Warrants or any document
contemplated hereby or thereby.
10
4.16. INTENTIONALLY OMITTED .
4.17. FEDERAL RESERVE REGULATIONS AND OTHER MATTERS . The Company
will not, directly or indirectly, use any of the proceeds from the sale
of the Notes and Warrants for the purpose, whether immediate,
incidental or ultimate, of buying any "margin stock," or of
maintaining, reducing or retiring any indebtedness originally incurred
to purchase any stock that is currently a "margin stock," or for any
other purpose which might constitute the transactions contemplated
hereby a "purpose credit," in each case within the meaning of
Regulation G or U of the Board of Governors of the Federal Reserve
System (12 C.F.R. 207 and 221, as amended, respectively), or otherwise
take or permit to be taken any action which would involve a violation
of such Regulation G or Regulation U or of Regulations T or X of the
Board of Governors of the Federal Reserve System (12 C.F.R. 220 and
224, as amended, respectively) or any other regulation of such Board.
No indebtedness that may be maintained, reduced or retired with the
proceeds from the sale of the Notes or Warrants was incurred for the
purpose of purchasing or carrying any "margin stock" and neither the
Company nor any of its Subsidiaries own any such "margin stock" or have
any present intention of acquiring, directly or indirectly, any such
"margin stock."
4.18. BOOKS AND RECORDS . The minute books of the Company and each
of its Subsidiaries contain complete and accurate records of all
meetings and other corporate actions of the Company's and each of its
Subsidiaries' Shareholders Board of Directors and committees thereof
and accurately reflect in all material respects all transactions
referred to therein. The stock ledger of the Company and each of its
Subsidiaries are complete and reflects all issuances, transfers,
repurchases and cancellations of shares of Capital Stock of the Company
and each of its Subsidiaries.
4.19. ENVIRONMENTAL MATTERS . To the best knowledge of the
Company, each of the representations and warranties set forth in
paragraphs (a) through (e) of this subsection are true and correct with
respect to each parcel of real property heretofore or now owned or
operated by the Company or any Subsidiary (the "Properties"), except as
set forth on SCHEDULE 4.19 and except to the extent that the facts and
circumstances giving rise to any such failure to be so true and correct
could not have a Material Adverse Effect:
(a) The Properties do not contain, and have not previously
contained, in, on, or under, including, without limitation, the
soil and groundwater thereunder, any Hazardous Materials.
(b) The Properties and all operations and facilities at the
Properties are in compliance with all Environmental Laws, and
there is no Hazardous Materials contamination or violation of any
Environmental Law which could interfere with the continued
operation of any of the Properties or impair the fair saleable
value of any thereof.
11
(c) Neither the Company nor any of its Subsidiaries has
received any complaint, notice of violation, alleged violation,
investigation or advisory action or of potential liability or of
potential responsibility regarding environmental protection
matters or permit compliance with regard to the Properties, nor is
the Company aware that any Governmental Authority is contemplating
delivering to the Company or any of its Subsidiaries any such
notice.
(d) Hazardous Materials have not been generated, treated,
stored, disposed of, at, on or under any of the Properties, nor
have any Hazardous Materials been transferred from the Properties
to any other location.
(e) There are no governmental, administrative or judicial
proceedings pending or contemplated under any Environmental Laws
to which the Company or any of its Subsidiaries is or will be
named as a party with respect to the Properties, nor are there any
consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect
to any of the Properties.
4.20. PROPERTIES AND ASSETS . The Company and each of its
Subsidiaries have good record and marketable fee title to all real
property and all other property and assets, whether tangible or
intangible, owned by them and reasonably necessary in the conduct of
business of the Company and each of its Subsidiaries, except defects in
title which do not and will not have a Material Adverse Effect. All of
the leases necessary in any material respect for the operation of their
respective properties and assets, under which the Company and each of
its Subsidiaries holds any property or assets, real or personal, are
valid, subsisting and enforceable and afford peaceful and undisturbed
possession of the subject matter of the lease, and no material default
by the Company or any of its Subsidiaries exist under any of the
provisions thereof. All buildings, machinery and equipment of the
Company and each of its Subsidiaries are in good repair and working
order, except for ordinary wear and tear, and except as would have a
Material Adverse Effect. All material current and proposed uses of such
property or assets of the Company and each of its Subsidiaries are
permitted as of right and, to the knowledge of the Company, no such
regulation or ordinance interferes with such current or proposed uses.
To the knowledge of the Company, there is no pending or formally
proposed change in any such laws, regulations and ordinances which
would have a Material Adverse Effect. Except as set forth on SCHEDULE
4.20, no condemnation proceeding is pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries. All
property and assets of any kind (real or personal, tangible or
intangible) of the Company and each of its Subsidiaries are free from
all Liens except for (i) Liens disclosed on SCHEDULE 4.20 hereto and
(ii) Permitted Liens.
12
4.21. INSURANCE . A list of all insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors under which the Company and each of
its Subsidiaries may derive any material benefit is set forth on
SCHEDULE 4.21 hereof. There is no claim by the Company or any of its
Subsidiaries pending under any of such policies or bonds as to which
coverage has been questioned, reserved, denied or disputed by the
underwriters of such policies or bonds or their agents where such
question, reservation, denial or dispute would have a Material Adverse
Effect. All premiums due and payable under all such policies and bonds
have been paid, and the Company and each of its Subsidiaries are
otherwise in full compliance with the terms and conditions of all such
policies and bonds. Except as set forth on SCHEDULE 4.21, such policies
of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) are and have been in full
force and effect for at least the last year and remain in full force
and effect. The Company knows of no threatened termination of any such
policies or bonds.
4.22. EMPLOYMENT PRACTICES . Except as set forth on SCHEDULE 4.22
hereto, neither the Company nor any of its Subsidiaries are a party to
or in the process of negotiating any collective bargaining or labor
agreement or union contract. Except as set forth on Schedule 4.22,
there is no (i) charge, complaint or suit pending or, to the knowledge
of the Company, threatened against the Company or any of its
Subsidiaries respecting employment, hiring for employment, terminating
from employment, employment practices, employment discrimination,
sexual harassment or other forms of discriminatory harassment terms and
conditions of employment, safety, wrongful termination, or wages and
hours, (ii) unfair labor practice charge or complaint pending or, to
the knowledge of the Company, threatened against, or decision or order
in effect and binding on, the Company or any of its Subsidiaries before
or of the National Labor Relations Board, (iii) grievance or
arbitration proceeding arising out of or under collective bargaining
agreements pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, (iv) strike, labor
dispute, slow-down, work stoppage or other interference with work
pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or (v) to the knowledge of the
Company, union organizing activities or union representation question
threatened or existing with respect to any groups of employees of the
Company or any of its Subsidiaries.
4.23. FINANCIAL STATEMENTS .
(a) The Company has delivered to the Purchaser complete and
correct copies of its audited financial statements for the fiscal
years ended December 31, 1993, 1994, and 1995, and its unaudited
financial statements for the fiscal quarters ended March 31, 1996,
June 30, 1996, and September 30, 1996, together with the notes
thereto, if any, (the "Financial Statements"). The Financial
Statements fairly present in all material respects the financial
position of the Company and each of its Subsidiaries on the dates
of such statements and the results of their operations
13
on the applicable basis for the periods covered thereby in
accordance with GAAP, except, with respect to unaudited financial
statements, the absence of notes thereto and statements of cash
flows and subject to customary year-end adjustments; and have been
prepared in accordance with GAAP consistently applied.
(b) As of December 31, 1995, and as of the Closing Date, and
except as set forth in the Schedules hereto, there are and will be
no material liabilities or claims relating to the Company or any
of its Subsidiaries of any nature, whether accrued, absolute,
contingent or otherwise, asserted or, to the Company's knowledge,
unasserted, except liabilities or claims stated or adequately
reserved against in the Financial Statements or liabilities or
claims incurred in the ordinary course of the Company's and each
of its Subsidiaries' operations which are not required to be
reflected in the Financial Statements or in the notes thereto
under GAAP. Nothing has come to the attention of the Company since
the date of the Financial Statements which would indicate that the
Financial Statements were not true and correct in all material
respects as of the respective dates thereof.
4.24. INTELLECTUAL PROPERTY . The Company and each of its
Subsidiaries have exclusive ownership of, or exclusive license to use
all Intellectual Property that is material to the conduct of their
respective businesses as currently conducted and as proposed to be
conducted. A list of all Intellectual Property owned or licensed by the
Company and each of its Subsidiaries is set forth on SCHEDULE 4.24
hereto. To the best knowledge of the Company, no claim is pending or
threatened to the effect that the operations of the Company or any of
its Subsidiaries infringe upon or conflict with the asserted rights of
any other Person under any Intellectual Property, and there is no basis
for any such claim (whether pending or threatened) known to the
Company. No claim is known by the Company to be pending or threatened
to the effect that any Intellectual Property owned or licensed by the
Company or any of its Subsidiaries or which the Company or any of its
Subsidiaries otherwise have the right to use, is invalid or
unenforceable by the Company or its Subsidiaries. Each of the Company
and its Subsidiaries have taken reasonable precautions to maintain the
confidentiality of their respective trade secrets and other proprietary
information and, to the best of the Company's knowledge, as of the date
hereof, such confidentiality has not been breached in a manner which
may have a Material Adverse Effect. To the best of the Company's
knowledge, the business conducted or proposed to be conducted by the
Company and each of its Subsidiaries will not cause the Company or its
Subsidiaries to infringe or violate any Intellectual Property owned or
licensed by any other person or entity, which infringement or violation
would have a Material Adverse Effect. Except as set forth on SCHEDULE
4.24, the Company is not aware that any Key Employee of the Company or
any of its Subsidiaries or any individual who is performing consulting
services for the Company or any of its Subsidiaries is obligated under
any contract (including any license, covenant or commitment of any
nature), or subject to any judgment, decree or order of any court or
administrative agency, that would interfere or
14
conflict with the performance of such employee's duties as an officer,
employee, consultant or director of the Company or any of its
Subsidiaries or the use of such employee's best efforts to promote the
interests of the Company or any of its Subsidiaries or the Company's or
any of its Subsidiaries businesses as proposed to be conducted.
4.25. TAXES . The Company, all predecessors to the Company, each
of its Subsidiaries, and any of their predecessors have filed or
obtained extensions of all federal, state, local and foreign income,
excise, franchise, real estate, sales and use and other tax returns
heretofore required by law to be filed by it. All material taxes,
including, without limitation, all federal, state, county, local,
foreign or other income, property, sales, use, franchise, value added,
employees' income withholding, social security, unemployment and other
taxes, of any nature whatsoever which have become due or payable by the
Company, any predecessors thereto, each of its Subsidiaries, and any of
their predecessors including any fines or penalties with respect
thereto or interest thereon, whether disputed or not (collectively,
"Taxes"), have been paid in full or are adequately provided for in
accordance with GAAP on the financial statements of the applicable
Person. All material deposits, Taxes and other assessments and levies
required by law to be made, withheld, collected or provided for by the
Company, any predecessors thereto, each of its Subsidiaries, and any of
their predecessors including deposits with respect to Taxes
constituting employees' income withholding taxes, have been duly made,
withheld, collected or provided for and have been paid over to the
proper federal, state or local authority, or are held by the applicable
Person for such payment. No Liens arising from or in connection with
Taxes have been filed and are currently in effect against the Company
or any of its Subsidiaries except for Liens for Taxes which are not yet
due. The Company knows of no basis for any other Taxes that could
reasonably be expected to have a Material Adverse Effect.
4.26. TRANSACTIONS WITH AFFILIATES . Except as otherwise set forth
on SCHEDULE 4.26 or as otherwise contemplated in the Transaction
Documents, there are no material transactions, agreements or
understandings, existing or presently contemplated, between or among
the Company's or any of its Subsidiaries' officers or directors or
shareholders or any of their Affiliates or associates and either the
Company or any of its Subsidiaries.
4.27. LIMITATION ON SUBSIDIARY PAYMENT RESTRICTIONS . Except as
set forth in SCHEDULE 4.27 hereto, at and as of the Closing Date, none
of the Subsidiaries will be subject to any consensual restriction or
encumbrance on the ability of any such Subsidiary (a) to pay dividends
or make any other distributions on such Subsidiary's Capital Stock to,
or pay any indebtedness owing to, or repurchase or redeem any of such
Subsidiary's Capital Stock from, the Company or any other Subsidiary of
the Company, (b) to make any loans or advances to the Company or any
other Subsidiary of the Company, or (c) to transfer any of its property
or assets to the Company or any other Subsidiary.
15
4.28. NO OTHER BUSINESS . Neither the Company nor any of its
Subsidiaries have or are engaged in any material respect in any
business other than providing services through its professional
employer organization, such as payroll and benefit administration, and
human resource compliance and management, providing other flexible
industrial staffing services consistent with past practice, such as
temporary personnel and granting and supporting franchises of the
Company's business.
4.29. COMPLIANCE WITH LAWS . The Company and its Subsidiaries are
in compliance with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority except where such
failure to comply would not have a Material Adverse Effect.
4.30. INVESTMENT COMPANY ACT . Neither the Company nor any of its
Subsidiaries are an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
4.31. PUBLIC UTILITY HOLDING COMPANY ACT . Neither the Company nor
any of its Subsidiaries are a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended.
4.32. INTERSTATE COMMERCE ACT . To the Company's knowledge,
neither the Company nor any of its Subsidiaries are or will be, a "rail
carrier," or a Person controlled by or affiliated with a "rail
carrier," within the meaning of Title 49, U.S.C. or a "carrier" or
other Person to which 49 U.S.C. Section 11301(b)(1) is applicable.
4.33. MATERIAL CONTRACTS AND OBLIGATIONS . Set out on SCHEDULE
4.33 hereto is a list of all material agreements of any nature to which
the Company or any of its Subsidiaries are a party or by which they are
bound, including without limitation (a) each agreement which requires
future expenditures by the Company or any of its Subsidiaries in excess
of $250,000, (b) all employment and consulting agreements, employee
benefit, bonus, pension, profit-sharing, stock option, stock purchase
and similar plans and arrangements, and distributor and sales
representative agreements, (c) any agreement to which any shareholder,
officer or director of the Company or any of its Subsidiaries or any
"affiliate" or "associate" of such persons (as under the Securities
Act), is presently a party, including without limitation any agreement
or other arrangement providing for the furnishing of services by,
rental of real or personal property from, or otherwise requiring
payments to, any such person or entity and (d) any agreement relating
to the Intellectual property. The Company has delivered to the
Purchaser copies of such of the foregoing as requested. The Company
and, to the best of the Company's knowledge, each other party thereto
have in all material respects performed all the obligations required to
be
16
performed by them to date, have received no notice of default and are
not in default (with due notice or lapse of time or both) under any
lease, agreement or contract described in subsections (a), (b), (c) or
(d) above or that might result in payments to the Company in excess of
$250,000, now in effect to which the Company or any subsidiary is a
party or by which it or its property may be bound. All of such
agreements and contracts are valid, binding and in full force and
effect with respect to the Company. Neither the Company nor any of its
Subsidiaries has any present expectation or intention of not fully
performing all its obligations under each such lease, contract or other
agreement, and the Company has no knowledge of any breach or
anticipated breach by the other party to any contract or commitment to
which the Company or any Subsidiary is a party.
5. REPRESENTATIONS OF THE PURCHASERS. To induce the Company to
enter into this Agreement and to sell the Notes and Warrants, each of
the Purchasers severally represent and warrant as follows:
5.1. PURCHASE FOR INVESTMENT . Such Purchaser (a) is an accredited
investor as defined in Regulation D under the Securities Act, or (b) by
reason of its business and financial experience, and the business and
financial experience of those persons, if any, retained by it to advise
it with respect to its investment in the Notes and the Warrants,
together with such advisers have such knowledge, sophistication and
experience in business and financial matters as to be capable of
evaluating the merits and risk of the prospective investment in the
Notes and Warrants. Such Purchaser is purchasing the Notes and the
Warrants for its own account or for one or more separate accounts
maintained by it or for the account of one or more institutional
investors on whose behalf such Purchaser has authority to make this
representation for investment and not with a view to the distribution
thereof in violation of the Securities Act, provided that the
disposition of such Purchaser's or such investor's property shall at
all times be within its control. Such Purchaser understands and agrees
that the Notes and the Warrants have not been registered under the
Securities Act and may be resold (which resale is not now contemplated)
only if registered pursuant to the provisions thereunder or if an
exemption from registration is available and, if requested by the
Company, accompanied by an opinion of counsel in form and substance
satisfactory to the Company.
5.2. CORPORATE AUTHORIZATION; VALIDITY AND BINDING EFFECT . Such
Purchaser has full power and authority and has taken all action necessary
to authorize it to enter into and perform its obligations under this
Agreement, the Transaction Documents and all other documents or instruments
contemplated hereby or thereby. This Agreement is the legal, valid and
binding obligation of such Purchaser, and is enforceable in accordance with
its terms, except for (a) the effect upon the Transaction Documents of
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting the rights of creditors generally and (b)
limitations imposed by a court of competent jurisdiction under general
equitable principles upon the specific enforceability of any
17
of the remedies, covenants or other provisions of this Agreement and
upon the availability of injunctive relief or other equitable remedies.
5.3. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NONCONTRAVENTION .
The execution, delivery and performance by such Purchaser of each of
the Transaction Documents to which it is a party and all other
instruments or agreements to be executed in connection herewith or
therewith, do not and will not contravene or constitute a default under
or violation of (i) any provision of applicable law or regulation of
any Governmental Authority, including, without limitation, the Foreign
Assets Control Regulations and the Cuban Assets Control Regulations,
(ii) the Charter Documents of such Purchaser, (iii) any agreement (or
require the consent of any Person under any agreement that has not been
obtained or will not be obtained prior to the Closing Date) to which
the Purchaser is a party, or (iv) any judgment, injunction, order,
decree or other instrument binding upon such Purchaser or any of its
properties, except where such contravention, default or violation would
not have a Material Adverse Effect.
5.4. BROKER'S OR FINDER'S COMMISSIONS . In addition to and not in
limitation of any other rights hereunder, such Purchaser agrees that it
will indemnify and hold harmless the Company from and against any and
all claims, demands or liabilities for broker's, finder's, placement
agent's or other similar fees or commissions and any and all
liabilities with respect to any taxes (including interest and
penalties) payable or incurred or alleged to have been incurred by such
Purchasers or any Person acting or alleged to have been acting on such
Purchasers' behalf, as applicable, in connection with this Agreement,
the issuance or sale of the Notes or the Warrants, or any other
transaction contemplated by any of the Transaction Documents.
6. TERMS OF THE NOTES; PAYMENTS AND REDEMPTION; REGISTRATION
6.1. MATURITY; PRINCIPAL AMOUNT . The aggregate principal amount
of the Notes to be issued to the Purchasers under this Agreement shall
be TWENTY-FIVE MILLION DOLLARS AND NO CENTS ($25,000,000). The Notes
shall mature and principal payments and all accrued and unpaid interest
thereon and any other payments due thereunder shall be due and payable,
without set-off, deduction or counterclaim, at the times and in the
manner set forth in the Notes.
6.2. INTEREST . The Notes shall bear interest from the date of
issuance until February 20, 1999, at a rate of eleven percent (11%) per
annum and thereafter at a rate of twelve and one-half percent (12.5%)
per annum until the Stated Maturity Date. Interest on the unpaid
principal amount of the Notes shall be computed on the basis of a
360-day year and the actual days elapsed, and shall be payable
quarterly in arrears on the last day of March, June, September, and
December of each year, commencing on March 31, 1997, and upon any other
payment of any principal amount of the Notes.
18
6.3. DEFAULT INTEREST AND LATE CHARGES . In the event that any
principal amount of the Notes is not paid within five (5) days of when
due and payable (whether at stated maturity, by acceleration or
otherwise), the interest rate on such principal amount shall,
notwithstanding anything herein to the contrary and until all principal
payments on the Notes have been brought current, thereafter be
increased by three percent (3%) per annum. To the extent legally
enforceable, any interest on any principal amount of the Notes that is
not paid when due and payable shall thereafter be paid, on demand by
the holder of such Notes for which such interest is owed, together with
interest thereon at a rate of three percent (3%) per annum in excess of
the rate set forth in Subsection 6.2.
6.4. PAYMENTS ON THE NOTES . All payments of principal and
interest on the Notes and any other payments due thereunder shall be
made by the Company, without set-off, deduction or counterclaim, to the
Purchasers (or their respective nominees) at the respective addresses
and in accordance with the instructions set forth on the Purchaser
Signature Page attached hereto, or at such other address or by such
other method as the Purchasers (or their respective nominees) or any
transferee or successor holder of the Notes shall have designated to
the Company in writing. All such payments shall be made in dollars and
in immediately available funds not later than 3:00 p.m. Boston time, on
the date such payment shall become due. Any payment received after such
time on any Business Day shall be deemed to have been received on the
next Business Day. If any payment hereunder becomes due and payable on
a day other than a Business Day, such payment shall be extended to the
next succeeding Business Day, and, with respect to payments of
principal, interest thereon shall be payable at the then applicable
rate during such extension.
6.5. OPTIONAL REDEMPTION . The Company may at any time and from
time to time redeem the then outstanding principal amount of the Notes,
in whole or in part, at the Redemption Price by giving written notice
of redemption to all holders of the Notes not less than 30 days and not
more than 60 days prior to the Redemption Date, specifying (i) the
principal amount of the Notes to be redeemed, (ii) the Redemption Date,
(iii) the accrued and unpaid interest (as of the Redemption Date)
applicable to the Notes to be redeemed and (iv) the applicable
Redemption Price. Notice of redemption having been so given, the
aggregate amount of the Redemption Price, together with all accrued and
unpaid interest, if any, to the Redemption Date applicable to the Notes
to be redeemed shall become due and payable on the Redemption Date. If
less than all of the outstanding Notes are to be redeemed on any
Redemption Date, the Company MUST redeem a PRO RATA portion of the
Notes held by each of the Purchasers as of such Redemption Date. Any
partial redemption shall be in an aggregate principal amount of at
least $1,000,000 or integral multiples of $1,000,000 in excess thereof.
The Redemption Price shall be an amount equal to the indicated
percentage of the principal amount of the Notes to be redeemed
(excluding any principal payments made pursuant to Subsection 6.1) for
the applicable period set forth below:
19
PERIOD PERCENTAGE
Closing Date through February 20, 1999 100%
February 21, 1999 through May 20, 1999 107%
May 21, 1999 through August 20, 1999 106.125%
August 21, 1999 through November 20, 1999 105.25%
November 21, 1999 through February 20, 2000 104.375%
February 21, 2000 through May 20, 2000 103.5%
May 21, 2000 through August 20, 2000 102.625%
August 21, 2000 through November 20, 2000 101.75%
November 21, 2000 through February 20, 2001 100.875%
February 21, 2001 through February 20, 2002 100%
6.6. CHANGE OF CONTROL .
(a) If there occurs a Change of Control (the date on which a
Change of Control first occurs being referred to herein as the
"Change Date"), then the Company shall notify all holders of the
Notes in writing and the Company shall promptly make an offer to
redeem the Notes (a "Change of Control Offer") at a purchase price
in cash equal to the Redemption Price, together with all accrued
and unpaid interest, if any, to the Change of Control Purchase
Date (as defined below), in accordance with the procedures set
forth in this Subsection 6.6.
(b) Promptly, and in any event within 30 days, after the
Change Date, the Company shall send by first-class mail to each
holder of Notes, a written notice stating the following, pursuant
to this Subsection 6.6:
(i) a Change of Control has occurred and the holders of
the Notes may elect to have their Notes purchased by the
Company either in whole or in part, at a purchase price in
cash equal to the Redemption Price, together with all accrued
and unpaid interest, if any, to the date of repurchase;
(ii) the repurchase date (which shall be no less than 30
days nor more than 60 days after the date such notice is
mailed) (the "Change of Control Purchase Date"), or such
other date as may be required by law;
(iii) the circumstances and relevant facts known to the
Company regarding such Change of Control (including, to the
extent applicable, information with respect to pro forma
historical income, cash flow and capitalization after giving
effect to such Change of Control) which the Company in good
faith believes will enable such holder of Notes to make an
informed decision; and
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(iv) all instructions necessary to tender the Notes
pursuant to the Change of Control Offer, together with the
information contained in paragraph (c) below.
(c) Each holder of Notes electing to have its Notes purchased
will be required to deliver to the Company, at the address
specified in the notice received by such holder from the Company,
at least three Business Days prior to the Change of Control
Purchase Date, an election form specifying the principal amount of
Notes such holder elects to have purchased. Any partial redemption
shall be in an aggregate principal amount of at least $1,000,000
or integral multiples of $1,000,000 in excess thereof. Each holder
of Notes will be entitled to withdraw its election if the Company
receives, not later than three Business Days prior to the Change
of Control Purchase Date, a facsimile transmission or letter
setting forth the name of such holder, the principal amount of
Notes which the holder had elected to have purchased and a
statement that such holder is withdrawing its election to have
such Notes purchased.
(d) On the Change of Control Purchase Date, the Company shall
pay the Redemption Price, together with all accrued and unpaid
interest, if any, to the Change of Control Purchase Date to the
holders of Notes who have elected to have their Notes purchased by
the Company under this Subsection 6.6, and upon the payment of
such purchase price and accrued interest, the holders of such
purchased Notes shall deliver such purchased Notes to the Company
for cancellation. In connection with holders whose Notes are
purchased only in part, the Company (at the Company's expense)
shall execute, authenticate and deliver to such holders new Notes
equal in principal amount to the unpurchased portion of the Notes
surrendered.
6.7. REGISTRATION AND EXCHANGE OF NOTES .
(a) The Company shall maintain, at its principal office, a
register for the Notes, in which the Company shall record the name
and address of each Person in whose name each Note has been issued
and the name and address of each transferee and prior owner of
each Note. The Company may deem and treat the Person in whose name
a Note is so registered as the holder and owner thereof for all
purposes until due presentment of such Note for registration of
transfer as provided in this Subsection 6.7.
(b) Upon surrender for exchange or registration of transfer
of any Note at the principal office of the Company, the Company
shall execute and deliver, at its expense, one or more new Notes
of any denominations (of at least $100,000 and integral multiples
of $100,000) requested by the holder of the surrendered Note, each
dated the date to which interest has been paid on the Note so
surrendered (or,
21
if no interest has been paid, the date of such surrendered Note),
but in the same aggregate unpaid principal amount as such
surrendered Note, and registered in the name of such Person or
Persons as shall be designated in writing by such holder. Every
Note surrendered for registration of transfer shall be duly
endorsed, or be accompanied by a written instrument of transfer
duly executed by the holder of such Note or by his attorney duly
authorized in writing and reasonably satisfactory to the Company
and its counsel.
(c) At the request of any holder of any Note, the Company
will issue, at its expense, in replacement of any Note or Notes
lost, stolen, damaged or destroyed, upon surrender of the
mutilated portions thereof, if any, a new Note or Notes of the
same denominations, of the same unpaid principal amounts and
otherwise of the same tenor as, the Note or Notes so lost, stolen,
damaged or destroyed. The Company may condition the replacement of
a Note reported by a holder as lost, stolen, damaged or destroyed,
upon the receipt from such holder of an indemnity or security
reasonably satisfactory to the Company and its counsel, provided
that if such holder shall be a Purchaser or its nominee or an
institutional investor or its nominee, such Purchaser's or such
institutional investor's agreement of indemnity shall be
sufficient for purposes of this paragraph (c).
7. COVENANTS OF THE COMPANY.
7.1. GENERAL COVENANTS OF THE COMPANY . The Company covenants and
agrees that so long as any Notes or Warrants shall remain outstanding:
(a) FINANCIAL STATEMENTS AND OTHER Information. The Company
shall furnish to each holder of Notes or Warrants:
(i) ANNUAL FINANCIAL STATEMENTS - as soon as available,
but in any event within 90 days after the end of each fiscal
year of the Company, an audited consolidated balance sheet of
the Company and its Subsidiaries as at the end of such year
and the related audited statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries for such year, setting forth in each case in
comparative form the figures for the previous year, all in
reasonable detail reported on without a "going concern" or
like qualification or exception, or qualification arising out
of the scope of the audit, by Deloitte & Touche LLP or other
firm of independent certified public accountants of
nationally recognized standing acceptable to the holders of
the Notes and Warrants;
(ii) MONTHLY STATEMENTS - as soon as available, but in
any event not later than 30 days after the end of each month,
excluding the last month
22
of each fiscal year of the Company, an unaudited consolidated
and consolidating balance sheet of the Company and its
Subsidiaries as at the end of each such month and the related
unaudited consolidated and consolidating statements of
income, changes in shareholders' equity and cash flows of the
Company and its Subsidiaries for such month and the portion
of the fiscal year through such date, all in reasonable
detail and setting forth in comparative form the figures for
the budget for such fiscal year and results of the
corresponding period of the previous year on an operating
unit and consolidated basis, certified by the chief financial
officer, treasurer or controller of the Company;
(iii) ANNUAL BUDGET PLAN - as soon as available, but in
any event not later than 15 days prior to the commencement of
each fiscal year, an annual budget, including monthly
consolidated and consolidating income statements, balance
sheets and cash flow statements for such fiscal year for the
Company and its Subsidiaries;
(iv) REGULATORY FILINGS - promptly after they become
available, copies of any regular and periodic financial
information, and any other information and reports, which the
Company or any of its Subsidiaries shall file with the
Commission, any state securities regulatory authority, or any
other regulatory agency;
(v) SHAREHOLDER COMMUNICATIONS - promptly upon the
mailing thereof to the shareholders of the Company generally,
copies of all financial statements, reports and proxy
statements so mailed;
(vi) PRESS RELEASES - promptly following the release by
the Company or if any of its Subsidiaries to the press of any
material statement or other written communication, a copy
thereof;
(vii) LITIGATION - promptly, and in any event within
five (5) Business Days after obtaining knowledge thereof,
notice of any (i) litigation, investigation or proceeding
which may exist at any time between the Company or any of its
Subsidiaries and any Person, which in either case, if not
cured or if adversely determined, as the case may be, could
have a Material Adverse Effect, or (ii) any judgment or
decree entered against the Company or any of its Subsidiaries
involving a liability of $100,000 or more (singly or in the
aggregate) or in which injunctive or similar relief is
granted; and
(viii)OTHER INFORMATION - promptly any other information
reasonably requested by any holder of Notes or Warrants.
23
All financial statements required to be delivered pursuant to
clause (i) and (ii) of this Subsection 7.1(a) shall be complete
and correct in all material respects (subject, in the case of
interim statements, to normal year-end audit adjustments and the
absence of footnotes) and prepared in reasonable detail and in
accordance with GAAP.
(b) INSPECTION. So long as the Purchasers hold Notes in an
aggregate principal amount of $3,000,000 or greater, the Company
shall permit each of the Purchasers (provided any such Purchaser
holds Notes in an aggregate amount of at least $1,000,000), or any
authorized representative thereof, to visit and inspect the
properties of the Company and its Subsidiaries, including their
corporate and financial records, and to discuss their businesses
and finances with officers of the Company and its Subsidiaries,
during normal business hours following reasonable notice and as
often as may be reasonably requested. Each of the Purchasers may,
at its expense, designate a third party consultant who is not a
competitor of the Company or any Subsidiary and who will be bound
by and execute standard confidentiality provisions, as its
authorized representative to inspect the Company's corporate and
financial records.
(c) PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay
or discharge or cause to be paid or discharged, before any penalty
accrues thereon, (i) all material Taxes, assessments and
governmental charges levied or imposed upon the Company or any of
its Subsidiaries upon the income, profits or property of the
Company or any of its Subsidiaries and (ii) all material lawful
claims for labor, materials and supplies which, if unpaid, would
by law become a Lien upon the property of the Company or any of
its Subsidiaries; provided that neither the Company nor any of its
Subsidiaries shall be required to pay or discharge or cause to be
paid or discharged any such amount, the applicability or validity
of which is being contested in good faith by appropriate
proceedings and for which adequate provision has been made or
where the failure to effect such payment or discharge is not
adverse in any material respect to the interests of the
Purchasers.
(d) CORPORATE EXISTENCE. The Company shall do or cause to be
done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or
other existence of each of its Subsidiaries in accordance with the
respective Charter Documents of such Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company
and each of its Subsidiaries, PROVIDED, HOWEVER, that the Company
shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any
Subsidiary, if the Board of Directors of the Company shall
determine, in the exercise of business judgment, that the
preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries
24
taken as a whole, and that the loss thereof is not adverse in any
material respect to the interests of the Purchasers.
(e) INDEMNIFICATION OF DIRECTORS; PAYMENT OF DIRECTORS'
EXPENSES. The Company shall (i) at all times maintain provisions
in its Charter Documents indemnifying all members of the Board of
Directors of the Company against liability to the maximum extent
permitted under the laws of the State of Florida, and (ii)
promptly reimburse any member of the Board of Directors of the
Company for his reasonable out-of-pocket expenses incurred in
attending each meeting of the Board of Directors of the Company or
any committee thereof.
(f) DIRECTORS AND OFFICERS LIABILITY INSURANCE. The Company
shall use its best efforts to obtain and maintain standard
directors and officers liability insurance with a financially
sound and reputable insurance company against liability under
federal and state securities laws arising out of or related to the
Company's initial public offering if the Board of Directors
determines such insurance advisable in the exercise of its prudent
business judgment, and, thereafter, standard directors and
officers liability insurance covering the members of the Board of
Directors.
(g) KEY MAN INSURANCE. The Company shall (i) use its best
efforts to obtain and maintain a life insurance policy at
reasonable premiums with a financially sound and reputable
insurance company on the life of each of Xxxx X. Xxxxxxx and Xxxxx
Money in the face value of $5,000,000, each such policy naming the
Company as owner and beneficiary thereof, (ii) not cause or permit
any assignment of the proceeds of such policy, and (iii) not
borrow against such policy.
(h) CONFLICTING AGREEMENTS. The Company shall not, and shall
not permit any of its Subsidiaries to, enter into any agreement or
instrument (other than agreements or instruments between the
Company and the holders of Senior Indebtedness) that by its terms
expressly prohibits the Company from repurchasing the Notes or the
Warrants in accordance with the terms of this Agreement or the
other Transaction Documents.
(i) BOOKS AND RECORDS. The Company shall, and shall cause
each of its Subsidiaries to, (i) keep true books of records and
accounts in which full and correct entries shall be made of all
dealings or transactions in relation to their businesses and
affairs, in accordance with GAAP and sound business practices, and
(ii) reflect in their financialstatements adequate accruals and
appropriations to reserves in accordance with GAAP.
(j) COMPLIANCE WITH LAWS. The Company shall, and shall cause
each of its Subsidiaries to, comply with all statutes, laws,
ordinances, or government
25
rules and regulations to which the Company and its Subsidiaries
are subject except where such failure to comply would not have a
Material Adverse Effect.
(k) INVESTMENT COMPANY ACT. The Company shall not become an
investment company subject to registration under the Investment
Company Act of 1940, as amended.
(l) PAYMENTS FOR CONSENTS. The Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, pay
or cause to be paid any consideration, whether by way of interest,
fee or otherwise, to any holder of Notes or Warrants for or as an
inducement to any consent, waiver or amendment of any of the terms
or provisions of this Agreement or the other Transaction Documents
unless such consideration is offered to be paid or agreed to be
paid on a pro rata basis to all holders of the Notes or Warrants
which so consent, waive or agree to amend in the time frame set
forth in solicitation documents relating to such consent, waiver
or agreement.
(m) MAINTENANCE OF PROPERTIES AND INSURANCE. The Company
shall (i) cause all material properties owned by or leased to it
or any of its Subsidiaries and used or useful in the conduct of
its business or the business of such Subsidiary to be maintained
and kept in normal condition, repair and working order and
supplied with all necessary equipment and shall cause to be made
all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times;
PROVIDED, HOWEVER, that nothing in this Subsection 7.2(m) shall
prevent the Company or any of its Subsidiaries from discontinuing
the maintenance of any such properties, if such discontinuance is
desirable in the conduct of its business or the business of such
Subsidiary, and (ii) provide or cause to be provided, for itself
and its Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily
insured against by corporations similarly situated and owning like
properties, including, but not limited to, public liability
insurance, with reputable insurers.
(n) FURTHER INSTRUMENTS AND ACTS. The Company shall, and
shall cause each of its Subsidiaries to, execute and deliver such
further instruments and do such further acts any holder of Notes
or Warrants may deem reasonably necessary or proper to carry out
more effectively the purposes of this Agreement and the other
Transaction Documents.
7.2. COVENANTS OF THE COMPANY APPLICABLE TO THE NOTES . The
Company covenants and agrees that so long as any Notes shall remain
outstanding:
26
(a) CERTIFICATES; NOTICES OF DEFAULT AND OTHER INFORMATION.
The Company shall furnish to each holder of the Notes:
(i) OFFICERS' CERTIFICATE - together with the delivery
of the financial statements referenced in clause (i) of
Subsection 7.1(a), an Officers' Certificate executed by at
least two Officers of the Company, stating whether or not
such Officers know of any Default or Event of Default,
containing a certification from the chief executive officer,
chief financial officer or principal accounting officer of
the Company as to his or her knowledge of the Company's
compliance with all conditions and covenants under this
Agreement and the other Transaction Documents (for purposes
of this clause (i) such compliance shall be determined
without regard to any period of grace or requirement of
notice provided under this Agreement), and, if such Officers
do know of such a Default or Event of Default, the
certificate shall describe any such Default or Event of
Default, and its status;
(ii) ACCOUNTANT'S STATEMENT - together with the delivery
of the financial statements referenced in clause (i) of
Subsection 7.1(a) and so long as not contrary to the then
current recommendation of the American Institute of Certified
Public Accountants, a written statement by the Company's
independent certified pubic accountants stating whether or
not, in connection with their audit, which audit was not
directed primarily toward obtaining knowledge of
noncompliance of the specified sections referred to below,
information came to their attention that caused them to
believe that the Company failed to comply with the terms,
covenants, provisions or conditions of the specified sections
of this agreement, insofar as they relate to financial and
accounting matters, which would constitute a Default if not
waived by the holders of the Notes; PROVIDED, HOWEVER, that
the independent certified public accountants delivering such
statement shall not be liable in respect of such statement by
reason of any failure to obtain knowledge of any such Default
or Event of Default that would not be disclosed in the course
of an audit conducted in accordance with generally accepted
audit standards; and
(iii) NOTICE OF DEFAULT - within five (5) Business Days
of any Officer becoming aware of (i) any Default, Event of
Default or default in the performance of any covenant,
agreement or condition contained in this Agreement, any other
Transaction Document or the Bank Credit Agreement or (ii) any
event of default under any other mortgage, indenture or
instrument, an Officers' Certificate specifying such default
or event of default and what action the Company is taking or
proposes to take with respect thereto.
27
(b) LIMITATION ON INDEBTEDNESS.
(i) Except as set forth in this Subsection 7.2(b), the
Company shall not, and shall not permit any of its
Subsidiaries to Incur, directly or indirectly, any
Indebtedness (including Acquired Indebtedness) after the
Closing Date without the consent of two-thirds-in-interest of
the holders of the Notes. For purposes of this Agreement,
Indebtedness of any Person acquired in an Asset Acquisition
that is not a Subsidiary, which Indebtedness is outstanding
at the time such Person is acquired by the Company or a
Subsidiary or becomes, or is merged into or consolidated
with, a Subsidiary, shall be deemed to have been Incurred by
the Company at the time such Acquired Person becomes, or is
merged into or consolidated with, a Subsidiary.
(ii) Notwithstanding Subsection 7(b)(i) and in addition
to Indebtedness permitted to be Incurred under Subsection
7(b)(iii), the Company or any Subsidiary may Incur
Indebtedness if, and to the extent that (i) no Default or
Event of Default shall have occurred and be continuing at the
time or as a consequence of the Incurrence of such
Indebtedness, (ii) on the date of the Incurrence of such
Indebtedness, the Total Debt to EBITDA Ratio of the Company
and its Subsidiaries at the time of such Incurrence, after
giving pro forma effect thereto, is 5.0 or less, and (iii)
such Indebtedness consists of Subordinated Indebtedness on
terms substantially equivalent to those on which the Notes
are subordinated to the Senior Indebtedness.
(iii) Notwithstanding Section 7.2(b)(i) and in addition
to Indebtedness permitted to be incurred under Section
7.2(b)(ii), the Company and its Subsidiaries may incur the
following Indebtedness:
(1) Designated Senior Debt;
(2) Indebtedness evidenced by the Notes;
(3) Indebtedness evidenced by a Put Note;
(4) Indebtedness to any Wholly Owned Subsidiary
of the Company or to any other Wholly Owned Subsidiary or
Indebtedness of any Wholly Owned Subsidiary to the Company or
any other Wholly Owned Subsidiary (provided that such
Indebtedness is at all times held by the Company or a Wholly
Owned Subsidiary of the Company); PROVIDED, HOWEVER, that for
purposes of this Subsection 7.2(b)(iii)(4), upon either (A)
the transfer or other disposition by any such Wholly Owned
Subsidiary of
28
any Indebtedness so permitted to a Person other than the
Company or another Wholly Owned Subsidiary of the Company or
(B) the issuance, sale, lease, transfer or other disposition
of shares of Capital Stock (including by consolidation or
merger) of such Wholly Owned Subsidiary to a Person other
than the Company or another such Wholly Owned Subsidiary, the
provisions of this clause (iii) shall no longer be applicable
to such Indebtedness and such Indebtedness shall be deemed to
have been Incurred by the Company at the time of such
transfer or other disposition.
(c) LIMITATION ON CERTAIN DEBT. The Company shall not Incur
or suffer to exist any Indebtedness (other than Designated Senior
Debt and the Notes and the Put Notes) that would rank subordinate
to or junior in right of payment to any other Indebtedness of the
Company, unless the Indebtedness so Incurred is either (i) Pari
Passu Indebtedness or (ii) Subordinated Indebtedness and by its
terms, or by the terms of any agreement or instrument pursuant to
which such Subordinated Indebtedness is issued, (A) such
Subordinated Indebtedness does not provide for payments of
principal of such Indebtedness at the Stated Maturity thereof or
by way of a sinking fund applicable thereto or by way of any
mandatory redemption, defeasance, retirement or repurchase thereof
by the Company (including any redemption, retirement or repurchase
which is contingent upon events or circumstances, but excluding
any retirement required by virtue of acceleration of such
Indebtedness upon an event of default thereunder), in each case
prior to the final Stated Maturity Date of the Notes and (B) such
Subordinated Indebtedness does not permit redemption or other
retirement thereof (including pursuant to an offer to purchase
made by the Company) at the option of the holder thereof prior to
the final Stated Maturity Date of the Notes, other than a
redemption or other retirement at the option of the holder of such
Subordinated Indebtedness (including pursuant to an offer to
purchase made by the Company) which is conditioned upon a Change
of Control of the Company pursuant to provisions substantially
similar to those contained in Section 6.6; PROVIDED, however, that
the foregoing limitation shall not apply to (1) distinctions
between categories of Indebtedness which exist by reason of any
Liens arising or created in respect of some but not all
Indebtedness and (2) any intercreditor agreements (to which the
Company is not a party) among different classes of creditors of
the Company.
(d) LIMITATIONS ON LIENS. The Company will not, and will not
permit any Subsidiary to, create or incur, or suffer to be
incurred or to exist, any Lien on its or their property or assets,
whether now owned or hereafter acquired, or upon any income or
profits therefrom, or transfer any property for the purpose of
subjecting the same to the payment of obligations in priority to
the payment of its or their general creditors, or acquire or agree
to acquire, or permit any Subsidiary to acquire, any property or
assets upon conditional sales agreements or other title retention
devices, except:
29
(i) Liens for property taxes and assessments or
governmental charges or levies and Liens securing claims or
demands of mechanics and materialmen, PROVIDED that payment
thereof is not at the time required by Section 7.1(c).
(ii) Liens of or resulting from any judgment or award,
the time for the appeal or petition for hearing of which
shall not have expired, or in respect of which the Company or
any Subsidiary shall at any time in good faith be prosecuting
an appeal or proceeding for a review and in respect of which
a stay of execution pending such appeal or proceeding for
review shall have been secured;
(iii) Liens incidental to the conduct of business or the
ownership of properties and assets (including Liens in
connection with worker's compensation, unemployment insurance
and other like laws, warehousemen and attorneys' liens and
statutory landlords' liens) and Liens to secure the
performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other Liens
of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money,
PROVIDED in each case, the obligation secured is not overdue,
is being contested in good faith by appropriate actions or
proceedings;
(iv) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for
rights-of-way, utilities and other similar purposes, or
zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the
activities of the Company and its Subsidiaries or which
customarily exist on properties of corporations engaged in
similar activities and similarly situated and which do not in
any event materially impair their use in the operation of the
business of the Company and Subsidiaries;
(v) Liens securing Indebtedness of a Wholly-Owned
Subsidiary to the Company or to another Subsidiary; and
(vi) Liens existing as of the date hereof and described
on Schedule 4.20 hereto.
(e) SUBSIDIARY GUARANTORS. The Company shall cause each of
its current Subsidiaries to execute this Agreement as a Guarantor
of the obligations of the Company in accordance with the terms of
Section 11 of this Agreement and shall cause any other Wholly
Owned Subsidiary created or acquired after the Closing
30
Date (each an "Additional Guarantor") to execute a Guaranty
providing that such Additional Guarantor guarantees the
obligations of the Company in accordance with the terms of Section
11 of this Agreement and that all the terms and conditions of
Section 11 applying to the Guarantors shall apply with the same
effect to such Additional Guarantor or Additional Guarantors, and
to deliver promptly copies of the Guaranty to the Purchasers,
subject to the receipt of any approval required by a Governmental
Authority, which the Company and its Subsidiaries shall use their
best efforts to obtain.
(f) LIMITATION ON RESTRICTED PAYMENTS. The Company shall not,
and shall not permit any of its Subsidiaries to, directly or
indirectly, make any Restricted Payment without the prior written
consent of the Purchasers, except (a) dividends, payments or other
distributions with respect to any Capital Stock by any Subsidiary
to the Company or to any Wholly-Owned Subsidiary of the Company,
(b) the redemption, repurchase, retirement or conversion by the
Company of the Notes and the Warrants and the Put Notes in
accordance with the terms of this Agreement, and the Warrants, (c)
additional payments required subsequent to the Closing Date with
respect to the redemption, concurrently with the Closing, of those
shares of Common Stock listed on SCHEDULE 7.2(F) attached hereto,
(d) Restricted Debt Payments or (e) payments on account of Other
Designated Debt if, and to the extent that (i) no Default or Event
of Default shall have occurred and be continuing at the time or as
a consequence of such payment of such Indebtedness, (ii) on the
date of and after giving effect to such payment, the Total Debt to
EBITDA Ratio to the Company and its Subsidiaries at the time of
such Incurrence, after giving pro forma effect thereto, is 5.5 or
less and (iii) such Indebtedness consists of Subordinated
Indebtedness on terms substantially equivalent to those on which
the Notes are subordinated to the Senior Indebtedness.
(g) LIMITATIONS ON INVESTMENTS AND TRANSACTIONS WITH
AFFILIATES.
(i) From and after the Closing Date, the Company shall
not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make any Investment or purchase or
otherwise acquire any property, plant or equipment, other
than:
(1) Permitted Investments;
(2) Investments by the Company in any of its Wholly
Owned Subsidiaries or Investments by any Wholly Owned
Subsidiary in the Company or in any other Wholly Owned
Subsidiary;
(3) Asset Acquisitions or the funding of a newly-formed
Subsidiary in anticipation of and in order to effectuate the
acquisition by such entity of
31
the Capital Stock or assets of another Person up to an
aggregate amount of $5,000,000 during the term of the Notes;
and
(4) Accounts and notes receivable if credited or
acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms.
(ii) Notwithstanding anything else contained in this
Subsection 7.2(g), the Company shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction
or series of transactions to sell, lease, transfer, exchange
or otherwise dispose of any of its properties or assets or to
purchase any property or assets from, or for the direct or
indirect benefit of, an Affiliate of the Company or of any
Subsidiary of the Company, make any Investment in or enter
into any contract, agreement, understanding, loan, advance or
guaranty with, or for the direct or indirect benefit of, an
Affiliate of the Company or of any Subsidiary of the Company
(each, including any series of transactions with one or more
Affiliates, an "Affiliate Transaction"), (i) unless such
Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Subsidiary than those that
could have been obtained at that time in a comparable
transaction by the Company or such Subsidiary with an
unrelated Person, and (ii) unless such Affiliate Transaction
has been approved by a majority of the Board of Directors who
have no direct or indirect interest in the Affiliate
Transaction or in the Affiliate that is a party to the
Affiliate Transaction, or in any other party that is an
Affiliate of any such Affiliate; PROVIDED, HOWEVER, that any
Director who is also an executive officer of the Company or
any of its Subsidiaries shall be considered an "Affiliate"
with respect to matters relating to the compensation and
indemnification of any executives or management of the
Company. The provisions of this Subsection 7.2(g) shall not
apply to any Restricted Payment that is made in compliance
with the provisions of this Agreement or any other
Transaction Document, and to transactions exclusively between
or among the Company and any Wholly Owned Subsidiary or
exclusively between or among Wholly Owned Subsidiaries
provided such transactions are not otherwise prohibited by
this Agreement.
(iii) Notwithstanding anything else contained in this
Subsection 7.2(g), the Company shall not, and shall not
permit any of its Subsidiaries to establish or alter the
compensation payable or other material terms of employment
with respect to any of the Executive Officers without the
approval of a majority of the members of the Board of
Directors who are not Executive Officers of the Company or
any of its Subsidiaries; PROVIDED, HOWEVER, that the chief
executive officer of the Company may participate
32
in such deliberations and decisions of the Board of Directors
except with respect to his or her own compensation or terms
of employment.
(h) RESTRICTIONS ON CHANGE IN CONTROL Transactions. The
Company shall not, and shall not permit any of its Subsidiaries
to, become a party to any merger, consolidation, Asset Sale or
Asset Acquisition or any other transaction resulting in a Change
in Control without the prior written consent of two-thirds
in-interest of the holders of the Notes, except that (a) any
Wholly-Owned Subsidiary may merge or consolidate with the Company
or any other Wholly Owned Subsidiary.
(i) LIMITATIONS ON ACTIONS OF SUBSIDIARIES. The Company shall
not, and shall not permit any of its Subsidiaries to, without the
prior written consent of two-thirds-in-interest of the holders of
the Notes, (i) issue, sell, transfer or otherwise dispose of any
shares of Capital Stock or other equity ownership interest of any
Subsidiary (other than to the Company or to another Wholly Owned
Subsidiary) or permit any Person (other than the Company or a
Wholly Owned Subsidiary) to own or hold any shares of Capital
Stock or other equity ownership interest of any Subsidiary or any
Lien or security interest in such shares or other equity interest.
(j) RESTRICTIONS AGAINST LIMITATIONS ON UPSTREAM PAYMENTS.
The Company will not, and will not permit any Subsidiary of the
Company, to create or otherwise cause or suffer to exist or to
become effective any Payment Restriction or other encumbrance or
restriction on the ability of any Subsidiary of the Company to (a)
pay dividends or make any other distributions on its Capital Stock
or any other interest or participation in, or measured by, its
profits owned by, or pay any Indebtedness owed to, the Company or
a Subsidiary of the Company, (b) make loans or advances to the
Company or a Subsidiary of the Company, or (c) transfer any of its
properties or assets to the Company or any Subsidiary of the
Company, except for such Payment Restrictions or encumbrances
existing under or by reasons of: (i) any instrument governing
Indebtedness of the Company or any of its Subsidiaries not
Incurred in violation of this Agreement, PROVIDED that such
Payment Restrictions or encumbrances are no more restrictive in
the aggregate with respect to such dividends and other payments
than those contained in the Bank Credit Agreement as in effect on
the Closing Date, (ii) applicable law, (iii) any instrument
governing Indebtedness or Capital Stock of a Person acquired by
the Company or any of its Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was
Incurred in contemplation of or in connection with such
acquisition), provided that such restriction is not applicable to
any Person, or the property or assets of any Person, other than
the Acquired Person, (iv) non-assignment provisions in leases
entered into in the ordinary course of business and consistent
with past practices, (v) instruments governing purchase money
Indebtedness for property acquired in the ordinary course of
business that only impose restrictions on the property so
33
acquired, (vi) any agreement for the sale or disposition of the
Capital Stock or assets of such Subsidiary, PROVIDED that such
restriction is only applicable to such Subsidiary or assets, as
applicable, (vii) Refinancing Indebtedness permitted under this
Agreement with respect to Indebtedness described in clauses (iii),
(iv) or (v), PROVIDED that the restrictions contained in the
agreements governing such Refinancing Indebtedness are no more
restrictive in the aggregate than those contained in the
instrument governing the Indebtedness being refinanced immediately
prior to such refinancing.
(k) MAINTENANCE OF OFFICE OR AGENCIES. The Company will
maintain in the City of Deerfield Beach in the State of Florida,
an office or an agency (which may be an office of any agent) where
Notes may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company in respect of
the Notes and this Agreement may be served. The Company will give
prompt written notice to the Purchasers of any change in the
location of such office or agency, provided that the Company shall
at all times maintain an office or agency within the continental
United States. If at any time the Company shall fail to furnish
the Purchasers with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the
offices of Holland & Knight LLP, One East Broward Boulevard, P.O.
Box 14070, Xxxx Xxxxxxxxxx, Xxxxxxx 00000 (P.O. Xxx 00000, Xxxx
Xxxxxxxxxx, Xxxxxxx, 33302).
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or
surrendered for any or all such purposes and may from time to time
rescind such designations; PROVIDED, HOWEVER, that no such
designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the City of
Deerfield Beach in the State of Florida, for such purposes. The
Company will give prompt written notice to the Purchasers of any
such designation or rescission and of any change in the location
of any such other office or agency.
8. DEFAULTS AND REMEDIES
8.1. EVENTS OF DEFAULT . The occurrence of any one of the
following shall constitute an "Event of Default" hereunder:
(a) The Company shall fail to pay any interest on any Note or
any Put Note when the same becomes due and payable and the
continuance of such failure for a period of ten (10) days;
(b) The Company shall fail (i) to pay any principal of, or
premium, if any, on any Note when and as the same becomes due and
payable in accordance with the terms of the Notes, acceleration,
on any Redemption Date, on any Change
34
in Control Purchase Date, or otherwise, (ii) to repurchase any
Warrants on any Optional Repurchase Date, or (iii) to pay any
principal of, or premium, if any, on any Put Note when and as the
same becomes due and payable;
(c) The Company or any of its Subsidiaries shall fail to
perform or comply with any covenant or agreement contained in this
Agreement, the Warrant or any of the other Transaction Documents
(other than the covenants referred to in paragraphs (a) or (b)
above), and such failure shall not have been cured or waived
within a period of thirty (30) days;
(d) The Company or any Subsidiary shall fail to pay the
principal of any Indebtedness of the Company or of any Subsidiary
of the Company with a principal amount then outstanding in excess
of $1,000,000, individually or in the aggregate, when the same
becomes due and payable at its Stated Maturity and such failure
shall continue after any applicable grace period specified in the
mortgage, indenture, instrument or other agreement relating to
such Indebtedness; or a default on any such Indebtedness which
results in such Indebtedness becoming due and payable prior to its
Stated Maturity;
(e) Any representation or warranty made by the Company or any
of its Subsidiaries in connection with this Agreement or any of
the other Transaction Documents or any certificate or financial
information delivered pursuant to this Agreement or any of the
other Transaction Documents shall prove to have been untrue or
incorrect in any material respect when made;
(f) The Guaranty hereunder shall terminate or otherwise
become invalid or unenforceable or the Guarantors shall fail to
comply with or perform any of their respective obligations
contained in this Agreement or any other Transaction Document
unless such failure shall not have a Material Adverse Effect;
(g) the Company or any of its Subsidiaries (A) admits in
writing its inability to pay its debts generally as they become
due, (B) commences a voluntary case or proceeding under any
Bankruptcy Law with respect to itself, (C) consents to the entry
of a judgment, decree or order for relief against it in an
involuntary case or proceeding under any Bankruptcy Law, (D)
consents to the appointment of a custodian of it or for
substantially all of its property, (E) consents to or acquiesces
in the institution of a bankruptcy or an insolvency proceeding
against it, (F) makes a general assignment for the benefit of its
creditors, or (G) takes any corporate action to authorize or
effect any of the foregoing;
(h) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any of its
Subsidiaries in an involuntary case or proceeding under any
Bankruptcy Law, which shall (A) approve as
35
properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect to the Company or any of its
Subsidiaries, (B) appoint a custodian of the Company or any of its
Subsidiaries or for substantially all of its property or (C) order
the winding-up or liquidation of its affairs; and such judgment,
decree or order shall remain unstayed and in effect for a period
of 60 consecutive days; or
(i) any judgment or decree for the payment of money in excess
of $500,000 (to the extent not covered by insurance) shall be
rendered against the Company or any of its Subsidiaries and shall
not be discharged and either (A) an enforcement proceeding shall
have been commenced by a creditor upon such judgment or decree or
(B) there shall have occurred a period of 45 days following such
judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed.
Except as otherwise provided herein, the foregoing shall
constitute Events of Default whatever the reason for any such Event of
Default and whether such Event of Default 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.
The term "Bankruptcy Law" means Xxxxx 00, Xxxxxx Xxxxxx Code, or
any similar Federal or state law for the relief of debtors. "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator,
custodian or similar official under any Bankruptcy Law.
8.2. REMEDIES ON DEFAULT, ETC . After an Event of Default has
occurred, the Company shall promptly notify all of the holders of the
Notes in writing of such occurrence. Upon the occurrence of an Event of
Default, and at any time thereafter while such Event of Default is
continuing, the holders of a majority in aggregate principal amount of
the Notes at the time outstanding, by written notice to the Company,
may declare (a "Declaration") due and payable an amount equal to all
unpaid principal of, premium, if any, and accrued interest on, all
Notes issued and outstanding (the "Default Amount"). If an Event of
Default specified in clause (g) or (h) of Subsection 8.1 occurs, the
Default Amount shall become and be immediately due and payable without
the need for any declaration or other act on the part of any of the
holders of the Notes. The holders of a majority in aggregate principal
amount of the Notes, by written notice to the Company, may rescind any
Declaration if all Events of Default then continuing (other than any
Events of Default with respect to the nonpayment of principal of or
interest on any Note which has become due solely as a result of such
Declaration) have been cured.
In addition, any holder of any of the Notes may proceed to enforce
its rights by suit in equity, action at law and/or other appropriate
means to collect the payment of principal
36
or interest on the Notes or to enforce the performance of any provision
hereunder or under the Notes or the other Transaction Documents.
The Company hereby agrees to pay on demand reasonable costs and
expenses, including without limitation reasonable attorneys' fees,
Incurred or paid by any holder of the Notes in enforcing such holders
rights upon the occurrence of an Event of Default.
No provision of this Agreement, the other Transaction Documents or
the Notes shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal and interest on the
Notes at the times, places and rates, and in the currency provided.
8.3. WAIVER OF PAST DEFAULTS . The holders of a two-thirds in
aggregate principal amount of the Notes at the time outstanding, by
notice to the Company (and without notice to any other holders of the
Notes), may waive an existing Default or Event of Default and its
consequences except (a) an Event of Default described in paragraphs (a)
or (b) of Subsection 8.1 hereof, or (b) a Default in respect of a
provision that under the terms of this Agreement cannot be amended
without the consent of each holder of Notes that is affected. Events of
Default described in paragraphs (a) or (b) of Subsection 8.1 hereof may
only be waived by holders of all of the Notes at the time outstanding.
When a Default is waived, it is deemed cured and shall cease to exist,
but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
9. RESTRICTIONS ON TRANSFER.
9.1. RESTRICTIVE LEGENDS . Except as otherwise permitted by this
Section 9, each Note and Warrant certificate (or Common Stock
certificate issued on exercise thereof or in exchange therefor) issued
pursuant to this Agreement shall be stamped or otherwise imprinted with
a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE.
SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN
ACCORDANCE WITH APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO
(i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR
37
RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM
REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED
THAT, IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE.
The Company shall maintain a copy of this Agreement and any
amendments thereto on file in its principal office, and will make
such copy available during normal business hours for inspection to
any party thereto or will provide such copy to any holder of Notes
or Warrants upon such holder's request.
Whenever the legend requirement imposed by this Subsection
9.1 shall terminate, as provided in Subsection 9.2 hereof, the
respective holders of Notes and Warrants for which such legend
requirements have terminated shall be entitled to receive from the
Company, at the Company's expense, new Notes or Warrant
certificates, as applicable, without such legend.
9.2. NOTICE OF TRANSFER; OPINIONS OF COUNSEL . The holder of
each Note or Warrant certificate bearing the restrictive legend
set forth in Subsection 9.1 above (a "Restricted Security") agrees
with respect to any transfer of such Restricted Security, upon
reasonable request from the Company to such holder, to give to the
Company (a) written information describing the transferee and the
circumstances of such transfer necessary to establish the
availability of an exemption from the registration requirements of
the Securities Act and, (b) if requested, an opinion of counsel
(at the expense of such holder), which is knowledgeable in
securities law matters (including in-house counsel), in form and
substance reasonably satisfactory to the Company and its counsel,
to the effect that the transfer of such Restricted Security may be
effected without registration of such Restricted Security under
the Securities Act. If the Company fails to request any such
information or opinion, or if for any reason the Company (after
having been furnished with the information and, if requested,
opinion requested by the Company pursuant to this Subsection 9.2)
shall fail to provide such holder within 5 days with written
notice that, in the opinion of the Company or its counsel, the
transfer may not be legally effected (the "Illegal Transfer
Notice"), such holder shall thereupon be entitled to have the
transfer of the Restricted Security registered on the books of the
Company, or its transfer agent, as the case may be. If the holder
of the Restricted Security delivers to the Company an opinion of
counsel (including in-house counsel or regular counsel to such
Purchaser or its investment adviser) in form and substance
reasonably satisfactory to the Company that subsequent transfers
of such Restricted Security will not require registration under
the Securities Act, or if the Company does not provide the holders
with an Illegal Transfer Notice as set forth above, the Company
will promptly after such contemplated transfer
38
deliver new certificates for such Restricted Security which do not
bear the Securities Act legend set forth in Subsection 9.1 above.
The restrictions imposed by this Section 9 upon the
transferability of any particular Restricted Security shall cease
and terminate when such Restricted Security has been sold pursuant
to an effective registration statement under the Securities Act or
transferred pursuant to Rule 144 promulgated under the Securities
Act. The holder of any Restricted Security as to which such
restrictions shall have terminated shall be entitled to receive
from the Company a new security of the same type but not bearing
the restrictive Securities Act legend set forth in Subsection 9.1
and not containing any other reference to the restrictions imposed
by this Subsection 9.2. Notwithstanding any of the foregoing, no
opinion of counsel will be required to be rendered pursuant to
this Subsection 9.2 with respect to the transfer of any securities
on which the restrictive legend has been removed in accordance
with this Subsection 9.2. As used in this Subsection 9.2, the term
"transfer" encompasses any sale, transfer or other disposition of
any of the Notes or Warrants referred to herein.
10. SUBORDINATION.
10.1. AGREEMENT TO SUBORDINATE . The Company agrees, and each
holder of Notes by accepting a Note agrees, any provision of this
Agreement, the Notes or the Warrants to the contrary notwithstanding,
that all Indebtedness of the Company under and in respect of the Notes,
the Put Note or this Agreement and all obligations pursuant to Section
11 hereof of the Subsidiary Guarantors (as defined in Subsection 11.1
hereof) on account of their Guaranty (as defined in Subsection 11.1
hereof) of the obligations of the Company under this Agreement or the
Notes (collectively, the "Note Indebtedness") is subordinated in right
of payment, to the extent and in the manner provided in this Section
10, to the prior payment in full in cash of the Senior Indebtedness of
the Company (it being understood and agreed that the holders of
Designated Senior Debt shall have all the rights of holders of Senior
Indebtedness under this Section 10 so long as they have any binding
commitment to lend funds to the Company under the terms of the Bank
Credit Agreement whether or not any Indebtedness is outstanding under
the Bank Credit Agreement), and that the subordination of all Note
Indebtedness pursuant to this Section 10 is for the benefit of all
holders of all Senior Indebtedness of the Company, including, without
limitation, the holders of Designated Senior Debt, who shall be deemed
third party beneficiaries of the covenants and agreements of the
Company and the holders of Notes made in this Section 10. The Company
further agrees that all Indebtedness other than the Senior Indebtedness
and the Note Indebtedness, whether outstanding on the date of this
Agreement or Incurred thereafter, shall be subordinated in right of
payment to the prior payment in full in cash of the Note Indebtedness.
10.2. LIQUIDATION; DISSOLUTION; BANKRUPTCY . Upon any distribution
of cash, securities or other property of the Company to creditors upon
any Insolvency or Liquidation Proceeding with respect to the Company,
the holders of any Senior
39
Indebtedness will be entitled to receive payment in full in cash of all
Senior Indebtedness (including Post-Petition Interest) before the
holders of the Note Indebtedness will be entitled to receive any
payment or distribution of assets of the Company or any Subsidiary
Guarantor of any kind or character, whether in cash, property, or other
securities (other than in Reorganization Securities) on account of the
Note Indebtedness and until all Senior Indebtedness is paid in full in
cash, any payment or distribution (other than in Reorganization
Securities) on account of the Note Indebtedness to which the holders of
the Note Indebtedness would be entitled shall be made to the holders of
the Senior Indebtedness on a pro rata basis. Upon any Insolvency or
Liquidation Proceeding with respect to the Company, any payment or
distribution (other than in Reorganization Securities), to which the
holders of the Note Indebtedness would be entitled on account of the
Note Indebtedness but for the provisions of this Section 10 shall be
paid by the Company or any Subsidiary Guarantor, any other Person
making such payment or distribution, or by the holders of the Note
Indebtedness if received by them, directly to the holders of the Senior
Indebtedness (pro rata to such holders on the basis of the amounts of
Senior Indebtedness held by them) or their Representative, as their
interests may appear, for application to the payment of all outstanding
Senior Indebtedness until all such Senior Indebtedness has been paid in
full in cash, after giving effect to all other payments or
distributions to, or provisions made for, holders of Senior
Indebtedness.
10.3. DEFAULT ON SENIOR INDEBTEDNESS . Neither the Company nor any
Subsidiary Guarantor shall make any payment or distribution (other than
in Reorganization Securities) on account of any of the Note
Indebtedness if (a) a default in the payment of the principal of, or
premium, if any, or interest on, or any other amount owing with respect
to any Senior Indebtedness (a "Payment Default") occurs and is
continuing, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, or (b) the Company has
received written notice (a "Payment Blockage Notice") from the holders
of Senior Indebtedness that a Nonpayment Default (as defined below) has
occurred and is continuing; PROVIDED, HOWEVER, that payments and
distributions on account of the Note Indebtedness shall resume, and,
subject to the proviso at the end of this sentence, all past due
amounts in respect of the Note Indebtedness shall be paid (i) in the
case of a Payment Default, on the date on which such default is cured
or waived or shall have ceased to exist and all Senior Indebtedness
shall have been paid in full in cash and (ii) in the case of a
Nonpayment Default, (unless on such date a Payment Default shall have
occurred and be continuing or a new Payment Blockage Notice shall have
been given with respect to a new Nonpayment Default, so long as such
Payment Blockage Notice complies with the conditions and limitations
set forth in this Subsection 10.3) on the earliest of (A) the date on
which such Nonpayment Default is cured or waived or shall have ceased
to exist, (B) 179 days after the date on which the Payment Blockage
Notice with respect to such Nonpayment Default was received by the
Company, or (C) the date on which such blockage period shall have been
terminated by written notice to the Company from the holders of the
Senior Indebtedness unless the maturity of any Senior Indebtedness has
been accelerated and the Company has defaulted with respect to the
payment of such Senior
40
Indebtedness, PROVIDED, HOWEVER, no payment of past due amounts in
respect of Note Indebtedness shall be made unless the holders of the
Note Indebtedness and the Designated Senior Debt have received written
confirmation from the Company that no event of default (as defined in
the Bank Credit Agreement) will result from such payment. During any
consecutive 365-day period, the aggregate number of days in which
payments due (including past due amounts) in respect of the Note
Indebtedness may not be made as a result of Nonpayment Defaults on
Senior Indebtedness shall not exceed 245 days and there shall be a
period of at least 120 consecutive days in each consecutive 365-day
period when payments due (including payments of past due amounts) with
respect to the Note Indebtedness are not prohibited. If the holders of
Senior Indebtedness deliver a Payment Blockage Notice in respect of any
Nonpayment Default, no Nonpayment Default that existed or was
continuing on the date of delivery of such notice shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default
shall have been waived or cured for a period of not less than 90 days.
"Nonpayment Default" means any event of default (other than a Payment
Default) under the terms of any instrument governing any Senior
Indebtedness permitting one or more holders of such Senior Indebtedness
(or a Representative on behalf of the holders thereof) to declare all
or part of such Senior Indebtedness due and payable prior to the date
on which it would otherwise become due and payable.
10.4. LIMITATIONS ON COLLECTION ACTION; ACCELERATION OF NOTE
INDEBTEDNESS . Following the occurrence of an Event of Default, the
holders of Note Indebtedness shall not take any Collection Action (as
hereinafter defined) for a period of 180 days, so long as during such
period both of the following conditions continue to be satisfied: (a)
the Company and the Subsidiary Guarantors are not permitted pursuant to
Subsection 10.3 hereof to make any payment or distribution on account
of any of the Note Indebtedness and (b) no holder of Senior
Indebtedness has taken any Collection Action If payment of the Note
Indebtedness is accelerated because of an Event of Default, the Company
shall promptly notify the holders of the Senior Indebtedness of the
acceleration. "Collection Action" means: (i) to demand or xxx for the
whole or any part of the Note Indebtedness, (ii) to initiate or
participate with others in any involuntary insolvency, bankruptcy,
receivership, custodianship, liquidation, dissolution, reorganization,
assignment for the benefit of creditors, appointment of a custodian,
receiver, trustee or other officer with similar powers or other
proceeding for the liquidation, dissolution or other winding up of the
Company or a Subsidiary Guarantor, (iii) to commence judicial
enforcement of any of the rights and remedies under this Agreement or
the Notes or applicable law with respect to any part of the Note
Indebtedness or (iv) to accelerate any part of the Note Indebtedness.
10.5. WHEN DISTRIBUTIONS MUST BE PAID OVER .
(a) If the Company or any Subsidiary Guarantor shall make any
payment or distribution on account of the Note Indebtedness at a
time when such payment
41
is prohibited by this Section 10, then and in such event the
holders of the Note Indebtedness shall hold such payment or
distribution in trust for the benefit of, and shall pay over and
deliver to, the holders of the Senior Indebtedness (pro rata as to
each of such holders on the basis of the respective amounts of
such Senior Indebtedness held by them) or their Representative, as
their respective interests may appear, for application to the
payment of all outstanding Senior Indebtedness until all such
Senior Indebtedness has been paid in full in cash, after giving
effect to all other payments or distributions to, or provisions
made for, the holders of Senior Indebtedness.
(b) Nothing contained in this Section 10 or elsewhere in this
Agreement, or in the Notes or the Warrants shall prevent (i) the
Company or any Subsidiary Guarantor, at any time except during the
pendency of any Insolvency or Liquidation Proceeding or under the
conditions described in Subsection 10.3, from making payments or
distributions on account of the Note Indebtedness or (ii) the
application or retention of such payments or distributions by the
holders of the Note Indebtedness, if, at the time of such
application by the holders of the Note Indebtedness, such
distribution would not have been prohibited by the provisions of
this Section 10.
(c) With respect to the holders of Senior Indebtedness, the
holders of the Note Indebtedness undertake to perform only such
obligations on their part as are specifically set forth in this
Section 10, and no implied covenants or obligations with respect
to any holders of Senior Indebtedness shall be read into this
Agreement against the holders of the Note Indebtedness. The
holders of the Note Indebtedness shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness, and shall
not be liable to any holders of Senior Indebtedness if the Company
or any Subsidiary Guarantor shall pay over or distribute to the
holders of the Note Indebtedness or any other Person money or
assets to which any holders of Senior Indebtedness are entitled
pursuant to this Section 10, except if such payment is made at a
time when the holders of the Note Indebtedness had knowledge that
the terms of this Section 10 prohibit such payment.
10.6. NOTICE .
(a) The holders of the Note Indebtedness shall not at any
time be charged with the knowledge of the existence of any facts
that would prohibit the making of any payment to the holders of
the Note Indebtedness under this Section 10, unless and until the
holders of the Note Indebtedness shall have received written
notice thereof from the Company, one or more holders of Senior
Indebtedness or a Representative of any holders of Senior
Indebtedness; and, prior to the receipt of any such written
notice, the holders of the Note Indebtedness shall be entitled to
assume conclusively that no such facts exist. The holders of the
Note Indebtedness shall be entitled to rely on the delivery to the
holders
42
of the Note Indebtedness of written notice by a Person
representing itself as a holder of Senior Indebtedness (or a
Representative thereof) to establish that such notice has been
given. In the event that the holders of the Note Indebtedness
determine in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution
pursuant to this Section 10, the holders of the Note Indebtedness
may request such Person to furnish evidence to the reasonable
satisfaction of the holders of the Note Indebtedness as to the
amount of Senior Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such
Person under this Section 10, and if such evidence is not
furnished, the holders of the Note Indebtedness may defer any
payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
(b) The Company shall promptly notify the holders of the Note
Indebtedness in writing of any facts it knows that would cause a
payment of principal of, or premium, if any, or interest on, the
Note Indebtedness to violate this Section 10, but failure to give
such notice shall not affect the subordination of the Note
Indebtedness to the Senior Indebtedness provided in this Section
10 or the rights of holders of such Senior Indebtedness under this
Section 10.
10.7. SUBROGATION . After all Senior Indebtedness has been paid in
full in cash and all lending commitments under the terms of the
Designated Senior Debt have been terminated until the Note Indebtedness
is paid in full, the holders of the Note Indebtedness shall be
subrogated to the rights of holders of such Senior Indebtedness to
receive distributions applicable to such Senior Indebtedness to the
extent that distributions otherwise payable to the holders of the Note
Indebtedness have been applied to the payment of such Senior
Indebtedness. A distribution made under this Section 10 to holders of
Senior Indebtedness that otherwise would have been made to the holders
of the Note Indebtedness is not, as among the Company, its creditors
other than holders of Senior Indebtedness and the holders of the Note
Indebtedness, a payment or distribution by the Company to or on account
of its Senior Indebtedness.
10.8. RELATIVE RIGHTS .
(a) The provisions of this Section 10 are and are intended solely
for the purpose of defining the relative rights of the holders of the
Note Indebtedness on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this Section 10 or
elsewhere in this Agreement or in the Notes is intended to or shall (i)
impair, as among the Company or any Subsidiary Guarantor, their
respective creditors other then holders of Senior Indebtedness and the
holders of the Note Indebtedness, the obligation of the Company or any
Subsidiary Guarantor, which is absolute and unconditional, to pay
principal of, and premium, if any, and interest in respect of, the Note
Indebtedness in accordance with its terms; (ii) affect the relative
rights of the holders
43
of the Note Indebtedness and the Company's or any Subsidiary
Guarantor's creditors other than their rights in relation to holders of
Senior Indebtedness; or (iii) prevent any holder of Note Indebtedness
from exercising its available remedies upon a Default or Event of
Default, subject to the provisions of Subsection 10.4 and the rights of
holders of Senior Indebtedness to receive payment and distributions
otherwise payable or distributable to the holders of Note Indebtedness.
(b) The failure to make a payment on account of principal of, or
premium, if any, or interest in respect of the Note Indebtedness by
reason of any provision of this Section 10 shall not be construed as
preventing the occurrence of an Event of Default under Subsection 8.1.
10.9. NO IMPAIRMENT OF SUBORDINATION .
(a) No right of any holder of Senior Indebtedness to enforce the
subordination as provided in this Section 10 shall at any time or in
any way be prejudiced or impaired by any act or failure to act by the
Company or any Subsidiary Guarantor or by any noncompliance by the
Company or any Subsidiary Guarantor with the terms, provisions and
covenants of this Agreement, the Notes, the Warrants or any other
Transaction Document or any other agreement regardless of any knowledge
thereof which any such holder may have or be otherwise charged with.
(b) Without in any way limiting Subsection 10.9(a), the holders of
any Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to any holders of Note Indebtedness, without
incurring any liabilities to any holder of Note Indebtedness and
without impairing or releasing the subordination and other benefits
provided in this Agreement or the obligations of the holders of Note
Indebtedness to the holders of such Senior Indebtedness, even if the
right of reimbursement or subrogation or other right or remedy of any
holder of Note Indebtedness is affected, impaired or extinguished
thereby, do any one or more of the following: (i) amend, renew,
exchange, extend, modify, increase or supplement in any manner such
Senior Indebtedness or any instrument evidencing or guaranty or
securing such Senior Indebtedness or any agreement under which such
Senior Indebtedness is outstanding (including, but not limited to,
changing the manner, place or terms of payment or changing or extending
the time of payment of, or renewing, exchanging, amending, increasing,
releasing, terminating or altering, (1) the terms of such Senior
Indebtedness, (2) any security for, or any guaranty of, such Senior
Indebtedness, (3) any liability of any obligor on such Senior
Indebtedness (including any guarantor) or any liability Incurred in
respect of such Senior Indebtedness); (ii) sell, exchange, release,
surrender, realize upon, enforce or otherwise deal with in any manner
and in any order any property pledged, mortgaged or otherwise securing
such Senior Indebtedness or any liability of any obligor thereon, to
such holder, or any liability incurred in respect thereof; (iii) settle
or compromise any such Senior Indebtedness or any other liability of
any obligor of such Senior Indebtedness to such holder or any security
44
therefor or any liability incurred in respect thereof and apply any
sums by whomsoever paid and however realized to any liability
(including, without limitation, payment of any of Senior Indebtedness)
in any manner or order; and (iv) release, terminate or otherwise
cancel, or fail to take or to record or otherwise perfect, for any
reason or for no reason, any Lien or security interest securing such
Senior Indebtedness by whomsoever granted, exercise or delay in or
refrain from exercising any right or remedy against any obligor or any
guarantor or any other Person, elect any remedy and otherwise deal
freely with any obligor and any security for such Senior Indebtedness
or any liability of any obligor to the holders of such Senior
Indebtedness or any liability incurred in respect of such Senior
Indebtedness.
10.10. REPRESENTATIVES OF HOLDERS OF SENIOR INDEBTEDNESS .
Whenever a distribution is to be made, or a notice given, to holders of
Senior Indebtedness, the distribution may be made and the notice given
to their Representative, if any. If any payment or distribution of the
Company's assets is required to be made to holders of any Senior
Indebtedness pursuant to this Section 10, the holders of Note
Indebtedness shall be entitled to rely upon any order or decree of any
court of competent jurisdiction, or upon any certificate of a
Representative of such Senior Indebtedness, in ascertaining the holders
of such Senior Indebtedness entitled to participate in any such payment
or distribution, the amount to be paid or distributed to holders of
such Senior Indebtedness and all other facts pertinent to such payment
or distribution or to this Section 10.
10.11. REPRESENTATIVE OF THE HOLDERS OF NOTE INDEBTEDNESS .
Whenever a notice is to be given to holders of Note Indebtedness, the
notice may be given to the Purchasers as their representatives. The
holders of Senior Indebtedness or their Representative shall be
entitled to rely upon any order or decree of any court of competent
jurisdiction, or upon any certificate of the Purchasers, in
ascertaining the holders of such Note Indebtedness entitled to any
payment or distribution and all other facts pertinent to the rights and
obligations of the holders of Note Indebtedness pursuant to this
Section 10.
10.12. PAYMENT. For all purposes of this Section 10, a "payment or
distribution on account of Note Indebtedness" shall include, without
limitation, any direct or indirect payment or distribution on account
of the purchase, prepayment, redemption, retirement, defeasance or
acquisition of any Note or Put Note, any recovery by the exercise of
any right of set-off, any direct or indirect payment of principal,
premium or interest with respect to or in connection with any mandatory
or optional redemption or purchase provisions, any direct or indirect
payment or distribution payable or distributable by reason of any other
Indebtedness being subordinated to any Note Indebtedness, and any
direct or indirect payment or recovery on any claim (including claims
for indemnification or liquidated damages) relating to or arising out
of this Agreement, any Note or Put Note, or any other Transaction
Document or any of the transactions contemplated by or referred to
therein.
45
10.13. WHEN CONSENT OF HOLDERS OF DESIGNATED SENIOR DEBT REQUIRED.
Until all Designated Senior debt is paid in full and all loan
commitments under the Bank Credit Agreement have terminated, without
the prior written consent of the Representative of the holders of
Designated Senior Debt the holders of Note Indebtedness shall not agree
to any amendment, modification or supplement to any Note or this
Agreement which (i) would alter the provisions of this Section 10 or
(ii) would otherwise have a material adverse effect on the holders of
Designated Senior Debt
11. GUARANTY.
11.1. GUARANTY .
(a) In consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to
the provisions of this Section 11, each of the Guarantors, and each
Additional Guarantor which in accordance with Subsection 7.2(e) hereof
is required to execute a Guaranty, upon execution of this Agreement
(such Guarantor and Additional Guarantors are collectively referred to
herein as the "Subsidiary Guarantors"), hereby jointly and severally
irrevocably and unconditionally guarantee (the "Guaranty") to each
holder of a Note, irrespective of the validity and enforceability of
this Agreement, the Notes or the obligations of the Company under this
Agreement or the Notes, that: (x) the principal and premium (if any) of
and interest on the Notes and related costs and expenses will be paid
in full when due, whether at the Stated Maturity Date or interest
payment date, by acceleration, call for redemption, or otherwise; (y)
all other payment obligations of the Company to the holders of the
Notes under this Agreement, the Notes or the other Transaction
Documents will be promptly paid in full, all in accordance with the
terms of this Agreement, the Notes and the other Transaction Documents;
and (z) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, they will be paid in full when
due in accordance with the terms of the extension or renewal, whether
at maturity, by acceleration, call for redemption or otherwise.
(b) Each Subsidiary Guarantor hereby jointly and severally agrees
that its payment obligations with regard to this Guaranty shall be
unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Agreement, the absence of any
action to enforce the same, any delays in obtaining or realizing upon
or failures to obtain or realize upon collateral, the recovery of any
judgment against the Company, any action to enforce the same or any
other circumstances that might otherwise constitute a legal or
equitable discharge or defense of such Subsidiary Guarantor. Each
Subsidiary Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first
against the Company or right to require the prior disposition of the
assets of the Company to meet its obligations, protest, notice and all
demands whatsoever and
46
covenants that this Guaranty will not be discharged except by complete
performance of the obligations contained in the Notes and this
Agreement.
(c) If any holder of a Note is required by any court or otherwise
to return to either the Company or any Subsidiary Guarantor, or any
custodian, trustee or similar official acting in relation to either the
Company or any Subsidiary Guarantor, any amount paid by either the
Company or such Subsidiary Guarantor to the holder of such Note, this
Guaranty, to the extent theretofore discharged, shall be reinstated in
full force and effect. Each Subsidiary Guarantor agrees that it will
not be entitled to any right of subrogation in relation to the holders
of the Notes in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. Each Subsidiary
Guarantor further agrees that, as between such Subsidiary Guarantor, on
the one hand, and the holders of the Notes on the other hand, (i) the
maturity of the obligations guaranteed hereby may be accelerated as
provided in Section 8.2 for the purposes of this Guaranty,
notwithstanding any stay, injunction or other prohibition preventing
such acceleration as to the Company of the obligations guaranteed
hereby, and (ii) in the event of any Declaration of acceleration of
those obligation as provided in Section 8.2, those obligations (whether
or not due any payable) will forthwith become due and payable by such
Subsidiary Guarantor for the purpose of this Guaranty.
(d) It is the intention of the Subsidiary Guarantors and the
Company that the obligations of the Subsidiary Guarantors hereunder shall
be in, but not in excess of, the maximum amount permitted by applicable
law. Accordingly, if the obligations in respect of the Guaranty would be
annulled, avoided or subordinated to the creditors of a Subsidiary
Guarantor by a court of competent jurisdiction in a proceeding actually
pending before such court as a result of a determination both that such
Guaranty was made before such court as a consideration and, immediately
after giving effect thereto, such Subsidiary Guarantor was insolvent or
unable to pay its debts as they mature or left with an unreasonably small
capital, then the obligations of such Subsidiary Guarantor under such
Guaranty shall be reduced by such court if and to the extent such reduction
would result in the avoidance of such annulment, avoidance or
subordination; provided, HOWEVER, that any reduction pursuant to this
paragraph shall be made in the smallest amount as is strictly necessary to
reach such result. Notwithstanding the foregoing, however, in no event
shall the obligations of any Subsidiary Guarantor under the Guaranty exceed
95% of the Consolidated Net Worth of such Subsidiary Guarantor. For
purposes of this paragraph, "fair consideration," "insolvency," "unable to
pay its debts as they mature," "unreasonably small capital" and the
effective times of reductions, if any, required by this paragraph shall be
determined in accordance with applicable law.
47
11.2. EXECUTION AND DELIVERY OF GUARANTY .
To evidence its Guaranty set forth in Subsection 11.1, each
Subsidiary Guarantor agrees that a notation of such Guaranty shall be
endorsed on each Note and that this Agreement shall be executed on
behalf of each Subsidiary Guarantor.
Each Subsidiary Guarantor agrees that its Guaranty set forth in
Subsection 11.1 shall remain in full force and effect and shall apply
to all the Notes notwithstanding any failure to endorse on each Note a
notation of such Guaranty.
The delivery of any Note shall constitute due delivery of the
Guaranty set forth in this Agreement on behalf of each Subsidiary
Guarantor.
11.3. CERTAIN BANKRUPTCY EVENTS .
Each Subsidiary Guarantor hereby covenants and agrees that in the
event of the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company, such Subsidiary Guarantor shall not file
(or join in any filing of), or otherwise seek to participate in the
filing of, any motion or request seeking to stay or to prohibit (even
temporarily) execution of the Guaranty and hereby waives and agrees not
to take the benefits of any such stay of execution, whether under
Section 362 or 105 of the United States Bankruptcy Code or otherwise.
11.4. RELEASE OF GUARANTOR .
Concurrently with any sale or other disposition of all or
substantially all of the assets of any Subsidiary Guarantor by way of
merger, consolidation or otherwise, or a sale or other disposition by
way of such merger, consolidation or otherwise of all the Capital Stock
of such Subsidiary Guarantor, in each case where such sale,
consolidation, merger or other disposition is not prohibited by
Subsection 7.2(h), then such Subsidiary Guarantor, and the person
acquiring the Capital Stock or the assets of such Subsidiary Guarantor,
shall be automatically and unconditionally released and discharged from
all obligations under the Guaranty, this Section 11 and this Agreement
without any further action required on the part of the holders of the
Notes.
12. DEFINITIONS.
As used herein the following terms have the following respective
meanings:
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at
the time such Person becomes a Subsidiary (or such Person is merged
into the Company or a Subsidiary) or assumed in connection with the
acquisition of properties or assets from
48
any such Person and not incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary or such
acquisition, merger or consolidation.
"AFFILIATE" except as otherwise defined in this Agreement, means with
respect to any Person, any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) (i) who holds more than 10% of the
outstanding capital stock of such Person, or (ii) directly or indirectly
controlling or controlled by or under common control with such Person, PROVIDED
that, for purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"AGREEMENT" means this Agreement, as amended, modified or supplemented
from time to time, together with any exhibits, schedules or other attachments
thereto.
"AGREEMENT AMONG SHAREHOLDERS AND INVESTORS" means that certain
Agreement among Shareholders and Investors, dated February 21, 1997, by and
among the Company, each of its current shareholders and each of the holders of
the Warrants.
"ASSET ACQUISITION" means (i) an Investment by the Company or any
Subsidiary in any other Person pursuant to which such Person shall become a
Subsidiary of the Company or of any Subsidiary of the Company, or shall be
merged with or into the Company or any Subsidiary, or (ii) the acquisition by
the Company or any Subsidiary of the assets of any Person which constitute all
or substantially all of the assets of such Person, any division or line of
business of such Person or any other properties or assets of such Person other
than in the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other disposition by the Company or by any of its
Subsidiaries (including any sale and leaseback transaction) to any Person other
than to the Company or to a direct or indirect Wholly Owned Subsidiary of the
Company of (i) any Capital Stock of any Subsidiary of the Company or (ii) any
other property or assets of the Company or of any Subsidiary of the Company,
other than with respect to this clause (ii) any such sale, conveyance, transfer,
lease, assignment or other disposition of inventory or obsolete equipment in the
ordinary course of business; PROVIDED, however, that Asset Sales shall not
include (i) a transaction or series of related transactions for which the
Company or its Subsidiaries receive aggregate consideration of less than
$1,000,000.
49
"BANK CREDIT AGREEMENT" means (i) the Credit Agreement, dated as of
February 21, 1997, by and among the Company, Bank of Boston Connecticut, as
agent, and the lenders party thereto (ii) each instrument pursuant to which
obligations under the Bank Credit Agreement described in (i) above, or any
subsequent Bank Credit Agreement, is amended, deferred, extended, renewed,
replaced, refunded or refinanced, in whole or in part, and (iii) each instrument
now or hereafter evidencing, governing, guarantying or securing the Designated
Senior Debt under any such Bank Credit Agreement, as modified, amended, restated
or supplemented from time to time.
"BENEFICIAL OWNER" has the meaning ascribed thereto in Rules 13d-3 and
13d-5 promulgated by the Commission under the Exchange Act, except that a person
shall be deemed to be the beneficial owner of all shares that such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time; and the terms "beneficial ownership" and
"beneficially owns" have meanings correlative to the foregoing.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"BUSINESS DAY" means any day other than a day on which banks are
authorized or required to be closed in the State of New York.
"CAPITAL LEASE OBLIGATIONS" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; 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" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights, warrants or options exchangeable
for or convertible into such capital stock.
"CASH EQUIVALENTS" means: (i) marketable obligations issued or
unconditionally guaranteed by the United States government, in each case
maturing within 360 days after the date of acquisition thereof; (ii) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 360 days after the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc.; (iii) commercial paper maturing
no more than 360 days after the date of acquisition thereof, issued by a
corporation
50
organized under the laws of any state of the United States or of the District of
Columbia and, at the time of acquisition, having a rating in one of the two
highest rating categories obtainable from either Standard & Poor's Corporation
or Xxxxx'x Investors Service, Inc.; (iv) money market funds whose investments
are made solely in securities described in clause (i) maturing within one (1)
year after the date of acquisition thereof; (v) certificates of deposit maturing
within 360 days after the date of acquisition thereof, issued by any commercial
bank that is a member of the Federal Reserve System that has capital, surplus
and undivided profits (as shown on its most recent statement of condition)
aggregating not less than $100,000,000 and is rated A or better by Xxxxx'x
Investors Service, Inc. or Standard & Poor's Corporation; and (vi) repurchase
agreements entered into with any commercial bank of the nature referred to in
clause (i), secured by a fully perfected Lien in any obligation of the type
described in any of clauses (i) through (v), having a fair market value at the
time such repurchase agreement is entered into of not less than 100% of the
repurchase obligation thereunder of such commercial bank.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events (whether or not approved by the Board of Directors of the
Company): (i) if any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), is or becomes the "beneficial owner,"
directly or indirectly, of more than 30% of the total voting power of the Voting
Stock of the Company; (ii) the direct or indirect sale, lease, exchange or other
transfer of all or substantially all of the assets of the Company and its
subsidiaries (determined on a consolidated basis) in one transaction or a series
of transactions to any "person" (as such term is used in Section 13(d) or 14(d)
of the Exchange Act), provided that the foregoing shall not apply to the
granting of Liens on such assets to the extent permitted by this Agreement;
(iii) the Company consolidates with or merges with or into another Person or any
Person consolidates with, or merges with or into, the Company (in each case,
whether or not in compliance with the terms of this Agreement), in any such
event pursuant to a transaction in which immediately after the consummation
thereof the shareholders of the Company immediately prior to the consummation of
the transaction shall cease to have the power, directly or indirectly (including
by way of a general partnership interest), to vote or direct the voting of
securities having in the aggregate at least a majority of the ordinary voting
power for the election of the directors of the Company; (iv) the Company or any
of its Subsidiaries, directly or indirectly, sells, assigns, conveys, transfers,
leases or otherwise disposes of, in one transaction or a series of related
transactions, all or substantially all of the property or assets of the Company
and its Subsidiaries (determined on a consolidated basis) to any Person or group
(other than a Wholly Owned Subsidiary of the Company) of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group of Persons"); (v) the
adoption of any plan of liquidation or dissolution of the Company (whether or
not in compliance with the provisions of this Agreement); or (vi) the first day
on which a majority of the members of the Board of Directors of the Company are
not Continuing Directors. For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the
51
properties and assets of the Company shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
Notwithstanding the foregoing, no Change of Control shall be deemed to have
occurred by virtue of (i) the Company or any of its employee benefit or stock
plans filing (or being required to file after the lapse of time) a Schedule 13D
or 14D-1 (or any successor or similar schedule, form or report under the
Exchange Act), or (ii) the purchase by one or more underwriters of Common Stock
of the Company pursuant to a firm commitment underwriting in connection with a
public offering of such Common Stock.
"CODE" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, as amended from time to time.
"COMMISSION" means the United States Securities and Exchange Commission
or any other Federal agency at the time administering the Securities Act, the
Exchange Act and other Securities laws.
"COMMON STOCK" means the Company's Common Stock, par value $0.001 per
share, and any capital stock of any class of the Company hereafter authorized
which is not limited to a fixed sum or percentage of par, stated or liquidation
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company
"COMPANY" has the meaning ascribed thereto in the introduction hereof.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person, for
any period, the aggregate amount, to the extent such amount was deducted in
computing Consolidated Net Income, of interest (without deduction of interest
income), whether expensed or capitalized, paid, accrued or scheduled to be paid
or accrued during such period (except to the extent accrued in a prior period)
in respect of all Indebtedness of such Person and its subsidiaries (including,
without duplication, (a) original issue discount on any Indebtedness to the
extent attributable to such period), net cash gain or loss under all Interest
Swap Obligations (including amortization of fees); (b) all capitalized interest;
(c) interest paid by the borrower during such period on debt which is guaranteed
by such Person, and (d) the interest portion of any deferred payment obligations
for such period. For purposes of this definition, (a) interest on a Capital
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Board of Directors of such Person (as evidenced by a
resolution of such Board of Directors) to be the rate of interest implicit in
such Capital Lease Obligation in accordance with GAAP, and (b) interest shall be
increased or reduced by the net cost (including amortization of discount) or
benefit associated with Interest Rate or Currency Protection Agreements
attributable to such period.
52
"CONSOLIDATED NET INCOME," with respect to any Person, for any period,
means the aggregate of the net income (or loss) of such Person and its
subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that (a) the net income of any other Person in which such
Person or any of its subsidiaries has an interest (which interest does not cause
the net income of such other Person to be consolidated with the net income of
such Person and its subsidiaries in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions actually paid to such
Person or such subsidiary by such other Person in such period; (b) the net
income of any subsidiary of such Person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction actually
prevented the payment of an amount that otherwise could have been paid to, or
received by, such Person or a subsidiary of such Person not subject to any
Payment Restriction, and (c) there shall be excluded the following: (i) such
Person's share, determined in accordance with GAAP, of the net loss of any other
Person in which such Person or any of its subsidiaries has an interest (which
interest does not cause the net loss of such other person to be consolidated
with the net income or loss of such Person and its subsidiaries in accordance
with GAAP), (ii) the net income (or loss) of any other Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition, (iii) all gains realized upon or in connection with or as a
consequence of the issuance of the Capital Stock of such Person or any of its
subsidiaries and any gains on pension reversions received by such Person or any
of its subsidiaries, (iv) all gains and losses, together with any related
provision for taxes, realized in connection with any sale of assets by such
Person during such period (including, without limitation, dispositions pursuant
to sale and leaseback transactions), (v) all extraordinary gains or losses,
together with any related provision for taxes, realized by such Person during
such period, and (vi) the cumulative effect of a change in accounting principles
in the year of adoption of such change.
"CONTINUING DIRECTOR" means, as of the date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date hereof or (ii) was nominated for election or
elected to such Board of Directors subsequent to such date with the affirmative
vote of a majority of the Continuing Directors who were members of such Board at
the time of such election or nomination.
"DEFAULT" means any event which is, or after notice or passage of time,
or both, would be, an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) the Indebtedness outstanding under
the Bank Credit Agreement up to a maximum principal amount of $45,000,000 and
(ii) any interest, penalties, fees, indemnifications, reimbursements, damages
and other similar charges (including, but not limited to, all fees and expenses
of counsel and all other charges, fees and expenses) payable under the Bank
Credit Agreement.
53
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event (other than an event
which would constitute a Change of Control), (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof (except upon the occurrence of a Change
of Control), in whole or in part, on or prior to the Stated Maturity Date of the
Notes or (ii) is convertible into or exchangeable for (whether at the option of
the issuer or the holder thereof) (a) debt securities or (b) any Capital Stock
referred to in (i) above, in each case at any time prior to the Stated Maturity
Date of the Notes; provided, that only a portion of Capital Stock which so
matures or is mandatorily redeemable, is so convertible or exchangeable or is so
redeemable at the option of the holder thereof prior to such Stated Maturity
Date shall be deemed to be Disqualified Capital Stock.
"EBITDA" means, with respect to any period, the Consolidated Net Income
of the Company and its Subsidiaries for such period, plus, to the extent that
any of the following shall have been taken into account, in computing such
Consolidated Net Income (a) provision for taxes based on income or profits
(other than income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or dispositions of assets outside
the ordinary course of business), (b) Consolidated Interest Expense for such
period, (c) depreciation and amortization, and (d) other non-cash items (other
than non-cash interest) reducing Consolidated Net Income, other than any
non-cash item which requires the accrual of or a reserve for cash charges for
any future period, less other non-cash items increasing Consolidated Net Income.
"ENVIRONMENT" means soil, surface waters, groundwaters, land, stream
sediments, surface or subsurface strata and ambient air.
"ENVIRONMENTAL LAW(S)" means and includes any environmental or health
and safety-related law, regulation, rule, ordinance, or legally enforceable
requirement at the foreign, Federal, state, or local level.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, as amended from time to time.
"ESCROW AGENT" shall mean State Street Bank and Trust Company of
Connecticut, National Association, as escrow agent pursuant to the terms of the
Escrow Agreement.
"ESCROW AGREEMENT" shall mean that certain escrow agreement, dated as
of the Closing Date, by and among the Escrow Agent, the Company, the Purchasers
and certain shareholders of the Company.
54
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"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).
"EXECUTIVE OFFICERS" means as of a given date the chief executive
officer, the chief financial officer, any executive vice president and any
divisional president of the Company.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination; provided, however, that these definitions and all ratios and
calculations contained in any covenants set forth in this Agreement shall be
determined in accordance with GAAP as in effect and applied by the Company on
the Issue Date, consistently applied.
"GOVERNMENTAL AUTHORITY" means any governmental or quasi-governmental
authority including, without limitation, any federal, state, territorial,
county, municipal or other governmental or quasi-governmental agency, board,
branch, bureau, commission, court, department or other instrumentality or
political unit or subdivision, whether domestic or foreign.
"GUARANTOR(S)" means each Subsidiary guarantying the Company's
obligations under the Notes.
"HAZARDOUS MATERIALS" means and includes any hazardous waste, hazardous
material, hazardous substance, petroleum product, oil, toxic substance,
pollutant, contaminant, or other human health or safety, as defined or regulated
under any Environmental Law.
"HAZARDOUS WASTE" means and includes any hazardous waste as defined or
regulated under any Environmental Law.
"INCURRENCE" means the incurrence, creation, assumption, issuance,
guaranty of the payment of, or in any other manner becoming liable with respect
to, the payment of, any Indebtedness. "INCUR" and "INCURRED" shall have a
comparable meaning.
55
"INDEBTEDNESS" means, with respect to any Person, without duplication,
(i) the principal of and premium (if any) in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments (including purchase money
obligations) for 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 (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance,
securities purchase facility or similar credit transaction (other than
obligations with respect to stand-by letters of credit securing obligations
(other than obligations described in (i) through (iii) above) entered into in
the ordinary course of business of such Person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the second business day following receipt by such
Person of a demand for reimbursement following payment on the letter of credit);
(v) all Indebtedness of others (including all dividends of other Persons for the
payment of which is) guaranteed, directly or indirectly, by such Person or that
is otherwise its legal liability or which such Person has agreed to purchase or
repurchase or in respect of which such Person has agreed contingently to supply
or advance funds; (vi) net liabilities of such Person under Interest Rate or
Currency Protection Agreements; (vii) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on any asset or property (including,
without limitation, leasehold interests and any other tangible or intangible
property) of such Person, whether or not such Indebtedness is assumed by such
Person or is not otherwise such Person's legal liability; PROVIDED that if the
Obligations so secured have not been assumed by such Person or are otherwise not
such Person's legal liability, the amount of such Indebtedness for the purposes
of this definition shall be limited to the lesser of the amount of such
Indebtedness secured by such Lien; (viii) the repurchase price of all Redeemable
Stock of such Person (calculated at the maximum price, if variable), plus all
accrued and unpaid dividends; (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends which do not increase the liquidation preference, if any; PROVIDED,
HOWEVER, that Indebtedness will not include endorsements of negotiable
instruments for collection in the ordinary course of business. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to the Agreement and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value shall be determined reasonably and in good faith by the board of
directors of the issuer of such Disqualified Capital Stock. The amount of
Indebtedness of any Person at
56
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date; PROVIDED that the amount outstanding at any time of any Indebtedness
issued with original issue discount is the full amount of such Indebtedness; and
(x) Redeemable Stock of such Person; PROVIDED, HOWEVER, that Indebtedness will
not include endorsements of negotiable instruments for collection in the
ordinary course of business.
"INDEPENDENT FINANCIAL ADVISOR" means a reputable accounting, appraisal
or a nationally recognized investment banking firm that is, in the reasonable
judgment of the Board of Directors of the Company, qualified to perform the task
for which such firm has been engaged hereunder and disinterested and independent
with respect to the Company and its Affiliates.
"INSOLVENCY OR LIQUIDATION PROCEEDING" means, with respect to any
Person, (i) any insolvency or bankruptcy or similar case or proceeding, or any
reorganization, receivership, liquidation, dissolution or winding up of such
Person, whether voluntary or involuntary, or (ii) any assignment for the benefit
of creditors or any other marshaling of assets and liabilities of such Person.
"INTEREST RATE OR CURRENCY PROTECTION AGREEMENT" means any interest
rate swap agreement, interest rate cap agreement, currency swap agreement or
other financial agreement or arrangement designed to protect the Company or any
Subsidiary against fluctuations in interest rates or currency exchange rates and
which shall have a notional amount no greater than the payments due with respect
to Indebtedness being hedged thereby.
"INTELLECTUAL PROPERTY" means, collectively, patents, patent
applications, copyrights, trade secrets, trademarks, trademark registrations and
applications, service marks, service xxxx registrations and applications, trade
names, manufacturing processes, formulae, know how and any and all other
proprietary rights.
"INVESTMENT" by any Person means any direct or indirect (i) loan,
advance (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the books of such Person) or other
extension of credit or capital contribution (by means of transfers of cash or
other property (valued at the fair market value thereof as of the date of
transfer) to any other Person or payments for property or services for the
account or use of any other Person, or otherwise); (ii) purchase or acquisition
of Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by any other Person (whether by merger, consolidation,
amalgamation or otherwise and whether or not purchased directly from the issuer
of such securities or evidences of Indebtedness); (iii) assumption of any
Indebtedness or any other obligation of any other Person (except for an
assumption of Indebtedness for which the assuming
57
Person receives consideration at the time of such assumption in the form of
property or assets with a fair market value at least equal to the principal
amount of the Indebtedness assumed); and (iv) all other items that would be
classified as investments
"IRS" means the Internal Revenue Service or any successor agency.
"KEY EMPLOYEE" means any employee of the Company or any of its
Subsidiaries with the exception of clerical or administrative personnel.
"KNOWLEDGE" means to the knowledge of any of the Executive Officers of
the Company.
"LIEN" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction other than to reflect ownership by a
third party of property leased to the referent Person or any of its Subsidiaries
under a lease that is not in the nature of a conditional sale or title retention
agreement).
"OBLIGATIONS" with respect to any instrument governing Indebtedness
means any and all principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other charges, obligations and liabilities existing
on the date of this Agreement or arising from time to time thereafter under such
instrument, whether direct or indirect, joint or several, actual, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, including any
obligations or liabilities to repay, redeem, repurchase, retire, acquire or
defease any such Indebtedness, or any obligation to establish a sinking fund for
any such purpose.
"OFFICER" means, with respect to any corporation, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer or the Secretary of such corporation.
"OFFICERS' CERTIFICATE" means a certificate executed on behalf of the
Company or any Subsidiary, as applicable, by (a) the Chairman of the Board of
Directors (if an officer) or the President or one of the Vice Presidents of the
Company or such subsidiary and (b) the Treasurer or one of the Assistant
Treasurers or the Secretary or one of the Assistant Secretaries of the Company
or such Subsidiary.
58
"OPTIONAL REPURCHASE DATE" means each date on which the Company shall
be obligated under the terms of the Warrants to repurchase any of the Warrants
pursuant to an exercise by any holder of Warrants of a right to require the
repurchase any of such Warrants, as set forth in the Warrant.
"OTHER DESIGNATED DEBT" means Indebtedness of the Company listed on
SCHEDULE 12.1 attached hereto provided that such indebtedness is at all times in
the form as of the Closing Date without any amendments, waivers, refinancings or
other similar change not consented to by two-thirds-in-interest of the Notes.
"PARI PASSU," when used with respect to the Indebtedness ranking of any
Indebtedness of any Person in relation to other Indebtedness of such Person,
means that each such Indebtedness (a) either (i) is not subordinated or junior
in right of payment to any other Indebtedness of such Person or (ii) is
subordinate in right of payment to the same Indebtedness of such Person as is
the other and is so subordinate to the same extent and (b) is not subordinate in
right of payment to the other or to any Indebtedness of such Person as to which
the other is not so subordinate.
"PARI PASSU DEBT" means any Indebtedness of the Company or a
Subsidiary, as the case may be, whether outstanding at the Issue Date or
incurred thereafter, which (a) ranks PARI PASSU with the Notes and (b) by its
terms, or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, (i) does not provide for payments of principal of such
Indebtedness at the final Stated Maturity Date thereof or by way of a sinking
fund applicable thereto or by way of any mandatory redemption, retirement or
repurchase thereof by the Company or such Subsidiary (including any redemption,
retirement or repurchase which is contingent upon events or circumstances, but
excluding any retirement required by virtue of acceleration of such Indebtedness
upon an event of default thereunder), in each case prior to the final Stated
Maturity Date of the Notes and (ii) does not permit redemption or other
retirement (including pursuant to an offer to purchase made by the issuer) of
such other Indebtedness at the option of the holder thereof prior to the final
Stated Maturity Date of the Notes, other than a redemption or other retirement
at the option of the holder of such Indebtedness (including pursuant to an offer
to purchase made by the issuer) which is conditioned upon the change of control
of the Company pursuant to provisions substantially similar to those contained
in Section 6.6 hereof.
"PAYMENT RESTRICTION" means, with respect to a subsidiary of any
Person, any encumbrance, restriction or limitation, whether by operation of the
terms of its charter or by reason of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation, on the ability of (i)
such subsidiary to (a) pay dividends or make other distributions on its Capital
Stock or make payments on any obligation, liability or Indebtedness owed to such
Person or any other subsidiary of such Person, (b) make loans or advances to
such Person or any other subsidiary of such Person, or (c) transfer any of its
properties or assets to such Person or any other subsidiary of such Person, or
(ii) such
59
Person or any other subsidiary of such Person to receive or retain any such (a)
dividends, distributions or payments, (b) loans or advances, or (c) transfer of
properties or assets.
"PERMITTED INVESTMENTS" means: (i) certificates of deposit with a
maturity of one year or less issued by U.S. commercial banks having capital and
surplus in exams of $100.0 million; (ii) commercial paper with a minimum rating
of Al and/or Pl by Standard & Poor's Corporation and/or Moodys Investors
Service, Inc., respectively; (iii) direct obligations of the United States or of
a United States agency with a maturity of one year or less; (iv) shares of money
market mutual or similar funds having assets in excess of $100.0 million; and
(v) Investments by the Company in Wholly-Owned Subsidiaries.
"PERMITTED LIENS" means, with respect to any Person, (i) pledges or
deposits by such Person under workmen's compensation laws, unemployment
insurance laws or similar social security legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness), utility services or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or deposits of
cash or U.S. Government bonds to secure surety or appeal bonds to which such
Person is a party, or deposits as security for contested taxes or import duties
or for the payment of rent and incurred in the ordinary course of such Person's
business; (ii) Liens determined by law, such as carriers', warehousemen's,
mechanics' and bankers' Liens and incurred in the ordinary course of such
Person's business; (iii) Liens for taxes not yet subject to penalties for
non-payment or which are being contested in good faith and by appropriate
proceedings, if adequate reserve, as may be required by GAAP, shall have been
made therefor; (iv) Liens in favor of issuers of surety bonds (other than to
satisfy any judgment or judgments) issued pursuant to the request of and for the
account of such Person in the ordinary course of its business; and (v) survey
exceptions, encumbrances, easements or reservations of, or rights of others for,
rights-of-way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of real
properties or Liens incidental to the conduct of the business of such Person or
to the ownership of its properties and incurred in the ordinary course of such
Person's business.
"PERSON" means any natural person, sole proprietorship, partnership,
joint venture, trust, incorporated organization, limited liability company,
association, corporation, institution, public benefit corporation, entity or
government body (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, commission
or department thereof).
"POST-PETITION INTEREST" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument creating,
evidencing or governing such Indebtedness,
60
whether or not, pursuant to applicable law or otherwise, the claim for such
interest is allowed as a claim in such Insolvency or Liquidation Proceeding.
"PURCHASERS" except as defined elsewhere in this Agreement, has the
meaning ascribed thereto in the introduction hereof.
"PURCHASERS' SPECIAL COUNSEL" means Xxxxxxx, Procter & Xxxx LLP, a
limited liability partnership including professional corporations, acting as
special counsel to certain of the Purchasers in connection with the transactions
contemplated hereunder.
"PUT NOTE" means any promissory note issued by the Company in
connection with the exercise by any holder of Warrants of a right to require the
repurchase any of such Warrants, as set forth in the Warrant.
"REDEEMABLE STOCK" means any Capital Stock that by its terms or
otherwise is required to be redeemed prior to the first anniversary of the
Stated Maturity Date of the Notes or is redeemable at the option of the holder
thereof any time prior to the first anniversary of the Stated Maturity Date of
the Notes.
"REDEMPTION DATE" or "REDEMPTION DATE" means the Stated Maturity Date
of the Notes and such earlier date or dates as may be specified in any notice of
optional redemption of the Company delivered in accordance with Subsection 6.5
hereof.
"REFINANCING INDEBTEDNESS" means Indebtedness of the Company or any of
its Subsidiaries Incurred or given in exchange for, or the proceeds of which are
used to, extend, refinance, renew, replace, substitute, defease or refund any
other Indebtedness of the Company or any of its Subsidiaries (and related
interest, premium, penalties, breakage costs, fees, expenses and other amounts
owing in respect of such Indebtedness) Incurred in accordance with the terms of
this Agreement.
"REGISTRATION STATEMENT" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"RELEASE" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the Environment.
"REORGANIZATION SECURITIES" means Capital Stock, notes or other
securities of the Company (or Capital Stock, notes or any other securities of
any other Person (other than a Subsidiary of the Company, unless the Company is
no longer in existence and such
61
Subsidiary is the successor to the Company)), and the payment of all of which
Capital Stock, notes or other securities is subordinated, at least to the same
extent as the Notes, to the payment of all outstanding Senior Indebtedness.
"REPRESENTATIVE" means, with respect to the Senior Indebtedness, the
agent or other representative(s), if any, of holders of such Senior
Indebtedness.
"RESTRICTED DEBT PAYMENT" means all payments with respect to principal,
interest, premium and other obligations with respect to (i) Other Designated
Debt or (ii) Subordinated Indebtedness outstanding on the Date of Issuance or
incurred after the date hereof in compliance with Section 7.2(b)(ii).
"RESTRICTED PAYMENT" means, with respect to any Person, without
duplication: (i) any dividend or other distribution, whether in cash or in
property or securities, declared or paid on any shares of such Person's Capital
Stock, or the making by such Person or any of its subsidiaries of any other
distribution in respect of such Person's Capital Stock or any warrants, rights
or options to purchase or acquire shares of any class of such Capital Stock;
(ii) the redemption, repurchase, retirement or other acquisition for value by
such Person or any of its subsidiaries, directly or indirectly, of such person's
Capital Stock; (iii) any Restricted Debt Payment; or (iv) any Investment other
than Permitted Investments.
"RULE 144" means Rule 144 as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
"RULE 144A" means Rule 144A as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
"SECURITIES ACT" means the Securities Act of 1933, and the rules and
regulations of the Commission promulgated thereunder, as amended.
"SENIOR INDEBTEDNESS" means and includes all principal of, premium and
interest (including Post-Petition Interest) on and other Obligations with
respect to (i) Designated Senior Debt and (ii) any other Indebtedness of the
Company (other than as otherwise provided in this definition), Incurred by the
Company with the prior written consent of two-thirds-in-interest of the holders
of the Notes, provided, HOWEVER, that the following shall not constitute Senior
Indebtedness: (A) any Indebtedness which by the terms of the instrument creating
or evidencing the same is PARI PASSU, subordinated or junior in right of payment
to the Notes in any respect, (B) that portion of any Indebtedness Incurred in
violation of this Agreement or any covenant contained herein, (C) any Preferred
Stock, (D) any Indebtedness of the Company which is subordinated to or junior in
right of payment in any respect to any other Indebtedness of the Company, (E)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee
62
of the Company or any Subsidiary (including, without limitation, amounts owed
for compensation), (F) Indebtedness represented by Disqualified Capital Stock or
(G) Other Designated Debt. Notwithstanding the foregoing, "Senior Indebtedness"
shall not include (1) Indebtedness evidenced by the Notes, (2) Indebtedness
which when incurred and without respect to any election under Section 1111(b) of
Xxxxx 00, Xxxxxx Xxxxxx Code, is without recourse to the Company, (3) any
liability for foreign, federal, state, local or other taxes owed or owing by the
Company, (4) Indebtedness of the Company to the extent such liability
constitutes Indebtedness to a Subsidiary or any other Affiliate of the Company
or any of such Affiliate's subsidiaries, (5) Indebtedness for the purchase of
goods or materials in the ordinary course of business or (6) Indebtedness owed
by the Company for compensation to employees or for services.
"STATED MATURITY" means, with respect to any security, the date
specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"STATED MATURITY DATE" means, with respect to the Notes, February 20,
2002.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company which is
subordinated or junior in right of payment to the Notes.
"SUBSIDIARY" means with respect to any Person, any corporation,
association or other business entity of which securities representing more than
50% of the combined voting power of the total Voting Stock (or in the case of an
association or other business entity which is not a corporation, more than 50%
of the equity interest) is at the time owned or controlled, directly or
indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof. When used herein without reference to any Person,
Subsidiary means a Subsidiary of the Company.
"THREAT OF RELEASE" means a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the Environment which may
result from such Release.
"TOTAL DEBT TO EBITDA RATIO" means, with respect to any date, the ratio
of (a) the aggregate amount of all outstanding Indebtedness of the Company and
its Subsidiaries as of the Transaction Date (as defined below) on a consolidated
basis during the four full fiscal quarters for which financial information is
available (the "Four Quarter Period") ending on or prior to the date of the
transaction or event giving rise to the need to calculate the Total Debt to
EBITDA Ratio (the "Transaction Date") (but in no event ending more than 135 days
prior to the date of such transaction or event) to (b) EBITDA of the Company and
its Subsidiaries on a consolidated basis during the Four Quarter Period
determined on a pro forma basis. In addition to and without limitation of the
63
foregoing, for purposes of this definition, "EBITDA" shall be calculated after
giving effect on a PRO FORMA basis for the period of such calculation to (i) the
Incurrence or repayment of any Indebtedness of such Person or any of its
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any Incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
Incurrence or repayment of Indebtedness in the ordinary course of business
pursuant to working capital facilities, at any time subsequent to the first day
of the Four Quarter Period and on or prior to the Transaction Date, as if such
Incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period, (ii) any Asset
Sales or Asset Acquisitions or mergers or consolidations permitted under Section
7.2 (including, without limitation, any Asset Acquisition giving rise to the
need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person which becomes a Subsidiary as a result of any
such Asset Acquisition) Incurring Acquired Indebtedness) which occurred at any
time subsequent to the first day of the Four Quarter Period and on or prior to
the Transaction Date, as if such Asset Sale or Asset Acquisition (including the
Incurrence of any such Indebtedness or Acquired Indebtedness) occurred on the
first day of the Four Quarter Period. If such Person or any of its Subsidiaries
directly or indirectly guarantees Indebtedness of a third person, the preceding
sentence shall give effect to the Incurrence of such guaranteed Indebtedness as
if such Person or any Subsidiary of such Person had directly Incurred or
otherwise assumed such guaranteed Indebtedness.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement, the Notes,
the Warrants, the Agreement among Shareholders and Investors, the Escrow
Agreement, the Voting Trust Agreement and any and all agreements, certificates,
instruments and other documents contemplated thereby or executed and delivered
in connection therewith.
"VOTING STOCK" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to vote for the election of directors, managers or trustees of any
Persons (irrespective of whether or not at the time, stock of any class or
classes will have, or might have, voting power by the reason of the happening of
any contingency).
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
64
"WHOLLY OWNED SUBSIDIARY" means a Subsidiary all the Capital Stock of
which (other than directors' qualifying shares) is owned by the Company or
another Wholly Owned Subsidiary.
In addition to the foregoing, the following terms are defined in the
following Subsections of this Agreement:
TERM DEFINED IN SUBSECTION
"Additional Guarantor"...........................7.2(f)
"Affiliate Transaction"..........................7.2(h)
"Aggregate Closing Purchase Price"...............1.3(m)
"Bankruptcy Law".................................8.1
"Change of Control Offer"........................6.6(a)
"Change of Control Purchase Date"................6.6(b)(ii)
"Charter Documents"..............................4.1
"Change Date"....................................6.6(a)
"Closing"........................................2.1
"Closing Date"...................................2.1
"Closing Fee"....................................1.4
"Current Affiliate"..............................4.12(b)
"Custodian"......................................8.1
"Declaration"....................................8.2
"Default Amount".................................8.2
"Employee Program"...............................4.12(a)
"ERISA Affiliate"................................4.12(b)
"Event of Default"...............................8.1
"Guaranty"......................................11.1
"Financial Statements"...........................4.23
"Four Quarter Period"...........................12
"Illegal Transfer Notice"........................9.2
"Indemnified Party" and "Indemnified Parties"...13.1
"License(s)".....................................4.5
"Losses"........................................13.1
"Material Adverse Effect"........................4.1
"Multiemployer Plan".............................4.12(d)
"New Securities".................................7.2(b)
"Nonpayment Default"............................10.3
"Note Indebtedness".............................10.1
"Notes"..........................................1.1
"Payment Blockage Notice".......................10.3
"Payment Default"...............................10.3
"Property........................................4.19
65
"Redemption Price"...............................6.5
"Restricted Security"............................9.2
"Stated Maturity Date of the Notes"..............6.1
"Subsidiary Guarantor(s)".......................11.1
"Taxes"..........................................4.25
"Warrants".......................................1.2
13. MISCELLANEOUS
13.1. INDEMNIFICATION; EXPENSES, ETC .
(a) In addition to any and all obligations of the Company to
indemnify the Purchasers hereunder or under the other Transaction
Documents, the Company agrees, without limitation as to time, to
indemnify and hold harmless the Purchasers and their respective
Affiliates, and the employees, officers, directors, and agents of the
Purchasers and their respective Affiliates (individually, a "Purchaser
Indemnified Party" and, collectively the "Purchaser Indemnified
Parties") from and against any and all losses, claims, damages,
liabilities, costs (including the costs of preparation and attorneys'
fees) and expenses (including expenses of investigation) (collectively,
"Losses") incurred or suffered by a Purchaser Indemnified Party (i) in
connection with or arising out of any material breach of any warranty,
or the material inaccuracy of any representation, as the case may be,
made by the Company, or the failure of the Company to fulfill any
agreement or covenant contained in this Agreement or (ii) in connection
with any proceeding against the Company or any Purchaser Indemnified
Party brought by any third party arising out of or in connection with
this Agreement or the other Transaction Documents or the transactions
contemplated hereby or thereby or any action taken in connection
herewith or therewith (or any other document or instrument executed
herewith or pursuant hereto or thereto), whether or not the
transactions contemplated by this Agreement are consummated and whether
or not any Purchaser Indemnified Party is a formal party to any
proceeding; PROVIDED, however, that the Company shall not be liable for
any losses resulting from action on the part of any Purchaser
Indemnified Party which is finally determined in such proceeding to be
wrongful or which is an act of gross negligence, recklessness, or
willful misconduct by such Purchaser Indemnified Party. The Company
agrees promptly to reimburse any Purchaser Indemnified Party for all
such Losses as they are incurred or suffered by such Purchaser
Indemnified Party. Except as otherwise provided herein, the Company
agrees (for the benefit of each Purchaser) to pay, and to hold each
Purchaser harmless from and against, all costs and expenses (including,
without limitation, reasonable attorneys' fees, expenses and
disbursements), if any, in connection with the enforcement against the
Company, as the case may be, of this Agreement or any other Transaction
Document or any other agreement or instrument furnished pursuant hereto
or thereto or in connection
66
herewith or therewith in any action in which the Purchaser attempting
to enforce any of the foregoing shall prevail or in any action in which
the Purchaser shall in good faith assert any provision of any of the
foregoing as a defense.
(b) In addition to any and all obligations of the Purchasers to
indemnify the Company hereunder or under the other Transaction
Documents, the Purchasers agree, without limitation as to time, to
indemnify and hold harmless the Company, its Subsidiaries and its
Affiliates, and the employees, officers, directors, and agents of the
Company and its Affiliates (individually, a " Company Indemnified
Party" and, collectively the "Company Indemnified Parties") from and
against any and all losses, claims, damages, liabilities, costs
(including the costs of preparation and attorneys' fees) and expenses
(including expenses of investigation) (collectively, "Losses") incurred
or suffered by a Company Indemnified Party (i) in connection with or
arising out of any material breach of any warranty, or the material
inaccuracy of any representation, as the case may be, made by the
Purchasers, or the failure of the Purchasers to fulfill any agreement
or covenant contained in this Agreement or (ii) in connection with any
proceeding against the Purchasers or any Company Indemnified Party
brought by any third party arising out of or in connection with this
Agreement or the other Transaction Documents or the transactions
contemplated hereby or thereby or any action taken in connection
herewith or therewith (or any other document or instrument executed
herewith or pursuant hereto or thereto), whether or not the
transactions contemplated by this Agreement are consummated and whether
or not any Company Indemnified Party is a formal party to any
proceeding; PROVIDED, HOWEVER, that the Purchasers shall not be liable
for any losses resulting from action on the part of any Company
Indemnified Party which is finally determined in such proceeding to be
wrongful or which is an act of gross negligence, recklessness, or
willful misconduct by such Company Indemnified Party. The Purchasers
agree promptly to reimburse any Company Indemnified Party for all such
Losses as they are incurred or suffered by such Company Indemnified
Party. Except as otherwise provided herein, the Purchasers agree (for
the benefit of the Company) to pay, and to hold the Company harmless
from and against, all costs and expenses (including, without
limitation, reasonable attorneys' fees, expenses and disbursements), if
any, in connection with the enforcement against the Purchasers, as the
case may be, of this Agreement or any other Transaction Document or any
other agreement or instrument furnished pursuant hereto or thereto or
in connection herewith or therewith in any action in which the Company
attempting to enforce any of the foregoing shall prevail or in any
action in which the Company shall in good faith assert any provision of
any of the foregoing as a defense.
(c) If any of the Purchaser Indemnified Parties or the Company
Indemnified Parties (collectively, the "Indemnified Parties") is
entitled to indemnification hereunder, such Indemnified Party shall
give prompt notice to the
67
party required to give indemnification (the "Indemnifying Party") of
any claim or of the commencement of any proceeding against such
Indemnified Party brought by any third party with respect to which such
Indemnified Party seeks indemnification pursuant hereto; PROVIDED,
HOWEVER, that the failure so to notify the Indemnifying Party shall not
relieve the Indemnifying Party from any obligation or liability except
to the extent the Indemnifying Party is prejudiced by such failure. The
Indemnifying Party shall have the right, exercisable by giving written
notice to an Indemnified Party promptly after the receipt of written
notice from such Indemnified Party of such claim or proceeding, to
assume, at the expense of the Indemnifying Party, the defense of any
such claim or proceeding with counsel reasonably satisfactory to such
Indemnified Party. The Indemnified Party or Parties will not be subject
to any liability for any settlement made without its or their consent
(but such consent will not be unreasonably withheld). The Indemnifying
Party shall not consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the
giving by claimant or plaintiff to such Indemnified Party or Parties of
a release, in form and substance satisfactory to the Indemnified Party
or Parties, from all liability in respect of such claim, litigation or
proceeding.
(d) In addition to any other obligations of the Company to
indemnify the Purchasers herein or pursuant to any of the Transaction
Documents or any other agreements or documents executed and delivered
in connection therewith, the Company will pay, and will save the
Purchaser and each other holder of any of the Notes or Warrants
harmless from liability for the payment of all expenses arising in
connection with such transactions, including, without limitation: (i)
all document production and duplication charges and the reasonable
fees, charges and expenses of Purchasers' Special Counsel (whether
arising before or after any Closing Date), the transactions
contemplated hereby (up to a maximum of $75,000) and any subsequent
proposed modification of, or proposed consent under, this Agreement,
whether or not such proposed modification shall be effected or proposed
consent granted; (ii) the costs and expenses, including attorneys'
fees, incurred by any Purchaser in enforcing any rights under this
Agreement or in responding to any subpoena or other legal process
issued in connection with this Agreement or the transactions
contemplated hereby or thereby or by reason of such Purchaser's having
acquired the Notes or Warrants, including without limitation costs and
expenses incurred by such Purchaser in any bankruptcy case; (iii) the
cost of delivering to such Purchaser's principal office, insured to its
satisfaction, the Notes and Warrants delivered to such Purchaser
hereunder and any Notes Warrants or Common Stock delivered to such
Purchaser upon any substitution of any of the Notes or Warrants
pursuant to the terms of this Agreement or the Transaction Documents
and of such Purchaser's delivering any Notes, Warrant certificates or
Common Stock certificates, insured to its satisfaction, upon any such
substitution; and (iv) the reasonable out-of-pocket expenses incurred
by such
68
Purchaser in connection with such transactions and any such amendments
or waivers.
13.2..SURVIVAL OF REPRESENTATIONS AND WARRANTIES; SEVERABILITY .
All representations and warranties contained in this Agreement or the
other Transaction Documents or made in writing by or on behalf of the
Company in connection with the transactions contemplated by this
Agreement or the other Transaction Documents shall survive, for so long
as any of the Notes or Warrants shall remain outstanding, the execution
and delivery of this Agreement, and the other Transaction Documents,
any investigation at any time made by any Purchaser or on such
Purchaser's behalf, the purchase of the Notes and Warrants by the
Purchasers under this Agreement and any disposition of or payment on
the Notes or Warrants. All statements contained in any certificate or
other instrument delivered to the Purchasers by or on behalf of the
Company pursuant to this Agreement or the other Transaction Documents
shall be deemed representations and warranties of the Company under
this Agreement. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provisions in any other
jurisdiction.
13.3..AMENDMENT AND WAIVER . This Agreement may be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may be given, provided that the same are in
writing and signed by the Company and two-thirds-in-interest of the
holders of the Notes and Warrants.
13.4..NOTICES, ETC . Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall
be in writing and shall be delivered by courier, or mailed by a
nationally recognized overnight courier, postage prepaid, addressed,
(a) if to any Purchaser, at the address specified for such Purchaser on
the Purchaser Signature Pages attached hereto or such other address as
the Purchaser shall have furnished to the Company in writing, or (b) if
to any other holder of any Note or Warrant or any part thereof, at such
address as such other holder shall have furnished to the Company in
writing, or, until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of such Note or
Warrant or part thereof who has furnished an address to the Company, or
(c) if to the Company, at its address set forth on the Company
Signature Page attached hereto, to the attention of the Chief Executive
Officer, or at such other address, or to the attention of such other
Officer, as the Company shall have furnished to the Purchaser and each
such other holder in writing, or (d) if to any Guarantor, at the
address specified for such Guarantor on the Guarantor Signature Page
attached hereto, to the chief executive officer of such Guarantor, or
at such other address, or to the attention of such other officer, as
such Guarantor shall have furnished to the Purchaser and each such
other holder in writing. This Agreement and the
69
other Transaction Documents and all documents delivered in connection
herewith or therewith embody the entire agreement and understanding
between the Purchaser and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof.
13.5. SUCCESSORS AND ASSIGNS . Whenever in this Agreement any of
the parties hereto are referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the respective parties which
are contained in this Agreement shall bind and inure to the benefit of
the successors and assigns of all other parties. The terms and
provisions of this Agreement, and the other Transaction Documents shall
inure to the benefit of and shall be binding upon any assignee or
transferee of the Purchasers, and in the event of such transfer or
assignment, the rights and privileges herein conferred upon the
Purchasers shall automatically extend to and be vested in, and become
an obligation of, such transferee or assignee, all subject to the terms
and conditions hereof. In connection therewith, such transferee or
assignee may disclose all documents and information which such
transferee or assignee now or hereafter may have relating to any of the
Notes or Warrants or any part thereof, this Agreement, the other
Transaction Documents, the Company, any other Persons referred to
herein or any of the business of any of the foregoing entities.
13.6. DESCRIPTIVE HEADINGS . The headings in this Agreement are
for purposes of reference only and shall not limit or otherwise affect
the meaning hereof.
13.7. SATISFACTION REQUIREMENT . If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of
this Agreement required to be satisfactory to any Purchaser, the
holders of a specified portion of the Notes or the Warrants or the
Company, the determination of such satisfaction shall be made by such
Purchaser, such holders or the Company, as the case may be, in the sole
and exclusive judgment (exercised in good faith) of the Person or
Persons making such determination.
13.8. GOVERNING LAW . THIS AGREEMENT AND THE NOTES AND WARRANTS
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF
THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF FLORIDA,
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAW.
13.9. SERVICE OF PROCESS. Each of the Company, the Subsidiary
Guarantors, and the Purchasers (a) hereby irrevocably submits itself to
the jurisdiction of the state courts of the State of Florida and to the
jurisdiction of the United States District Courts for the District of
Florida, for the purpose of any suit, action or other proceeding
arising out of or based upon this Agreement, the Notes, the Warrants or
any part or parts thereof, the other Transaction Documents or the
subject matter hereof or thereof brought by any of the
70
other parties hereto or their successors or assigns and (b) hereby
waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is
not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution,
that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or
that this Agreement or the subject matter hereof may not be enforced in
or by such court, and (c) hereby waives any offsets or counterclaims in
any such action, suit or proceeding (other than compulsory
counterclaims). Each of the Company, the Subsidiary Guarantors, and the
Purchasers hereby consents to service of process by registered mail at
the address to which notices are to be given. Each of the Company, the
Subsidiary Guarantors, and the Purchasers agrees that its submission to
jurisdiction and its consent to service of process by mail is made for
the express benefit of the other parties hereto. Final judgment against
any of the Company, the Subsidiary Guarantors or the Purchasers in any
such action, suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit, action or proceeding on the judgment, a
certified or true copy of which shall be conclusive evidence of the
fact and of the amount of any indebtedness or liability of such party
therein described or in any other manner provided by or pursuant to the
laws of such other jurisdiction. Except with respect to the enforcement
of final judgments as set forth in the immediately preceding sentence,
the parties hereto agree that any action, suit or other proceeding
arising out of or based upon this Agreement, whether at law or in
equity, shall be brought and maintained exclusively in the courts
referenced in this Subsection 13.9.
13.10. COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original,
and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
13.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This
Agreement may not be used to interpret another agreement, indenture,
loan or debt agreement of the Company or any of its Subsidiaries. Any
such agreement, indenture, loan or debt agreement may not be used to
interpret this Agreement.
13.12. WAIVER OF JURY TRIAL . EACH OF THE COMPANY, THE SUBSIDIARY
GUARANTORS AND THE PURCHASERS HEREBY WAIVES TRIAL BY JURY IN ANY
LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE NOTES, THE
WARRANTS, ANY OTHER TRANSACTION DOCUMENTS, OR ANY INSTRUMENT OR
DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT, THEREOF, PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY
COMPULSORY COUNTERCLAIM (I.E., A CLAIM BY THE COMPANY AGAINST
71
ANY OF THE PURCHASERS WHICH IF NOT BROUGHT IN SUCH ACTION WOULD RESULT
IN THE COMPANY BEING FOREVER BARRED FROM BRINGING SUCH CLAIM) THE
COMPANY SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY COUNTERCLAIM IN
ANY SUCH LITIGATION.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
72
SECURITIES PURCHASE AGREEMENT
SENIOR SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed
this Agreement on behalf of the Company as of the date first above written.
OUTSOURCE INTERNATIONAL, INC., a
Florida Corporation
By:/s/ XXXX X. XXXXXXX
----------------------
Name: Xxxx X. Xxxxxxx
Title: President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
SECURITIES PURCHASE AGREEMENT
SENIOR SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
GUARANTOR SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed
this Agreement on behalf of the Guarantor indicated below as of the date first
above written.
OUTSOURCE INTERNATIONAL OF AMERICA,
INC.
By: /s/ XXXX X. XXXXXXX
-----------------------
Name: Xxxx X. Xxxxxxx
Title: President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
OUTSOURCE FRANCHISING, INC.
By:/s/ XXXX X. XXXXXXX
----------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
CAPITAL STAFFING FUND, INC.
By:/s/ XXXX X. XXXXXXX
----------------------
Name: Xxxx X. Xxxxxxx
Title: President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
EMPLOYEES INSURANCE SERVICES, INC.
By:/s/ XXXX X. XXXXXXX
----------------------
Name: Xxxx X. Xxxxxxx
Title: President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
SYNADYNE I, INC.
By:/s/ XXXX X. XXXXXXX
----------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
SYNADYNE II, INC.
By:/s/ XXXX X. XXXXXXX
----------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
SYNADYNE III, INC.
By:/s/ XXXX X. XXXXXXX
----------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
SYNADYNE IV, INC.
BY:/s/ XXXX X. XXXXXXX
----------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
Address: 0000 Xxxx Xxxxxxx Xxxxxx xxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
SYNADYNE V, INC.
BY:/s/ XXXX X. XXXXXXX
----------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
SECURITIES PURCHASE AGREEMENT
SENIOR SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the
date first written above: Purchase Price to be paid by
Bachow at the Closing: $11,000,000
BACHOW INVESTMENT PARTNERS III,
L.P. ("BACHOW")
Principal amount of Notes
to be purchased by
Bachow at the Closing: $11,000,000
Shares of Common Stock
By: Bala Equity Partners, L.P., issuable upon exercise of
its general partner Initial Warrants to be
purchased by Bachow at
Closing: 532,411
By: Bala Equity, Inc., its general partner
By: /s/ XXX X. XXXX
-----------------------
Name: Xxx X. Xxxx
Title: Vice President
Address: Three Xxxx Xxxxx Xxxx
0xx Xxxxx
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Nominee (name in which the Notes and Warrants
are to be registered, if different
than name of Bachow):
N/A
____________________________________________
(Nominee's Name)
Tax ID No.: 00-0000000
(if acquired in the name of a nominee
the taxpayer ID No. of such nominee)
Wire Transfer Instructions:
Bank Name: ____________________
ABA No.: ____________________
Acct Name: ____________________
Acct No.: ____________________
Reference: ____________________
SECURITIES PURCHASE AGREEMENT
SENIOR SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the
date first written above: Purchase Price to be paid by
Triumph at the Closing: $14,000,000
TRIUMPH-CONNECTICUT LIMITED
PARTNERSHIP
Principal amount of Notes
to be purchased by
Triumph at the Closing: $14,000,000
Shares of Common Stock
By: Triumph-Connecticut Capital issuable upon exercise of
Advisors, L.P., Initial Warrants to be purchased
its general partner by Triumph at Closing: 677,614
By:/s/ XXXXXXX X. XXXXXXXX
-------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Managing Director
Address: Sixty Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Nominee (name in which the Notes
and Warrantsare to be registered,
if different than name of Triumph:
N/A
_________________________________
(Nominee's Name)
Tax ID No.: 00-0000000
(if acquired in the name of a nominee
the taxpayer ID No. of such nominee)
Wire Transfer Instructions:
Bank Name: Bank of Boston-Connecticut
ABA No.: 011-100805
Acct Name: Triumph-Connecticut Limited Partnership
Acct No.: 000-000-00
Reference: Xxxxx Xxxxx-Institutional Banking
City National Bank of Florida, N.A.
February 19, 1997
Page 6
EXHIBIT B
JOINDER AGREEMENT
The undersigned hereby agrees, effective as of the date hereof, that
any shares of common stock, par value $.001 per share, (the "Common Stock") of
OutSource International, Inc. (the "Company"), voting trust certificates
representing beneficial ownership of shares of Common Stock issued pursuant to
that certain Voting Trust Agreement (the "Voting Trust Agreement"), dated as of
February 21, 1997 by and among the Company, Xxxxxxxx Xxxxxxxx and the parties
named therein, or other securities issued by the Company (collectively,
"Securities"), acquired by the undersigned (including without limitation upon
foreclosure on pledges or other security interests) from any individual or
entity party to that certain Agreement among Stockholders and Investors (the
"Stockholders' Agreement"), dated as of February 21, 1997 by and among the
Company, Xxxxxxxx Xxxxxxxx and the parties named therein, shall remain subject
to all of the provisions of the Stockholders Agreement as if such Securities
were still owned by the transferor. The address and facsimile number to which
notices may be sent to the undersigned is as follows:
CITY NATIONAL BANK OF FLORIDA
By: /s/ XXXXXXXX X. XXXXXX
--------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Vice President
Dated: February 19, 1997
SCHEDULES
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 1.6
USE OF PROCEEDS
EXPENSES OF TRANSACTION:
Bachow /Triumph fee $375,000
Xxxxx Xxxxxx fee 1,500,000
Out of pocket expense 250,000
-----------
TOTAL EXPENSES OF TRANSACTION 2,125,000
-----------
SHAREHOLDER PAYMENTS:
Distribution of PTI, net of notes and advances 5,263,000
Share redemptions, net of notes 5,008,000
All-Temps acquisition, net of advances 567,000
WAD acquisition, net of notes 532,000
-----------
TOTAL SHAREHOLDER PAYMENTS 11,370,000
-----------
ACQUISITIONS:
NOTE: FOLLOWING AMOUNTS ARE SHOWN NET OF SELLER AND BANK FINANCING AND DO
NOT COMPRISE THE TOTAL ACQUISITION PURCHASE PRICE.
Labor World - Elgin (Pay Ray) 1,250,000
Labor World - South Florida 7,200,000
Labor World - Atlanta 390,000
Stand-by Personnel - Colorado Springs 1,630,000
Staff Management 1,035,000
-----------
TOTAL ACQUISITIONS 11,505,000
-----------
TOTAL USE OF PROCEEDS $25,000,000
===========
Note: Use of proceeds for acquisitions listed above may not take place on actual
closing date of this transaction and certain items have been temporarily
disbursed by the Company out of working capital pending this transaction.
EXHIBIT 4.1
OUTSOURCE INTERNATIONAL, INC.
STATUS OF SUBSIDIARIES
FOREIGN AUTHORITY TO DO BUSINESS
FEBRUARY 17, 1997
STATE OSI (IL)/OIA (1) OFI EISI CSF SYNADYNE I SYNADYNE II SYNADYNE III SYNADYNE IV SYNADYNE V
--------------------- ---------------- ---------- ---- --- ---------- ----------- ------------ ----------- ----------
Alabama X/X X/X X/X X/X X/X REGISTERED APP PENDING N/A N/A
Alaska X/X X/X X/X X/X X/X X/X APP PENDING N/A N/A
Arizona REGISTERED N/A N/A N/A N/A N/A REGISTERED N/A N/A
Arkansas X/X X/X X/X X/X X/X X/X APP PENDING N/A N/A
California REGISTERED N/A N/A N/A N/A WILL APPLY WILL APPLY N/A N/A
Colorado WILL APPLY N/A N/A N/A N/A WILL APPLY N/A N/A N/A
Connecticut X/X X/X X/X X/X X/X X/X APP PENDING N/A N/A
District of Columbia N/A N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Florida REGISTERED REGISTERED X/X X/X X/X X/X XXXXXXXXXX X/X X/X
Xxxxxxx REGISTERED N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Idaho N/A N/A N/A N/A N/A N/A REGISTERED X/X X/X
Xxxx X/X X/X X/X X/X X/X WILL APPLY REGISTERED X/X X/X
Xxxxxxxx XXXXXXXXXX X/X X/X X/X X/X WILL APPLY REGISTERED X/X X/X
Xxxxxxx X/X X/X X/X X/X X/X WILL APPLY REGISTERED N/A N/A
Kansas X/X X/X X/X X/X X/X X/X APP PENDING N/A N/A
Kentucky N/A N/A N/A N/A N/A N/A REGISTERED X/X X/X
Xxxxxxxxx X/X X/X X/X X/X X/X WILL APPLY REGISTERED N/A N/A
Maryland REGISTERED N/A N/A N/A N/A WILL APPLY APP PENDING N/A N/A
Massachusetts REGISTERED N/A N/A N/A N/A WILL APPLY REGISTERED X/X X/X
Xxxxxxxx XXXXXXXXXX X/X X/X X/X X/X WILL APPLY REGISTERED X/X X/X
Xxxxxxxxx X/X X/X X/X X/X X/X WILL APPLY REGISTERED N/A N/A
Mississippi N/A APP PENDING N/A N/A N/A N/A APP PENDING N/A N/A
Missouri N/A N/A N/A N/A N/A N/A EXPIRED N/A N/A
Nevada N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
New Hampshire REGISTERED X/X X/X X/X X/X X/X APP PENDING N/A N/A
New Jersey WILL APPLY N/A N/A N/A N/A WILL APPLY APP PENDING N/A N/A
EXHIBIT 4.1 (CONTINUED)
OUTSOURCE INTERNATIONAL, INC.
STATUS OF SUBSIDIARIES
FOREIGN AUTHORITY TO DO BUSINESS
FEBRUARY 17, 1997
STATE OSI (IL)/OIA (1) OFI EISI CSF SYNADYNE I SYNADYNE II SYNADYNE III SYNADYNE IV SYNADYNE V
--------------------- ---------------- ---------- ---- --- ---------- ----------- ------------ ----------- ----------
New Mexico X/X X/X X/X X/X X/X X/X REGISTERED N/A N/A
New York N/A N/A N/A N/A N/A WILL APPLY REGISTERED X/X X/X
Xxxxx Xxxxxxxx X/X X/X X/X X/X N/A WILL APPLY APP PENDING N/A N/A
Ohio N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
Okalahoma N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
Oregon X/X X/X X/X X/X X/X X/X APP PENDING N/A N/A
Pennsylvania REGISTERED N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
South Carolina N/A N/A N/A N/A N/A WILL APPLY APP PENDING N/A N/A
South Dakota N/A N/A N/A N/A N/A N/A REGISTERED X/X X/X
Xxxxxxxxx X/X X/X X/X X/X X/X WILL APPLY REGISTERED N/A N/A
Texas N/A APP PENDING N/A N/A N/A WILL APPLY REGISTERED X/X X/X
Xxxx X/X X/X X/X X/X X/X N/A REGISTERED N/A N/A
Vermont X/X X/X X/X X/X X/X X/X APP PENDING N/A N/A
Virginia REGISTERED N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Washington N/A N/A N/A N/A N/A N/A REGISTERED X/X X/X
Xxxxxxxxx X/X X/X X/X X/X X/X WILL APPLY APP PENDING N/A N/A
LEGEND
REGISTERED = THERE IS AN ACTIVE REGISTRATION IF EFFECT
LICENSED = THERE IS AN ACTIVE LICENSE IN EFFECT
APP PENDING = AN APPLICATION HAS BEEN FILED, BUT WE HAVE NOT BEEN NOTIFIED THAT
OUR REGISTRATION IS EFFECTIVE
WILL APPLY = APPLICATIONS WILL BE FILED BY OUR ATTORNEYS NOT LATER THAN
FEBRUARY 28TH
N/A = NOT APPLICABLE IN THIS STATE
NOTE 1: OutSource International, Inc. (IL) will be merged into OutSource
International of America, Inc. (FL)
AUTHORITY
SCHEDULE 4.2
Subsidiaries
STATE OF
NAME INCORPORATION TAX STATUS
--------------------------------------- ------------- -------------
OutSource International of America, Inc. Florida C corporation
OutSource Franchising, Inc. Florida C corporation
Capital Staff Funding, Inc. Florida C corporation
Employees Insurance Services, Inc. Florida C corporation
Synadyne 1, Inc. Florida C corporation
Synadyne II, Inc. Florida C corporation
Synadyne III, Inc. Florida C corporation
Synadyne IV, Inc. Florida C corporation
Synadyne V, Inc. Florida C corporation
OutSource International, Inc. (1) Illinois S corporation
Note (1) To be merged into OutSource International of America, Inc.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.3
CAPITALIZATION
See schedule entitled "February 1997 Corporate Recapitalization" attached to
Schedule 4.4, which sets forth the following options and warrants:
Incentive Stock Option plan
Warrants to Triumph Capital
Warrants to Bachow and Associates
Warrants in escrow in connection with Triumph/Bachow agreements
Note: The above warrants contain a contingent put obligation - See Schedule
4.33.
In addition, the following outstanding debt is convertible into common stock of
the company at the time of an IPO, based on the IPO per share price:
PayRay, Inc. $1,226,000
TriTemps, Inc. 780,000
----------
Total convertible portion of debt $2,006,000
==========
See Schedule 4.33 regarding commitments to issue options in connection with
acquisitions.
As of the closing date, with regards to OutSource International,Florida
corporation:
Common Stock, $.001 par value:
Authorized 100,000,000 shares
Issued 8,382,749 shares
Outstanding 8,382,749 shares
Preferred Stock, $.OOI par value:
Authorized 10,000,000 shares
Issued 0 shares
Outstanding 0 shares
OUTSOURCE INTERNATIONAL
February 1997 Corporate Recapitalization
Summary of Private Redemption and Private Placement:
PRO FORMA PRO FORMA
INITIAL PARENT PRIVATE SUB-TOTAL PRO-FORMA PRO-FORMA ENDING # OF SHARES ENDING % OF SHARES
COMPANY SHARES REDEMPTION SHARES ISSUED OPTIONS WARRANTS OWNERSHIP VOTING OWNERSHIP VOTING
-------------- ---------- ------------- --------- --------- --------- ------ --------- -------
(Private
Placements)
Xxxxx Xxxxxxxx trust 892,956 (109,833) 783,123 783,123 In trust 6.95% 0.00%
Xxxxx Xxxxxxxx trust 892,956 (109,833) 783,123 783,123 In trust 6.95% 0.00%
Xxxx Xxxxxxxx 2,314,279 (111,677) 2,202,602 2,202,802 In trust 19.54% 0.00%
Xxxx Xxxxxxxx trust 394,698 0 394,698 394,698 In trust 3.50% 0.00%
Xxxx Xxxxxxxx 88,394 0 86,394 86,394 In trust 0.77% 0.00%
Xxxxx Xxxxxxxx trust 481,092 0 481,092 481,092 In trust 4.27% 0.00%
Xxxxx Xxxxxx 88,763 0 86,763 86,763 In trust 0.77% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Xxxxxxxx subtotal 5,149,138 (331,344) 4,817,795 0 0 4,817,795 0 42.74% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Xxx Xxxxxxx, Xx. 1,278,801 (188,239) 1,092,581 1,092,561 In trust 9.89% 0.00%
Xxx Xxxxxxx 402,255 0 402,255 402,255 In trust 3.57% 0.00%
Xxx Xxxxxxx, Xx. 315,749 0 315,749 315,749 In trust 2.60% 0.00%
Xxx Xxxxxxx, Xx. trust 88,507 0 86,507 86,507 In trust 0.77% 0.00%
Xxxxx Xxxxxxx 404,310 0 404,310 404,310 In trust 3.59% 0.00%
Xxxxx Xxxxxxx trust 88,948 0 86,948 86,948 In trust 0.77% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ----- ------
Xxxxxxx subtotal 2,574,570 (186,239) 2,285,330 0 0 2,385,330 0 21.19% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Founder subtotal
(in voting trust) 7,723,709 (517,584) 7,208,125 0 0 7,208,125 0 63.92% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Xxxx Xxxxxxx 909,615 0 909,615 58,000 0 977,615 977,615 8.67% 9.41%
Xxx Xxxxxxx 178,007 0 178,007 0 0 178,007 178,007 1.55% 1.71%
Xxx Xxxxxxx trust 89,003 0 89,003 0 0 89,003 69,003 0.79% 0.86%
Other OSI management
and employees 0 0 0 729,354 0 729,354 729,354 6.47% 7.02%
Founder shares -
Xxxx Xxxxxxx as 100%
trustees 0 0 0 0 0 0 7,208,125 0.00% 69.38%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Management subtotal 1,176,625 0 1,176,625 797,354 0 1,973,979 9,180,104 17.51% 88.35%
Triumph 0 0 0 0 877,614 677,614 577,614 6.01% 5.52%
Bachow 0 0 0 0 532,411 532,411 532,411 4.72% 5.12%
Founder shares-
Triumph/Bachow rep
as 0% trustees 0 0 0 0 0 0 0 0.00% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Investor subtotal 0 0 0 0 1,210,025 1,210,025 1,210,025 10.73% 11.65%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Tranche 2 - Escrow 0 0 0 0 278,295 278,295 escrow 2.47% 0.00%
Tranche 3 - Escrow 0 0 0 0 604,456 604,456 escrow 5.36% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Escrow subtotal 0 0 0 0 882,751 882,751 0 7.83% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Totals 8,900,333 (517,584) 8,382.750 797,354 2,092,778 11,272,880 10,390,129 100.00% 100.00%
========= ======== ========= ======= ========= ========== ========== ====== ======
Note Total ISO plan option shares authorized are 1,090,878 - Above proforma
presentation includes grant of 515,189 shares on 1/1/96 (after expiration of
unexercised, unvested options) plus proposed February 1997 grant of 262,185
shares.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.4
STOCKHOLDERS AND VOTING AGREEMENTS
See schedule entitled "February 1997 Corporate Recapitalization" attached
hereto.
Founder shares are subject to Voting Trust Agreement by and among OutSource, the
trustees, and certain OutSource shareholders, as well as an Agreement between
Shareholders and Investors in OutSource, both agreements dated February 1997.
Warrants in escrow subject to release in accordance with Escrow Agreement dated
February 1997, by and among Bank of Boston Connecticut, certain OutSource
shareholders, certain investors in senior subordinated notes and warrants, and
OutSource.
Note: The above warrants contain a contingent put obligation - See Schedule
4.33.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.9
DEBT AND OTHER LIABILITIES
Page 1 of 4
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
------ AT CLOSING ---------------
-----------
SUBORDINATED INDEBTEDNESS:
-------------------------
Capital Staffing Fund:
Xxxx X. Xxxxxxx $500,000 Principal due February 2001, interest
paid monthly at 21% per annum
Xxxxxxx X. Xxxxxxx 125,000 Principal due February 2001, interest
paid monthly at 21% per annum
Xxxxx X. Xxxxxxx 50,000 Principal due February 2001, interest
paid monthly at 21% per annum
Xxxxx X. Xxxxxxx 100,000 Principal due February 2001, interest
paid monthly at 21% per annum
Xxxxxxx Xxxxxxx 125,000 Principal due February 2001, interest
paid monthly at 21% per annum
Xxxxxxx X. Xxxxxxx 100,000 Principal due February 2001, interest
paid monthly at 21% per annum
Xxxxxx X. Xxxxxxxxx 200,000 Principal due February 2001, interest
paid monthly at 21% per annum
Shareholders:
Xxxxx Xxxxxxxx trust 407,000 Principal due in five quarterly
installments starting February 1999,
interest paid quarterly at 10% per
annum
Xxxxx Xxxxxxxx trust 407,000 Principal due in five quarterly
installments starting February 1999,
interest paid quarterly at 10% per
annum
Xxxx Xxxxxxxx 605,000 Principal due in five quarterly
installments starting February 1999,
interest paid quarterly at 10% per
annum
Xxxx Xxxxxxx 325,000 Interest only payable quarterly for
the first two years at 10% per annum.
Principal and interest at 10% per
annum paid in twelve (12) equal
quarterly installments starting May
1999.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.9
DEBT AND OTHER LIABILITIES Page 2 of 4
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
------ AT CLOSING ---------------
-----------
Acquisitions:
WAD, Inc. 400,000 Principal and interest at 10% per annum
(Beneficiaries-Xxxx Xxxxxxx, paid in eight (8) equal quarterly
Xxxxxx Xxxxxxx) installments starting May 1997
All-Temps, Inc 158,325 $8,325 due immediately - the balance is
(Beneficiary - Xxxxx Xxxxxx) payable in minimum annual installments
of $40,000 in 1997 and 1998, with any
remainder due at the end of 1999. Non
interest bearing.
PayRay, Inc. 1,526,290 Principal and interest at 14% per annum
(Beneficiary - Ray paid over five years in equal monthly
Xxxxxxx and Partners) installments starting March 1997
TriTemps, Inc. 1,037,180 Principal and interest at 14% per annum
(Beneficiary - Ray paid over five years in equal monthly
Xxxxxxx and partners) installments starting March 1997
CST, Inc. 100,123 Principal plus one year interest at 7%
per annum due December 1997.
Xxxxxxx X Xxxxxxxxx, Inc. 100,566 50% of principal plus six months'
interest at 6% per annum due June and
December 1997.
Komco, Inc. 9,780 Earn out balance due on demand.
Demark, Inc. 27,996 Earn out balance due on demand.
XxXxxxx Enterprises, Inc. 400,000 Due in June 1997 with six months,
interest at 10% per annum
XxXxxxx Enterprises, Inc. 250,000 18 monthly installments of principal
and interest starting March 1997 at 7%
per annum
(1) StaffNet, Inc. 160,000 Four quarterly payments starting June
1997 - non interest bearing.
(1) Stand-by Personnel - Denver 500,000 Principal plus interest at 6% due April
1998 (one year after transaction date).
(1) Xxxxx-xx Xxxxxxxxx - Xxxxxx 000,X0X 50% of principal plus interest at 6% due
July 1998 (15 months after transaction date).
50% of principal plus interest at 6% due
July 1999 (27 months after transaction date).
Subject to earnout - See Schedule 4.33
(1) Stand-by Personnel -
Colorado Springs 850,000 50% of principal plus one year interest at
4% per annum due March 1998 and March 1999.
Subject to earnout - See Schedule 4.33
(1) Staff Management Services. Inc. 1,650,000 Principal of $925,000 plus interest at
4% per annum due March 1998 and $725.000 plus
interest due March 1999.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.9
DEBT AND OTHER LIABILITIES Page 3 of 4
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
----- AT CLOSING ---------------
-----------
SUBORDINATED DEBT WITH WARRANTS:
Triumph Capital 14,000,000 Interest payable monthly at ll% per anum
for the first two years and 12.5% per annum
Bachow and Associates, Inc. 11,000.000 for the next three years. Principal of $9.2
million due in February 2001 and balance due
in February 2002.
NOTE: THE WARRANTS ASSOCIATED WITH THE ABOVE DEBT CONTAIN A CONTINGENT PUT
OBLIGATION - SEE SCHEDULE 4.33.
NON-SUBORDINATED INDEBTEDNESS:
CAPITALIZED LEASES:
(3) Hewlett Packard Leasing 1,527,988 Equal monthly installments over 5 years
at 8.2% per annum interest.
Catalfumo Constuction 5,300,000 Base rental payments of $45,854 per month,
not including operating expenses, through
December 1999, after which base rental is
$53,393 for thirteen years. Purchase option and
right to convert to 75% financing at 8.2% per
annum with 20 year amortization/10 year maturity
expires December 1999.
Bankers Direct Leasing - Lease #1 539,078 Lease #1 incurred 10/18/96 for furniture
and equipment, base payments of $11,232.22
through October 2001 - imputed interest rate is
7.2%. Payment period is 60 months.
Bankers Direct Leasing - Lease #2 389,394 Lease #2 is yet to be implemented, but represents
furniture and equipment ordered and shipped by
12/31/96. At present the lease finance factor will
be consistent with Lease #1. A one month deposit of
$7,828.04 was made in 1996. Payment period is 60
months upon execution of the lease.
AT&T 4,556 Baltimore - Base payments are $119.78 for sixty months,
ending September 2001. The lease rate is 19.820%.
AT&T 6,777 Alexandria - Base payments are $354.73 for 36 months,
ending November 1998. The lease rate is 19.265%.
Finova 4,859 Manchester - Base payments of $496.09, rate 16.309%,
ending 8/7/97.
Finova 1,860 Chattanooga - Represents acquisition lease buyout. Base
payment is $265.65. Final payment is due June 1997. No
interest is imputed due to inavailability of asset fair
market value and immateriality.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.9
DEBT AND OTHER LIABILITIES Page 4 of 4
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
------ AT CLOSING ---------------
MORTGAGES: ----------
(1) California Federal 73,406 Base payments of $863.00 due with final payment on
(Condo-Boca Raton) September 2008. Interest rate is 8.50%. In March
1995, $228.64 used for impound payment began to
be applied towards payment of loan.
(1) Devon 239,636 Base payment is $1,152.00 plus accrued interest
(Dispatch center - Chicago, IL) (prime + 2%), through April 1999.
(1) Xxxxxxx 209,839 Payments $2,001.09 through February 2013 interest
(Dispatch center - Waukegan, IL) rate is 8.50$.
OTHER:
TKO Software 86,230 $100,000 due November 1997, which includes imputed
interest at 10% per annum.
NBD Bank 6,915 CHN-Base payment $515.55, interest rate of 6.919%
final payment Feb. 1996.
NBD Bank 5,725 CHS-Base payment $538.79, interest rate of 8.995%
final payment Nov. 1997.
NBD Bank 5,759 CHHP-Base payment $495.35, interest rate of 5.90%
final payment Dec. 1997.
Chrysler Credit 9,915 WK-Base payment $425.35, interest rate of 9.930%,
final payment Feb 1999.
Chrysler Credit 11,604 MAN-Base payment $345.56, interest rate of 13.033%,
final payment June 2000.
GUARANTEES:
(2) NationsBank 1,112,533 Represents 1st mortgage on 0000 X. Xxxxxxx, Xxxx
Xxxxx, XX. Payment is $7,458.67 plus accrued interest.
Rate is prime + 1%. Final payment is due is approximately
$814,000 in May 2000.
(2) Xxxxxx 637,593 Represents 2nd mortgage on 0000 X. Xxxxxxx, Xxxx
Xxxxx, XX. Payment $7,321.10 through August 2000.
Payment from Sept 2000 through August 2005 is
$7258.28. Payment from Sept 2005 through August 2010 is
$7,258.28. Interest rate is 9.531%. Payments include
fees for CDC and CSA, which are approx 5% of monthly
payment.
-----------
Subtotal-term debt 45,788,729
Line of Credit - Bank of
Boston, as agent 40,387,618 Matures February, 2001. Interest payable monthly -
variable rate based on ratio of Funded Indebtedness to EBITDA.
This represents the current maximum borrowing limit, of which
approximately $20 million will be actually borrowed
and outstanding after closing this transaction.
Letter of Credit - Bank of
Boston, as agent 4,612,382 Matures December, 1997 but is renewable annually,
----------- until the expiration of the term of the Line of
Credit above. May be increased to $10 million, with
any increase reducing the available Line of Credit
amount shown above.
Total - all debt $90,788,729
===========
----------
(1) Note: The debt indicated is not actually outstanding as of closing, but is
expected to be incurred shortly thereafter, at the time the related asset
is purchased.
(2) Note: This debt relates to OutSource's previous headquarters building in
Boca Raton, Florida and represents guarantees by certain OutSource
subsidiaries. The building is currently for sale and once sold, these
guarantees will be release. Also; SMSB partnership, the lessor and owner of
the building has agreed to limit OutSource's liability for rent to 18
months (approximately $30,000 per month) starting in December 1996.
(3) Note: Full amount of authorized borrowing of $2,151,000 under this credit
facility are expected to be incurred over next twelve months.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.10
MATERIAL DEVELOPMENTS
(i) Writeoff of approximately $1.8 million related to aborted IPO,
investigation of certain matters by Xxxxxx Xxxxxx Xxxxx, and settlement of
lawsuit by Xxxxxx Xxxxxxxxx.
(ii) Debt incurred for certain acquisitions - PayRay/TriTemps, CST Xxxxxxx X.
Xxxxxxxxx, Komco, Demark, and XxXxxxx Enterprises.
Capitalized 15 year lease for new headquarters in Deerfield Beach, FL
Lease/purchase of approximately $1.2 million in furniture and equipment
related to above acility.
Lease/purchase of approximately $2 million in software Masterpack,
Xxxxxxx, Unidata) and related hardware.
(iii) Acquisitons noted in (ii) above.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.11
RECENT EVENTS
See Schedule 4.10
SCHEDULE 4.12
EMPLOYEE PROGRAMS
The following is a list of Employee Programs maintained by the Company (or its
Subsidiaries or Current Affiliates) during the six-year period ending on the
Closing Date:
A) Procedures Manual
B) Labor World Profit Sharing Plan 5500s [1995, 1994, 1993]
C) Synadyne Flexible Benefits Plan 5500s [1995, 1994]
D) Synadyne Group Welfare Benefits Plan 5500s [1995, 1994] (Plan had less
than 100 participants in 1993 and therefore was not required to file a
5500.)
E) Synadyne Savings and Investment Plan
F) Synadyne Dependent Care Assistance Plan
G) OutSource International, Inc. Stock Option Plan, as amended and
restated effective February 1, 1997.
The Labor World Profit Sharing and Retirement Plan and Trust does not have a
current IRS determination letter.
Pursuant to the terms of the Labor World Profit Sharing and Retirement Plan and
Trust ("LW Plan"), highly compensated employees are not eligible to participate
in the LW Plan. However, as a result of administrative errors, some highly
compensated employees have been permitted to make elective salary deferral
contributions. The Company is reviewing all records and compiling information
regarding this operational defect in order to make the appropriate correction.
The Company intends to seek IRS approval regarding the proposed correction under
the Voluntary Closing Agreement Program ("VCAP"). There will be a penalty,
payable by the Company, associated with a correction under the VCAP.
The Company provides welfare plan coverage (health insurance coverage) to
certain employees who have terminated employment; this post-termination
coverage is attributable solely to the previous employment relationship with
the Company.
SCHEDULE 4.19
ENVIRONMENTAL MATTERS
NONE
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.20
LIENS
The following lenders have liens on the assets noted:
1) Hewlett Packard Lease Financing:
Masterpack software
Unidata software
Xxxxxxx software
American Business Communications telephone system
Hewlett Packard computers
2) TKO Financing
OutSmart software
3) Bankers Direct Leasing
Workstations in Deerfield Beach headquarters
Office furniture in Deerfield Beach headquarters
4) Catalfumo Construction
Deerfield Beach headquarters building
5) Bank of Boston, as agent
All assets, particularly cash and accounts receivable
6) AT&T
Finova
Office equipment
7) NBD Bank
Chrysler Credit
Vans
FOLLOWING LIENS RELATE TO ASSETS ANTICIPATED TO BE PURCHASED SHORTLY AFTER
CLOSING:
8) California Federal
Condominium - Boca Raton, FL
9) Devon
Dispatch center - Chicago, IL
10) Xxxxxxx
Dispatch center - Waukegan, IL
11) Staff Management, Inc.
Rights to repossess certain intangible assets upon a default in payment
of deferred purchase price
FOLLOWING LIENS RELATE TO ASSETS OWNED BY OTHER ENTITIES BUT GUARANTEED BY
OUTSOURCE SUBSIDIARIES:
12) Nations Bank
Xxxxxx
Office building - 0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxx Xxxxx, XX
SCHEDULE 4.21
INSURANCE
SEE ATTACHED EXHIBITS A AND B
SCHEDULE 4.21
EXHIBIT A
INSURANCE DIGEST
OUTSOURCE INTERNATIONAL, INC. etal.
CENTURY FINANCIAL SERVICES
000 XX XXXXXXX XXXXX XXXX. #000 EFFECTIVE JULY 1, 1996
XXXX XXXXX, XX 00000 1 OF 5
TYPE OF POLICY LOCATION/COVERAGE LIMIT OR AMOUNT COMPANY/POLICY NO. POLICY PERIOD ANNUAL COST
-------------- ----------------- --------------- ------------------ ------------- -----------
COMMERCIAL LIMITS OF LIABILITY: $1,000,000 National Union Fire 7/1/96 - $138,750
GENERAL LIABILITY Any One Occurrence: Combined Insurance Co. (AIG) 7/1/97
Single Limit Policy # RMGL 1437689
Products/Completed Operations
Aggregate: Combined Single Limit $2,000,000
General Aggregate: Per Location $2,000,000
Personal Injury and Advertising
Injury:
Any One Person or Organization $1,000,000
Fire Damage Liability: Any One Loss $1,000,000
Medical Expense: Any One Person $5,000
EMPLOYEE BENEFIT LIMITS OF LIABILITY:
PROGRAMS LIABILITY Any One Claim: $1,000,000 * * * * Included
(CLAIMS-MADE FORM) Aggregate All Claims: $2,000,000 above
Deductible - Each Claim: $1,000
UMBRELLA LIABILITY LIMITS OF LIABILITY: American Home 7/1/96 - $50,256
Each Occurrence Limit: Combined Assurance Co. (AIG) 7/1/97
Single Limit $15,000,000 Policy # BE93228-76
General Aggregate Limit: $15,000,000
Products/Completed Operations
Aggregate Limit: $15,000,000
Excess Scheduled Primary
Policies or Subject to Self-
Insured Retention of: $10,000
INSURANCE DIGEST
OUTSOURCE INTERNATIONAL, INC. etal.
CENTURY FINANCIAL SERVICES
000 XX XXXXXXX XXXXX XXXX. #000 EFFECTIVE JULY 1, 1996
XXXX XXXXX, XX 00000 2 OF 5
TYPE OF POLICY LOCATION/COVERAGE LIMIT OR AMOUNT COMPANY/POLICY NO. POLICY PERIOD ANNUAL COST
-------------- ----------------- --------------- ------------------ ------------- -----------
BUSINESS AUTO COVERAGES: National Union Fire 7/1/96 - $48,525
COVERAGE Combined Single Limit Each Insurance Co. of 7/1/97
Accident: $1,000,000 Pittsburgh, PA (AIG)
All Owned, Hired, Non-Owned Policy # RMCA1438722
Autos
Personal Injury Protection: Statutory By State
All Owned Autos Subject to
No Fault
Property Protection Insurance: Statutory By State
(MI Only)
Medical Payments - Each Person $2,000
Uninsured/Underinsured Motorists: Statutory By State
Protection - Commercial Autos
Uninsured/Underinsured Motorists: $1,000,000
Protection-Private Passenger
Autos
Comprehensive Coverage
All Owned Autos
Actual Cash Value Less
Deductible of: $500
Collision Coverage
All Owned Autos:
Actual Cash Value Less
Deductible of: $500
SCHEDULE OF OWNED VEHICLES
ON FILE WITH CARRIER
INSURANCE DIGEST
OUTSOURCE INTERNATIONAL, INC. etal.
CENTURY FINANCIAL SERVICES
000 XX XXXXXXX XXXXX XXXX. #000 EFFECTIVE JULY 1, 1996
XXXX XXXXX, XX 00000 3 OF 5
TYPE OF POLICY LOCATION/COVERAGE LIMIT OR AMOUNT COMPANY/POLICY NO. POLICY PERIOD ANNUAL COST
-------------- ----------------- --------------- ------------------ ------------- -----------
PROPERTY PER LOCATION SCHEDULE ON FILE
INSURANCE WITH CARRIER - SUBJECT TO
QUARTERLY REPORTING OF NEW OR
ADDITIONAL LOCATIONS.
SUBJECTS OF INSURANCE:
Buildings: $3,855,000 Lumbements Mutual 7/1/96 - $40,854
Contents Including EDP: $4,302,000 Casualty Company 7/1/97
Business Income/Extra Expense: $4,373,000 (Xxxxxx Group)
Accounts Receivable: $150,000
Valuable Papers: $50,000
Newly Acquired Buildings: $500,000
Personal Property-Acquired
Locations: $250,000
Fine Arts: $50,000
Recharge Fire Protection
Equipment: $10,000
Pollution Cleanup and Removal: $25,000
Property in Transit: $50,000
COVERAGE:
"All Risk" of direct physical
damage, excluding the causes of
loss of Earthquakes and Flood and
as per policy terms, conditions,
and exclusions.
COINSURANCE:
90% - Personal Property (Contents)
and EDP
50% - Business Income
VALUATION:
Replacement Cost-Personal Property
DEDUCTIBLE:
Per Contents Loss: $1,000
Except Florida Locations Wind
Deductible: 2% of the personal
property values (including EDP)
expressed as a flat dollar amount,
but not less than $1,000.
INSURANCE DIGEST
OUTSOURCE INTERNATIONAL, INC. etal.
CENTURY FINANCIAL SERVICES
000 XX XXXXXXX XXXXX XXXX. #000 EFFECTIVE JULY 1, 1996
XXXX XXXXX, XX 00000 4 OF 5
TYPE OF POLICY LOCATION/COVERAGE LIMIT OR AMOUNT COMPANY/POLICY NO. POLICY PERIOD ANNUAL COST
-------------- ----------------- ---------------------------- ------------------ ------------- -----------
CRIME INSURANCE LIMITS OF LIABILITY: LIMIT DEDUCTIBLE Lumbermens Mutual 7/1/96 - $19,682.43
Fidelity - Coverage Casualty Company 7/1/97
Form A $2,000,000 $10,000 (Xxxxxx Group)
Forgery & Alteration - Policy #
Coverage Form B $2,000,000 $10,000 3F894661-00
Theft, Disappearance &
Destruction - Coverage
Form C $2,000,000 $10,000
Premises Burglary -
Coverage Form E $2,000,000 $10,000
Computer Fraud -
Coverage Form F $2,000,000 $10,000
LIMITS OF LIABILITY:
For Payroll Partners
Allstate Contracts
Only:
Fidelity - Coverage
Form A $1000,000 $1,500 Lumbermens Mutual 7/1/96 - $1,808.48
Casualty Company 7/1/97
(Xxxxxx Group)
Policy #
3F894662-00
EXHIBIT B
ADVICE OF INSURANCE
NUMBER/DATE: LAT97-0002/January 1, 1997
NAMED INSURED OUTSOURCE INTERNATIONAL, INC. et al.
ADDRESS 0000 X. Xxxxxxx Xxxxxx
Xxxxxxxxx Xxxxx, XX 00000
Attn: Xxxx XxXxxxx
IN ACCORDANCE WITH YOUR INSTRUCTIONS. WE HAVE ARRANGED INSURANCE ATTACHING FROM
January 1, 1997 AND EXPIRING March 1, 1997 (policies to be issued with
January 1, 1998 expirations)
WORKERS' COMPENSATION & EMPLOYERS LIABILITY
TYPE OF COVERAGE:
Workers' Compensation:
Statutory, all scheduled states
Other States Insurance - all Non-monopolistic states
Employers Liability:
Bodily Injury by Accident - $1,000,000 each accident
Bodily Injury by Disease - $1,000,000 each employee
Bodily Injury by Disease - $1,000,000 policy limit
Terms and Conditions:
Deductible - $250,000 per Accident, $500,000 for USL&H
Retention - $250,000 per Accident, $500,000 for USL&H
Endorsements: Stop Gap - $1,000,000 limit - Monopolistic States
Voluntary Compensation Endorsement, USL&H Endorsement
Alternate Employer Endorsement-90 Day Notice of Cancellation
90 Day Notice of Non-Renewal Endorsement
INSURANCE COMPANY OF THE STATE OF PA:
Pol. # 2177940 All other States, Ex. ME, and Monopolistic States
Pol. # 2177944 - AZ, MD, VA; Pol. # 2177945 - CA
Pol. # 2177946 - ID; Pol. # 2177948 - OR
NATIONAL UNION FIRE INSURANCE COMPANY OF PA:
Pol. # 2177943 - UT, WI
INSURING COMPANY(IES)
COVERAGE IS SUBJECT TO ALL TERMS, CONDITIONS AND EXCLUSIONS OF THE POLICY. THE
POLICY(IES) ARE BEING PREPARED AND WILL BE FORWARED TO YOU AS SOON AS POSSIBLE.
IMPORTANT. IF THERE IS ANY INACCURACY IN THE ABOVE DESCRIPTION OF INSURANCE
REQUIRED, PLEASE ADVISE US IMMEDIATELY.
/s/ XXXX X. XXXXXX
-------------------------
Xxxx X. Xxxxxx
Authorized Representative
[LETTERHEAD]
EXHIBIT 4.22
EMPLOYMENT MATTERS
OUTSOURCE INTERNATIONAL
LITIGATION 1990 TO 1997
2.19.97
YEAR CURRENT
INITIATED PLAINTIFF DESCRIPTION RESOLUTION STATUS
--------- --------- ----------- ---------- -------
1997 Xxxx Xxxxx ADA & Wrongful Open In Progress;
Discharge Expect to be
Dismissed.
0000 Xxxxxxxx Xxxxxxx XX Fair Emp. Law Open In Progress;
Expect to be
dismissed
1996 Xxxx Xxxxxx EEOC - Title VII Open EEOC ruled
"no cause",
Plaintiff
has 90 day
right to
xxx.
1996 Xxx Xxxxxxxx EEOC - Title VII Settled Settled
1996 Xxxxxx Xxxxxxxxx Wrongful Discharge Settled Settled
1995 Xxxxxxx Xxxxx EEOC - Title VII Open Plaintiff
failed to
show for
arbitration
hearing;
should be
dismissed
1995 Xxxxxxxx Xxxx EEOC - Title VII Open In Progress;
we expect to
be dismissed.
1995 Xxxxx Xxxxxxxxxx EEOC - Title VII Open EEOC ruled
"no cause";
Plaintiff has
90 day right
to xxx.
1993 None
1992 None
1991 None
1990 None
EXHIBIT 4.22 (CONTINUED)
1/23/97
LIABILITY CLAIMS
ILLINOIS
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER / LABOR WORLD
--------------------------------------------------------------------------------
XXXXXX XXXXXX 4/14/92 $1,500.00 / $
CARRIER: Credit General COVERAGE: Employer's Liability
THE EMPLOYEE RECEIVED SECOND DEGREE XXXXX TO HIS RIGHT HAND AND FOREARM FROM A
HOT GLUE MACHINE WHILE WORKING AT RHOPAC INC.
STATUS: We will maintain our lien of $82,611.00 should a settlement be reached.
A trial date has not been set.
ACTION: Keep legal costs to a minimum while monitoring the third party claim.
XXXX XXXXXXXX 8/4/94 $5,000.00 / $
CARRIER: National Union Fire COVERAGE: General Liability
XX. XXXXXXXX, A REGULAR EMPLOYEE OF CHICAGO CARDBOARD WAS WORKING ON A PRESS
WHEN HIS LEG WAS AMPUTATED.
STATUS: Depositions of Dynment, Chicago Cardboard, employees were taken,
however, the employee's attorney no longer wishes to take the depositions of
Labor World employees at this time.
ACTION: Our defense attorney will pursue a dismissal upon completion of
discovery.
1
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER / LABOR WORLD
--------------------------------------------------------------------------------
XXXXXXXXX XXXXXXXX 6/14/91 $5,000.00 / $
CARRIER: Home Insurance Co. COVERAGE: General Liability
THIS EMPLOYEE WAS WORKING AT ALMARC AND HAD HIS HAND INSIDE A MIXING MACHINE
WHEN ANOTHER TEMPORARY EMPLOYEE TURNED THE MACHINE ON.
STATUS: The employee settled his third party suit with the machine manufacturer
for $20,000.00. We have requested $6,000.00 of that to satisfy our workers
compensation lien.
The trial of 9/6/96 resulted in the employee's Motion to file a Second Complaint
against Olmarc and the Motion to file a Reconsideration on the Dismissals to be
set for hearing on 1/15/97.
ACTION: Determine amount of lien recovery and obtain results of the hearing on
1/15/97.
MARYLAND
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER / LABOR WORLD
--------------------------------------------------------------------------------
XXXXXXX XXXXX 2/21/91 $50,000.00 / $
CARRIER: Home Insurance Co. COVERAGE: General Liability
AN AMPLOYEE OF A SUBCONTRACTOR WORKING ON THE PREMISES OF LEEDMARK (A LABOR
WORLD CUSTOMER) ALLEGES AN UNKNOWN INDIVIDUAL DROPPED A METAL SHELF ON HER HAND,
CAUSING AN AMPUTATION OF HER FINGER.
STATUS: The employee's deposition was obtained revealing that she was assigned a
helper by Leedmark when she arrived to the job site. She trained this individual
and the two worked together for approximately three hours before the incident
took place. None can identify the individual who worked with Xx. Xxxxx thus, we
should be able to obtain a dismissal from this suit.
ACTION PLAN: Continue attempts to secure a dismissal from this claim.
2
FLORIDA
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER / LABOR WORLD
--------------------------------------------------------------------------------
XXXXXXX XXXXX 5/26/94 $2,500.00 / $
CARRIER: Redland Insurance Co. COVERAGE: General Liability
THIS PERSON HAS NAMED OUR CORPORATE COMPANY IN A SUIT FOR INJURIES HE SUSTAINED
WHILE WORKING AT A JOB SITE IN POMPANO BEACH FLORIDA. HE ALLEGES THAT A
TEMPORARY EMPLOYEE OF LABOR WORLD, AT THE SAME JOB SITE, CAUSED HIS INJURIES.
STATUS: The Labor World franchise that is believed to be the proper defendant
in this claim has been added to the complaint.
The deposition of the franchise owner is to be schedule and once obtained,
verifying that his company is the one involved in this incident, the corporate
Labor World will be dismissed.
ACTION PLAN: Obtain franchise owners deposition date and pursue dismissal.
3
MASTER LIABILITY POLICY
FRANCHISE
CINCINNATI
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER / LABOR WORLD
--------------------------------------------------------------------------------
CARGHILL 8/16/93&1/3/94 $2,500.00 / $874.72
Maryland Casualty
CARRIER: Redland Insurance Co. COVERAGE: General Liability
A CLIENT, CARGHILL, ALLEGES THAT BRANCH MANAGER, XXXXX XXXXXXX, LABOR WORLD OF
CINCINNATI, OUTSOURCE, LABOR WORLD USA & EMPLOYEES UNLIMITED BREACHED THE
SERVICING AGREEMENT BY FAILING TO PROVIDE LONGSHOREMANS COVERAGE FOR EMPLOYEE,
XXXXX XXXXXX.
STATUS: The defense counsel is Collecting supporting evidence to pursue a
dismissal for OutSource and Labor World USA who were wrongly named as defendants
in this suit.
ACTION PLAN: Determine what additional information is needed for a dismissal to
be granted.
4
EXHIBIT 4.24
OUTSOURCE INTERNATIONAL
STATUS
OF
TRADEMARKS
FEBRUARY 6, 1997
EXECUTIVE SUMMARY
TRADEMARKS WE NOW OWN
/bullet/ OutSource International - The Leader in Human Resources and design -
#2,009,431 - Effective 10/22/96
/bullet/ Labor World Name in conjunction with the Globe Logo - #l,843,149 -
Effective 7/5/94
/bullet/ Labor World (name only) - #1,956,465 - Effective 2/13/96
/bullet/ Synadyne (name only) - #1,960,796 - Effective 3/5/96
/bullet/ Office Hours (name only) - #2,009,427 - Effective 10/22/96
/bullet/ Office Hours (clock logo only) - #1,976,113 - Effective 5/28/96
TRADEMARKS FILED AND AWAITING ACTION
NAME CHANCES EXPECTED DATE
---- ------- -------------
Synadyne, "'A Professional Excellent 03/31/97
Employee, and Design
"High Efficiency Staffing Excellent 03/31/97
Solutions"
OSI (initials only) Good 09/30/97
Labor Technologies (name) Excellent 03/31/97
"Partners in Productivity" Excellent 03/31/97
Labor Tech Logo Design Good 06/30/97
All European Marks Good 09/30/97
All Canadian Marks Good 12/31/97
36 States where we do Excellent 26 effective;
Business 6 pending;
4 not
permitted
OUTSOURCE INTERNATIONAL
INDIVIDUAL STATE TRADEMARK REGISTRATIONS
36 STATES WHERE WE DO BUSINESS
Holland & Knight handling the registrations
STATES WHERE WE ARE EFFECTIVE
STATE REGISTRATION # STATE REGISTRATION #
----- -------------- ----- --------------
AL 106-818 MS X/X
XX 000000 MO 13639
FL T96000000912 NV X/X
XX X00000 NH VOL 92, PG 121
ID 15373 NJ 14112
IL 078646 OR S30703
IN 5010-3871 PA 2708405
KY 11298 TN X/X
XX X/X XX 00000
XX 00000 UT 036604
MI X00-000 XX X/X
XX 00000 NY 515 241
OH XX00000 XX X/X
XXXXXX WHERE WE ARE PENDING STATES WITH NO REGISTRATION
CT IA AK
MD WI AZ
NC WA NM
DC
EUROPEAN COMMUNITY - TRADEMARK OFFICE - ALICANTE, SPAIN
PENDING - Xxxxxxx & Xxxxx is handling the registrations
Austria France Italy Spain
Belgium Germany Luxembourg Sweden
Denmark Greece The Netherlands United Kingdom
Finland Ireland Portugal
Labor World Serial #20438)
Office Ours Seriel #20420) All filed on 4/1/96
OutSource International Serial #20404)
Synadyne Serial #20412)
CANADIAN TRADEMARKS - OUTSOURCE INTERNATIONAL - SYNADYNE - OFFICE OURS ALL
FILED ON 10/30/96 - ALL HANDLED BY XXXXXXX & XXXXX
OUTSOURCE INTERNATIONAL
STATUS OF PENDING REGISTRATION OF TRADEMARKS
WITH THE U.S. PATENT AND TRADEMARK OFFICE
NOTE: All marks are owned by OutSource Franchising, Inc. except for the
OutSource International marks which are owned by OutSource International,
Inc.
LABOR TECHNOLOGIES
NOTE - EVEN THOUGH WE DO NOT INTEND TO USE THIS XXXX, AT THE PRESENT TIME, WE
ARE PROCEEDING WITH THE REGISTRATION SINCE WE MAY WANT TO USE IT IN THE FUTURE
AND ALL OF OUR COSTS ARE BEHIND US.
PENDING - Xxxxxxx & Xxxxx is handling the registration
/bullet/ "LABOR TECHNOLOGIES" - PTO Serial #74/594038 - Filed 11/2/94 - Notice
of Allowance issued.
/bullet/ "PARTNERS IN PRODUCTIVITY" - PTO serial # 74/594044 - Filed 11/2/94 -
Notice of Allowance issued.
/bullet/ "LOGO - PTO Serial # not assigned - Filed 7/20/95 - Office Action
issued.
/bullet/ MAN & GEAR DESIGN - Application withdrawn 7/20/95
SYNADYNE
PENDING - Xxxx, Xxxx and Xxxxx is handling the registration
/bullet/ "SYNADYNE", "A PROFESSIONAL EMPLOYER" AND DESIGN - PTO serial
# 74/703925 - Filed approximately 8/4/95
OFFICE OURS
PENDING - Xxxxxxx & Xxxxx is handling the registration
/bullet/ "HIGH EFFICIENCY STAFFING SOLUTIONS" - PTO serial # 74/703943 - Filed
7/20/95 - Office Action issued.
OUTSOURCE INTERNATIONAL
PENDING - Xxxxxxx & Xxxxx is handling the registrations
/bullet/ "OSI" (initials only) - PTO serial # 75/034925 - filed 12/20/95.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.26
TRANSACTIONS WITH AFFILIATES Page l of 2
Xxxxx X. Xxxxxxx - attorney - routine collection work in Illinois at
hourly rate established subject to OutSource's routine bid process
Group health insurance provided to Xxxxx Xxxxxxxx, Xxxx Xxxxxxxx, and
Xxxxx X. Xxxxxxx for monthly reimbursement to OutSource of actual costs of
approximately $1,610 per month.
Month to month leasing of records storage space in warehouse owned by
SMSB, a partnership owned by Xxxxx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxxx X
Xxxxxxx and Xxxx Xxxxxxx, in the approximate amount of $2,055 per month.
Leasing of Boca condominium, Chicago dispatch facility, and Waukegan
dispatch facility from SMSB, a partnership owned by Xxxxx Xxxxxxxx, Xxxx
Xxxxxxxx, Xxxxx X Xxxxxxx and Xxxx Xxxxx in the approximate amount of
$11,694 per month pending the purchase of those assets for approximately
$810,000.
Payments to Xxxxxxx Xxxxxxxx and Xxxxx X. Xxxxxxx for the purchase of the
Hammond, Indiana Labor World office - 50% of normal sales commission for
year ended June 10, 1997 and 25% of normal sales commission for year ended
June 10,1998, based on business in place at that office at time of
acquisition.
Xxxxxxx Xxxxxxxx, Xxxxx X.Xxxxxxx and Xxx Xxxxxxx have ownership interest
in the following entities that have Labor World and Office Ours franchise
agreements with OutSource Franchising, Inc. The Labor World franchise
agreements are on the same terms as Labor World Franchise agreements with
other unrelated third parties. The Office Ours franchise agreement with
Xxx Xxxxxxx is the only such Office Ours franchise agreement in existence
at this time.
Division Franchisee and Related Party Stockholders 1996 Royaltie Location
Labor World LM Investors, Inc. - Xxxx Xxxxxxxx $183,857 Aurora, IL
- Xxxxx X Xxxxxxx
Labor World LM Investors, Inc. - Xxxx Xxxxxxxx 110,228 Joliet, IL
- Xxxxx X Xxxxxxx
Labor World Temp Aid, Inc. - Xxxx Xxxxxxxx 148,757 Elkhart, IN
- Xxxxx X Xxxxxxx
Labor World TempAid, Inc. - Xxxx Xxxxxxxx 103,857 Grand Rapids, MI
- Xxxxx X Xxxxxxx
Office Ours All Staff Temps, Inc. - Xxx Xxxxxxx 17,908 Schaumburg, IL
--------
$564,607
========
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.27
SUBSIDIARY PAYMENTS
See attached provisions 7.7, 7.10 and 7.15 of the Credit Agreement among
OutSource and Bank of Boston, as agent, dated February 1997. The items in
those provisions are prohibited - The Borrower referenced is OutSource
International, the Florida parent and the Subsidiaries referenced are
OutSource Franchising, Inc, Capital Staffing Fund, Inc., Synadyne I
through V, Inc., OutSource International of America, Inc. and Employees
Insurance Services, Inc.
7.7 LIMITATION ON RESTRICTED PAYMENTS. (i) Declare or pay any dividend or
make any distribution in respect of the Borrowees or any Subsidiary's Capital
Stock (except (A) dividends or distributions payable solely in the Borrower's or
a Subsidiary's Capital Stock, (B) options, warrants or other rights to purchase
the Capital Stock of the Borrower or a Subsidiary, (C) stock divdends or
distributions payable from a Subsidiary to the Borrower so long as any such
stock dividend is pledged by the Borrower pursuant to the Pledge Agreement to
which the Borrower is a party, and (D) non-stock dividends or distributions
payable solely to the Borrower which has executed and delivered to the Agent a
Subsidiary Guarantee), or (ii) purchase, redeem or otherwise acquire or retire
for value, or set apart assets for a sinking or other analogous fund for the
benefit of, any Capital Stock of the Borrower or any Subsidiary, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary (collectively, a "Restricted Payment") except that as long as no
Default exists or would result therefrom, the Borrower may (A) declare and pay
dividends on its Capital Stock (x) after February __, 1999 if the Consolidated
Indebtedness to Consolidated EBIIDA Ratio at the time of declaration and payment
is less than 3.50 to 1.00 or (y) after the Borrower has received aggregate net
proceeds of not less that $45,000,000 as a result of its issuance of its Capital
Stock in one or more public offerings and (B) repurchase warrants issued
pursuant to the Securities Purchase Agreement in accordance with the terms
thereof but only if such repurchase is paid for with Put Notes (as defined in
said Agreement) which notes are subordinated pursuant to the Securities Purchase
Agreement.
7.10 TRANSACTIONS WITH AFFILIATES. Enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, with any Affiliate unless such transaction is not
otherwise prohibited under this Agreement, is in the ordinary course of the
Borrower's or such Subsidiary's business (including in connection with the
Borrowers on-going franchise program) and is upon fair and reasonable terms no
less favorable to the Borrower or such Subsidiary, as the case may be, than
it would obtain in a comparable arm's length transaction with a Person not an
Affiliate.
7.15 NO LIMIT ON UPSTREAM PAYMENTS BY SUBSIDIARIES. Permit any of its
Subsidiaries to enter into or agree, or otherwise become subject, to any
agreement, contract or other arrangements with any Person pursuant to the terms
of which (a) such Subsidiary is or would be prohibited from declaring or paying
any cash dividends, or distributions or making any other payment to the
Borrower, or (b) such dividends, distributions or other payments are, or would
be limited or restricted on an annual or cumulative basis or otherwise. The
Borrower shall cause its Subsidiaries, to the extent permitted by applicable
law, to make such distributions of funds, including dividends, as may be
necessary to meet in a timely manner all of the Borrower's obligations under
this Agreement.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.33
MATERIAL CONTRACTS AND OBLIGATIONS Page 1 of 2
Debt and Other Liabilities, including leases - See Schedule 4.9
The warrants issued to Triumph/Bachow, as well as the warrants placed in
escrow, should they be eventually issued to Triumph/Bachow, all contain a
contingent put obligation, whereby OutSource would be required to purchase
the warrants for the "publicly traded" fair value of those warrants should
OutSource not cause an Initial Public Offering to happen by February 2001.
This put right expires February 2003. OutSource may satisfy the put
obligation by the issuance of a 3 year subordinated obligation payable in
equal quartedy installments with the first payment due 6 months from the
issuance of the put note and payments due every six months thereafter -
interest would be payable quarterly at the rate of 13% per annum.
Transactions with Affiliates - See Schedule 4.26
Employment Agreements:
Officers - See Schedule 4.26
The company has also committed to employment terms in connection with past
or planned acquisitions as follows:
Xxxxxx Xxxxxxx - CST - potential of $75,000 per year through 1997 and
participation in the ISO plan, with no stated minimum employment term.
Xxxxx Xxxxxxxx - Apex Personnel - 3 years employment (allows termination
for cause) potential $210,000 per year plus 1% of regional sales (as
defined) and minimum options of 12,500 shares during the three year period
(7,500 options at closing and 2,500 options in year 2 and year 3).
Xxxxxx Xxxxxx - Standby-Colorado Springs - potential of $127,000 per year,
with no stated minimum employment term.
Xxxxxx Xxxxxx - Staff Management - potential of $120,000 per year plus
auto allowance, with no stated minimum employment term. Minimum options of
15,000 shares during a three year period (5,000 options at closing and
5,000 options in year 2 and year 3), subject to agreed performance
standards.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.33
MATERIAL CONTRACTS AND OBLIGATIONS Page 2 of 2
The company offers the following employee benefit plans:
Stock Option Plan - See Schedules 4.3, 4.4 and 4.26
Group Health, Life, and Dental Insurance
Annual and Quarterly Incentive Bonus Plans
401(k) plan and employee contribution match
The following acquisitions contain contingent "earnout" provisions which
could allow additional payments based on achieving certain levels of gross
margins, sales or net income:
All-Temps, Inc. - 2.1875% of gross margin of Industrial Division
operations in certain southern California counties, through 1999, with a
minimum annual amount payable of $40,000 and an aggregate three year
(1997-1999) minimum payment of $150,000.
CST, Inc. 3.5 times the excess of Boston Industrial net income (as
defined) over $484,000 for the twelve month period ended May 31, 1997 and
1.5 times the excess of net income (as defined) over $484,000 for the
twelve month period ended May 31, 1998, the sum of both items not to
exceed $380,000.
Komco, Inc. - 1% of Phoenix sales until September, 1997.
Payments to Xxxxxx Xxxxxxxx and Xxxxx X. Xxxxxxx for the purchase of the
Hammond, Indiana Labor World office - See Schedule 4.26
Xxxxxxx X. Xxxxxxxxx, Inc. - 1% of Chattanooga sales through September
1998, with minimum payment of $10,000 and maximum payment of $30,000.
Standy-by Personnel - Denver - 15% of gross margin of positive or negative
variance from $4,750,000 gross margin in 1997 and $5,500,000 gross margin
in 1998, not to exceed $125,000 additional payment per year and not to
exceed $260,000 payment reduction per year.
Stand-by Personnel - Colorado Springs - 15% of gross margin of positive or
negative variance from $1,950,000 gross margin in each of 1997 and 1998,
not to exceed $250,000 per year.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 7.2(F)
SHARES TO BE REDEEMED AT CLOSING
See schedule entitled "February 1997 Corporate Recapitalization" attached
to Schedule 4.4. The column entitled "Private Redemption" denotes the
number of share being redeemed by the company for the following
consideration.
NAME AMOUNT
Xxxxx Xxxxxxxx trust $1,616,394
Xxxxx Xxxxxxxx trust $1,616,394
Xxxx Xxxxxxxx 1,643,532
Xxx Xxxxxxx, Xx. 2,740,840
----------
$7,617,160
==========
The company is deducting approximately 8.5% from the above consideration
to compensate for its financing costs and the net amount due in being paid
with a combination of cash and notes.
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 12.1
OTHER DESIGNATED DEBT
Distribubons of each Subsidiaries' AAA accounts, consistent with the
declarations made by such Subsidiaries on or about February 21, 1997. The
total amounts are estimated to be $9.1 million, of which $4.3 million will
be returned to the Subsidiaries for a net payment retained by the
shareholders of $4.8 million. These amounts are estimates and subject to
final accounting and tax determinations.
Notes payable to the following individuals and listed on Schedule 4.9
Xxxxx Xxxxxxxx trust
Xxxxx Xxxxxxxx trust
Xxxx Xxxxxxxx
Xxxx Xxxxxxx
WAD, Inc.
Payment of approximately $242,000 representing the equity of the following
individuals in SMSB partnership, pertaining to real estate to be purchased
by the Company:
Xxxxx Xxxxxxxx
Xxxx Xxxxxxxx
Xxxx Xxxxxxx
Xxxxx X. Xxxxxxx
EXHIBIT A
EXHIBIT A -- FORM OF SENIOR SUBORDINATED NOTE
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE TOTAL AMOUNT OF THE
ORIGINAL ISSUE DISCOUNT IS 75.5% OF ITS PRINCIPAL AMOUNT, THE ISSUE DATE IS
FEBRUARY 21, 1997, AND THE YIELD TO MATURITY ON THE ISSUE DATE IS 20.5%,
COMPOUNDED QUARTERLY. FOR ADDITIONAL INFORMATION, PLEASE CONTACT XXXXXX
XXXXXXXXX, CHIEF FINANCIAL OFFICER OF OUTSOURCE INTERNATIONAL, INC. AT (954)
418-6200.
THIS NOTE AND THE INDEBTEDNESS REPRESENTED BY THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE
SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH NOTE AND INDEBTEDNESS MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED,
EXCEPT IN ACCORDANCE WITH APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH NOTE AND INDEBTEDNESS WHICH IS
EFFECTIVE UNDER SUCH ACT, (II) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (III)
ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT,
PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY THAT AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
SENIOR SUBORDINATED NOTE DUE FEBRUARY 20, 2002
[$_________] February 21, 0000
Xxxxxx, Xxxxxxxxxxxxx
FOR VALUE RECEIVED, the undersigned, OUTSOURCE INTERNATIONAL, INC., a
Florida corporation (the "Company"), hereby promises to pay to
__________________ or to its order or to such persons as it may designate from
time to time (hereinafter referred to as the "Payee") the principal sum of
__________________________ DOLLARS ($_________).
This Note is issued pursuant to and is entitled to the benefits of the
Securities Purchase Agreement (the "Agreement"), dated as of the date hereof,
between the Company and the Payee. Terms used herein and not otherwise defined
shall have the meanings set forth in the Agreement.
1. MATURITY. Unless sooner prepaid or accelerated in accordance with
the Agreement, the principal amount of this Note shall be repaid by the Company
in two installments as follows: (a) on March 31, 2001, the Company shall pay
$________ against the outstanding principal amount of this Note, and (b) on
February 20, 2002, the Company shall pay $________, representing the remaining
principal balance of this Note; each such payment shall be together with all
accrued and unpaid interest to the date of payment and any other payments due
hereunder without set-off, deduction or counterclaim.
2. INTEREST. The Notes shall bear interest from the date of issuance
until February 21 , 1999 at a rate of eleven percent (11%) per annum and
thereafter at a rate of twelve and one-half percent (12.5%) per annum. Interest
on the unpaid principal amount of the Notes shall be computed on the basis of a
360 day year and the actual days elapsed, and shall be payable quarterly in
arrears on the last day of March, June, September, and December of each year
(or, if such day is not a Business Day, then on the next Business Day),
commencing on March 31, 1997, and upon any other payment of any principal amount
of the Notes.
3. DEFAULT INTEREST AND LATE CHARGES. In the event that any principal
amount of this Note is not paid within five (5) days of when due and payable
(whether at stated maturity, by acceleration or otherwise), the interest rate on
such principal amount shall, notwithstanding anything herein or in the Agreement
to the contrary and until all principal payments on this Note have been brought
current, thereafter be increased by three percent (3%) per annum to the extent
legally enforceable. Any interest not paid when due and payable shall thereafter
be paid, on demand by the Payee, together with interest thereon at a rate of
three percent (3%) per annum in excess of the rate set forth in Section 2 of
this Note.
4. PAYMENTS. All payments of principal and interest on this Note and
any other payment due hereunder or under the Agreement shall be made by the
Company in accordance with the terms of the Agreement.
5. OPTIONAL REDEMPTION. This Note may be redeemed at the option of the
Company, in whole or from time to time in part, at any time and from time to
time, without premium or penalty, in accordance with the terms of Section 6.5 of
the Agreement.
6. REQUIREMENT THAT THE COMPANY OFFER TO REDEEM THE NOTE FOLLOWING A
CHANGE OF CONTROL. Subject to the terms and conditions of the Agreement, the
Company shall become obligated to offer to redeem this Note after the occurrence
of a Change of Control of the Company, in accordance with and to the extent
provided in Section 6.6 of the Agreement.
7. SUBORDINATION. This Note and the Indebtedness represented by this
Note are subordinated to the Senior Indebtedness (as defined in the Agreement).
To the extent provided in the Agreement, the Senior Indebtedness must be paid
before this Note may be paid. The Company agrees and the Payee and each holder
of this Note by accepting this Note agrees, to be bound by such subordination.
No provision of the Agreement or this Note shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal and
interest on this Note at the times, places and rates, and in the currency
provided.
8. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence of an Event of
Default (as defined in the Agreement), the principal amount of this Note
together with all accrued interest and all other payments due hereunder or under
the Agreement may be declared to be immediately due and payable in the manner
and with the effect provided in the Agreement. Certain events of bankruptcy or
insolvency are Events of Default which will result in this Note becoming due and
payable immediately upon the occurrence of such Events
of Default. Subject to the terms of the Agreement, following the occurrence of
an Event of Default, the Payee may proceed to enforce and exercise its rights by
suit in equity, action at law and/or other appropriate means. The Company agrees
to pay on demand all reasonable costs of collection and all other reasonable
costs and expenses, including without limitation reasonable attorneys' fees,
incurred or paid by the Payee in enforcing or collecting this Note upon the
occurrence of an Event of Default.
9. NO WAIVERS; AMENDMENTS. No failure or delay on the part of the
Company or the Payee in exercising any right, power or remedy hereunder or under
the Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein and in the Agreement are cumulative and are not
exclusive of any remedies that may be available to the Company or the Payee at
law or in equity or otherwise. This Note may not be amended and the provisions
hereof may not be waived without the prior written consent of the holders of a
majority of the aggregate principal amount of the Notes outstanding at the time
such action is taken by the Company.
10. GOVERNING LAW. This Note shall be deemed to be a contract made
under the laws of the State of Florida, and for all purposes shall be governed
by and construed in accordance with the laws of the State of Florida without
regard to principles of conflicts of laws thereof.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
and delivered as a sealed instrument at the place and on the date set forth
above by the duly authorized representative of the Company.
ATTEST: OUTSOURCE INTERNATIONAL, INC.
----------------------------- By:____________________________________
Name:
Title:
EXHIBIT B
================================================================================
EXHIBIT B-FORM OF
COMMON STOCK WARRANT
TO PURCHASE COMMON STOCK OF
OUTSOURCE INTERNATIONAL, INC.
Certificate No. W -__
February 21, 1997
================================================================================
TABLE OF CONTENTS
PAGE
----
ARTICLE I - DEFINITIONS .............................................. 1
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS ......... 6
Section 2.1 Manner of Exercise ................................. 6
Section 2.2 Payment of Taxes ................................... 7
Section 2.3 Fractional Shares of Common Stock .................. 7
Section 2.4 Certain Rights and Obligations of Holders .......... 8
Section 2.5 Reservation of Warrant Shares ...................... 8
Section 2.6 No Impairment ...................................... 8
ARTICLE III - TRANSFERS, EXCHANGES ................................... 8
Section 3.1 Exchange and Transfer of Warrant Certificates ...... 8
Section 3.2 Division and Combination ........................... 9
Section 3.3 Lost, Stolen, Mutilated or Destroyed Warrants ...... 9
Section 3.4 Cancellation of Warrant ............................ 9
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS 9
Section 4.1 Subdivisions and Combinations ...................... 9
Section 4.2 Certain Other Distributions ........................ 10
Section 4.3 Issuance of Additional Shares ...................... 11
Section 4.4 Issuance of Warrants, Options or Other Rights ...... 13
Section 4.5 Issuance of Convertible Securities ................. 13
Section 4.6 Adjustment of Number of Warrant Shares ............. 14
Section 4.7 Other Provisions Applicable to Adjustments
under this Section ................................. 14
Section 4.8 Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets ............. 16
Section 4.9 Payment of Dividends ............................... 17
Section 4.10 Verification of Computations ....................... 17
Section 4.11 Notice of Certain Actions .......................... 18
ARTICLE V - REPURCHASE ............................................... 18
Section 5.1 Conditions of Repurchase ........................... 18
Section 5.2 Repurchase Price and Payment ....................... 19
ARTICLE VI - MISCELLANEOUS ........................................... 19
Section 6.1 Changes to Agreement ............................... 19
Section 6.2 Assignment ......................................... 20
Section 6.3 Notices, Etc ....................................... 20
Section 6.4 Defects in Notice .................................. 20
Section 6.5 Governing Law and Forum ............................ 20
(i)
PAGE
----
Section 6.6 Standing ............................................... 21
Section 6.7 Headings ............................................... 21
Section 6.8 WAIVER OF JURY TRIAL ................................... 21
SIGNATURES
Exhibit A Subscription Agreement
Exhibit B Assignment Form
(ii)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE WITH
APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (II) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (III) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
Date of Issuance: February 21, 1997 Certificate No. W -__
WARRANT
To Purchase Shares of Common Stock of
OUTSOURCE INTERNATIONAL, INC.
FOR VALUE RECEIVED, OutSource International, Inc., a Florida
corporation (the "Company"), hereby grants to____________________________ (the
"Purchaser"), or registered assigns, the right to purchase from the Company
_______________________ Shares of the Company's Common Stock (as hereinafter
defined), at a purchase price of $0.01 per share, all on the terms and
conditions and pursuant to the provisions hereinafter set forth. Certain
capitalized terms used herein are defined in Article I hereof. The amount of
securities purchasable pursuant to the rights granted hereunder and the purchase
price for such securities are subject to adjustment pursuant to the provisions
contained in this Warrant.
ARTICLE I - DEFINITIONS
In addition to any terms defined elsewhere herein, as used in this
Warrant the following terms have the respective meanings set forth below:
"AASI" shall mean that certain Agreement among Shareholders and
Investors, dated February 21, 1997, by and among the Company, each of its
current shareholders and each of the holders of Warrants.
"Approval Process" shall mean the process to be used by the Company and
the Holder to determine the Current Value in the event that there is a dispute
regarding such Current
Value as follows: the Company and the Holder shall choose a nationally
recognized, independent investment bank (the "Appraiser") mutually acceptable to
such parties, which will determine the Current Value and deliver to each party a
fairness opinion with respect to such Current Value. If the parties cannot agree
on a mutually acceptable Appraiser, each of the Company and the Holder shall
select a nationally recognized investment banking firm, the two firms so
selected shall select a third nationally recognized investment banking firm, and
such third firm shall be the Appraiser; PROVIDED, HOWEVER, that if the Approval
Process in a particular instance relates to a dispute involving holders of
warrants issued pursuant to the Purchase Agreement to the "Purchasers" (as
defined therein) in addition to the Holder, then all such holders (including the
Holder) must act as a group with the approval of two-thirds-interest of all such
holders) All expenses with respect to the Approval Process shall be borne by the
Company. The Appraiser will consider the cost of the appraisal and fairness
opinion when determining the Current Value. The Approval Process shall proceed
on a timely basis with all parties using their best efforts to resolve such
disputes as soon as practicable.
"Assigned Value" shall mean initially $8.87, subject to adjustment
pursuant to Article IV hereof.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Charter Documents" shall mean the Company's Articles of Incorporation
and the Company's by-laws, each as amended and in effect from time to time.
"Closing Price" on any date shall mean the last sale price of the
Common Stock reported in THE WALL STREET JOURNAL or other trade publication
regular way or, in case no such reported sale takes place on such date, the
average of the last reported bid and asked prices regular way, in either case on
the principal national securities exchange on which the Common Stock is admitted
to trading or listed if that is the principal market for the Common Stock or, if
not listed or admitted to trading on any national securities exchange or if such
national securities exchange is not the principal market for the Common Stock,
the last sale price as reported by the Nasdaq Stock Market ("NASDAQ") or its
successor, if any, or if the Common Stock is not so reported, the average of the
reported bid and asked prices in the over-the-counter market, as furnished by
the National Quotation Bureau, Inc., or if such firm is not then engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business and selected by the Holder or, if there is no such firm, as
furnished by any NASD member selected by the Holder.
"Commission" or "SEC" shall mean the Securities and Exchange Commission
on or any other federal agency then administering the Securities Act, the
Exchange Act and other federal securities laws.
"Common Stock" shall mean the Company's Common Stock, par value, $0.001
per share, and any capital stock of any class of the Company hereafter
authorized which is not
2
limited to a fixed sum or percentage of par, stated or liquidation value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"Company" shall mean OutSource International, Inc., a Florida
corporation, and any successor to the business or assets thereof.
"Company Sale" shall mean any merger or consolidation of the Company,
sale of substantially all outstanding Common Stock, sale of all or substantially
all of the assets of the Company or a recapitalization transaction.
"Convertible Securities" shall mean any and all evidences of
indebtedness, shares of capital stock or other securities which are convertible
or exercisable into or exchangeable for, with or without payment of additional
consideration in cash or property, Common Stock, either immediately or upon the
occurrence of a specified date or a specified event or events, other than the
Warrants.
"Current Value" as of any given date shall mean the fair market value
of the Common Stock on such date determined as follows: (a) if there has been a
Qualified Public Offering, the Company has a Qualified Public Float and the
Closing Price for the Common Stock is available, the average of the daily
Closing Price of the Common Stock for the twenty (20) consecutive Trading Days
ending on the Trading Day immediately prior to the date of determination;
PROVIDED, HOWEVER, that if there shall have occurred prior to the date of
determination any event described in Sections 4.1 through 4.5 hereof which shall
have become effective with respect to market transactions at any time (the
"Market-Effect Date") on or within such 20-day period, the Closing Price for
each Trading Day preceding the Market-Effect Date shall be adjusted, for
purposes of calculating such average, by multiplying such Closing Price by a
fraction, of which the numerator shall be the Assigned Value as in effect on the
Trading day preceding the date of determination and the denominator of which
shall be the Assigned Value as in effect on the Trading Day preceding the
Market-Effect Date, it being understood that the purpose of this provision is to
ensure that the effect of such event on the market price of the Common Stock
shall, as nearly as possible, be eliminated in order that the distortion in the
calculation of the Current Value may be minimized; or (b) if there has not been
a Qualified Public Offering, the Company does not have a Qualified Public Float
or the Closing Price for the Common Stock is not available, the Board of
Directors of the Company and the Holder shall independently determine Current
Value on the basis of an assumed Company Sale as a whole reflecting external
market conditions and the unique characteristics of the Company, as if the
Common Stock were freely tradeable in a liquid public market (i.e. without any
discount for lack of liquidity or restrictions on free trading or due to the
fact that the Company has no class of equity securities registered under the
Exchange Act, if such is the case). The value of individual subsidiaries of the
Company may be considered but any final determination of Current Value shall
derive from a valuation of the Company and its subsidiaries taken as a whole.
In the event that clause (b) above applies, each of the Board of Directors of
the Company and the Holder shall deliver to the other a report stating the
Current
3
Value as of a specified date and setting forth a brief statement as to the
nature and scope of the examination or investigation upon which the
determination of such Current Value was made in the event that such reports
disagree as to Current Value, the Company and the Holder shall Promptly consult
with each other to resolve such disagreement; PROVIDED that, at any time during
such consultations, either the Board of Directors of the Company or the Holder
may request that the parties determine Current Value pursuant to the Approval
Process and upon such request each party shall be obligated to proceed with the
Approval Process.
"Current Warrant Price" shall mean, as of any date, the price at which
a share of Common Stock may be purchased pursuant to this Warrant on such date,
which initially shall be $0.01, subject to adjustment pursuant to Article IV.
"Date of Issuance" shall mean the date of issuance of this Warrant set
forth above; provided that the Date of Issuance shall be deemed to be the date
of issuance of this Warrant regardless of the number of times new certificates
representing the unexercised and unexpired rights formerly represented by this
Warrant shall be issued.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean February 20, 2002.
"Holder" shall initially mean the Purchaser and, thereafter, any Person
in whose name this Warrant is registered on the books of the Company maintained
for such purpose.
"Majority Holders" shall mean the Holders of Warrants exercisable for
in excess of 66.667% of the aggregate number of shares of Common Stock then
purchasable upon exercise of all outstanding Warrants.
"Notes" shall mean the Senior Subordinated Notes issued to the
Purchasers on the Date of Issuance pursuant to the Purchase Agreement in the
original aggregate principal amount of $25,000,000.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any natural person, sole proprietorship,
partnership, joint venture, trust, incorporated organization, limited liability
company, association, corporation, institution, public benefit corporation,
entity or government body (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality division, agency,
commission or department thereof).
4
"Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of February 21, 1997, among the Company, the Purchaser and
the other parties thereto named therein, as modified, supplemented or amended
from time to time.
"Qualified Public Float" shall mean that the Common Stock is registered
under Section 12 of the Exchange Act and the average of the daily Closing Price
of the Common Stock for thirty (30) consecutive Trading Days ending on the date
of determination multiplied by the number of shares of Common Stock outstanding
(excluding those held by affiliates as the term is defined under the Exchange
Act) and freely transferable in the public market is at least $30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering
(i) pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock (ii) in which the proceeds received
by the Company, net of underwriting discounts and commissions, equal or exceed
$25.0 million, (iii) the initial public offering price per share of Common Stock
is at least equal to the Assigned Value then in effect and (iv) at least one of
the "lead" or managing underwriters is one of the so called "bulge bracket Wall
Street firms".
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement, dated February 21, 1997, by and among the Company and each of
the Holders of Common Stock Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system, (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business, or (iii) otherwise any Business Day.
"Transfer" shall mean any disposition of any Warrant or the shares of
Common Stock acquired by the exercise of any purchase rights hereunder or of any
interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Common Stock Warrants" or "Warrant" shall mean this Warrant and the
other Common Stock Warrants issued on the Date of Issuance pursuant to the
Purchase Agreement, and all warrants to purchase Common Stock issued upon
transfer, division or combination of, or in substitution for, any thereof.
"Voting Securities" shall mean the Common Stock and any other class of
equity securities of the Company which, pursuant to the Company's Charter
Documents are entitled
5
to notice of any shareholders' meeting or solicitation of consents and to vote
upon matters submitted to shareholders for a vote.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Current Warrant Price as of the date
of such exercise.
"Warrant Shares" shall mean the shares of Common Stock purchasable or
purchased by the Holder upon the exercise hereof.
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 MANNER OF EXERCISE.
(a) GENERAL. The Holder may exercise, in whole or in part (but not
as to a fractional share of Common Stock), the purchase rights represented by
this Warrant at any time and from time to time after the Date of Issuance to and
including 5:00 p.m., New York City time, on the Expiration Date (such period,
the "Exercise Period") on any Business Day.
(b) SUBSCRIPTION AND PAYMENT OF WARRANT PRICE. In order to
exercise this Warrant, in whole or in part, the Holder shall deliver to the
Company at its principal office at 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx, Xxxxxxxxx
Xxxxx, Xxxxxxx 00000, or at the office or agency designated by Company pursuant
to Section 6.3, (i) a written notice of election to exercise this Warrant
substantially in the form of Subscription Agreement attached as EXHIBIT A to
this Warrant (the "Subscription Agreement"), duly executed by the Holder
exercising all or part of the purchase rights represented by this Warrant or
such Holder's authorized agent or attorney, which notice shall specify the
number of shares of Common Stock to be purchased, (ii) payment of the Warrant
Price, (iii) this Warrant, and (iv) if this Warrant is not registered in the
name of the Purchaser, an Assignment or Assignments substantially in the form of
the Assignment attached as EXHIBIT D to this Warrant (the "Assignment")
evidencing the assignment of this Warrant to the Person exercising all or part
of the purchase rights represented hereby in which case the Holder shall have
complied with all requirements of Section 3.1 hereof. Such Warrant Price shall
be paid in full (i) by wire transfer, cash, check, or money order, payable in
United States currency to the order of the Company, (ii) by the Holder
authorizing the Company to withhold from issuance that number of shares of
Warrant Shares issuable upon such exercise of this Warrant which when multiplied
by the Assigned Value of the Warrant Shares is equal to the Warrant Price (and
such withheld shares shall no longer be issuable under this Warrant) or (iii) by
any combination of the foregoing.
(c) DELIVERY OF CERTIFICATES. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within ten (10) Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to the Holder a certificate or certificates representing the aggregate
number of shares of Common Stock issuable upon such
6
exercise, together with cash in lieu of any fraction of a share as hereinafter
provided. The certificates so delivered shall be, to the extent possible, in
such denomination or denominations as such Holder shall request in the notice
and shall be registered in the name of such Holder or such other name as shall
be designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
the Holder or any other Person so designated to be named therein shall be deemed
to have become a holder of record of such shares of Common Stock for all
purposes, as of the date the notice, together with the Warrant Price and this
Warrant, is received by the Company as described above. The issuance of
certificates for shares of Common Stock shall be made without charge to the
Holder for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Common Stock.
(d) NEW WARRANTS. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to the Holder a new Warrant
evidencing the unexercised rights of the Holder to purchase the balance of the
shares of Common Stock for which this Warrant is then exercisable, which new
Warrant shall in all other respects be identical with this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register Warrant Shares issued
hereunder in the name of any Person who acquired this Warrant (or part hereof)
or any Warrant Shares otherwise than in accordance with this Warrant.
Section 2.2 PAYMENT OF TAXES. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and non-assessable and free from all liens and charges with
respect to the issuance thereof. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof; provided, however, that
the Company shall not be required to pay any federal, state or local income
taxes incurred by the Holder in connection with the issuance or delivery of such
shares. In addition, the Company shall not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of any
Warrant Shares issuable upon exercise of this Warrant in any name other than
that of the Holder, and in such case the Company shall not be required to issue
or deliver any certificate representing Warrant Shares until such tax or other
charge has been paid or it has been established to the satisfaction of Company
that no such tax or other charge is due.
Section 2.3 FRACTIONAL SHARES OF COMMON STOCK. The Company shall not be
required to issue fractional shares of Common Stock upon exercise of any
Warrant. As to any fraction of a share of Common Stock which the Holder of one
or more Warrants, the rights under which are exercised in the same transaction,
would otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction (which shall be deemed
to be a fraction of the last share of Common Stock issued) in an
7
amount equal to the same traction of the Current Value per share of Common Stock
on the date of exercise.
Section 2.4 CERTAIN RIGHTS AND OBLIGATIONS OF HOLDERS. The Holders of
the Warrants and the Warrant Shares shall (a) have such rights with respect to
the registration thereof under the Securities Act as are set forth in the
Registration Rights Agreement and such rights with respect to corporate
governance of the Company and transactions involving Common Stock as are set
forth in the AASI and (b) have such obligations with respect to the sale of a
portion of this Warrant and/or the Warrant Shares as are set forth in the Call
Agreement.
Section 2.5 RESERVATION OF WARRANT SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, for issuance upon
the exercise of Warrants, the maximum number of its authorized but unissued
shares or treasury shares, or both, of Common Stock which may then be issuable
upon the exercise in full of all outstanding Warrants. The Company shall from
time to time take all action which may be necessary or appropriate so that the
Warrant Shares, immediately upon their issuance following an exercise of
Warrants, will be listed or quoted, as the case may be, on the principal
securities exchanges or markets within the United States of America, if any, on
which other shares of Common Stock are then listed.
Section 2.6 NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its Charter Documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Warrants, but will at all
times in good faith assist in the carrying out of all such terms and in the the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holders against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant Shares
receivable upon the exercise of the Warrants above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable Warrant Shares upon the
exercise of any Warrant, and (c) use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under the Warrants. Notwithstanding the foregoing paragraph, the
Company shall not be required to issue Warrant Shares upon the exercise of any
Warrant if such issuance would result in a violation by the Company of any
applicable law.
ARTICLE III - TRANSFERS, EXCHANGES
Section 3.1 EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES. The Warrants
(and any Warrant Shares issued upon exercise of the Warrants) shall bear such
restrictive legend or legends as may be required by the Purchase Agreement and
as may be required by law and
8
shall be transferable only in accordance with the terms of this Agreement, the
Purchase Agreement and the AASI. Subject to such restrictions, this Warrant and
all rights hereunder are transferable, in whole or in part, without charge to
the Holder, upon surrender of this Warrant with a properly executed Assignment
at the principal office of the Company. Upon such surrender, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be canceled. A Warrant,
if properly assigned in compliance herewith, may be exercised by a new Holder
without having a new warrant issued.
Section 3.2 DIVISION AND COMBINATION. This Warrant may be divided or
combined with other Warrants upon presentation hereof at the aforesaid office or
agency of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 3.1 as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
Section 3.3 LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If any
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue,
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated Warrant, or in lieu of or in substitution for a lost, stolen or
destroyed Warrant, a new Warrant representing equivalent rights of the Holder.
If required by the Company, the Holder of the mutilated, lost, stolen or
destroyed Warrant must provide indemnity sufficient to protect the Company from
any loss which it may suffer if the Warrant is replaced. Any such new Warrant
shall constitute an original contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any
time enforceable by anyone.
Section 3.4 CANCELLATION OF WARRANT. Any Warrant surrendered upon the
exercise or for exchange or transfer, or purchased or otherwise acquired by the
Company, shall be canceled and shall not be reissued by the Company; and, except
as provided herein in case of the partial exercise of the Warrants or upon an
exchange or transfer, no Warrant shall be issued hereunder in lieu of such
canceled Warrant. Any Warrant so canceled shall be destroyed by the Company.
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS
Section 4.1 SUBDIVISIONS AND COMBINATIONS. If at any time Company shall:
(a) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock;
9
(b) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
(c) issue any shares of equity securities pursuant to a
reclassification of shares of Common Stock; or
(d) declare a dividend or make a distribution on outstanding
shares of Common Stock in shares of Common Stock;
(any of the events described in the foregoing clauses (a) through (d)
an "Extraordinary Common Stock Event"), then the Current Warrant Price and the
Assigned Value shall each be adjusted by multiplying the then effective Current
Warrant Price or Assigned Value, as applicable, by a fraction, the numerator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately before such Extraordinary Common Stock Event and the denominator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Current Warrant Price and Assigned Value,
respectively. The Current Warrant Price and Assigned Value, as so adjusted,
shall be readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events.
Section 4.2 CERTAIN OTHER DISTRIBUTIONS. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash (other than a cash distribution or dividend payable out
of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of Company which the Holder
shall receive pursuant to Section 4.9 hereof);
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Common Stock); or
(c) any warrants or other rights to subscribe for or purchase any
evidence of its indebtedness, any shares of its stock or any other securities or
property of any nature whatsoever (other than cash, Convertible Securities or
Common Stock);
then the Current Warrant Price and the Assigned Value shall each be adjusted, so
that in each such event lawful and adequate provision shall be made so that the
Holder shall receive upon exercise of this Warrant, in addition to the number of
shares of Common Stock receivable thereupon, the amount or quantity of cash,
evidences of indebtedness, securities, warrants, rights or other property which
they would have received had this Warrant been exercised on the date of and
immediately prior to such event and had they thereafter, during the period from
the date of such event to and including the date of actual exercise of this
Warrant, retained
10
such cash, evidences of indebtedness, securities, warrants, rights or other
property receivable by them as aforesaid during such period, giving application
to all adjustments called for during such period under this Article IV with
respect to the rights of the Holder of this Warrant. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
Section 4.3 ISSUANCE OF ADDITIONAL SHARES.
(a) Except as provided below in clause (b) of this Section 4.3, if
the Company shall, at any time while this Warrant is outstanding, issue any
additional shares of Common Stock of any class at a price per share less than
the Assigned Value in effect immediately prior to such issuance or sale, then in
each such case the Current Warrant Price or Assigned Value shall each be reduced
to an amount determined by multiplying the Current Warrant Price or Assigned
Value, as applicable, by a fraction:
(i) the numerator of which shall be (x) the number of shares
of Common Stock outstanding (excluding treasury shares) immediately
prior to the issuance of such additional shares of Common Stock, plus
(y) the number of shares of Common Stock issuable upon exercise in
full of all outstanding Warrants, plus (z) the number of shares of
Common Stock which the net aggregate consideration received by the
Company for the total number of such additional shares of Common Stock
so issued would purchase at the Assigned Value (prior to adjustment),
and
(ii) the denominator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of Common
Stock, plus (y) the number of shares of Common Stock issuable upon
exercise in full of all outstanding Warrants, plus (z) the actual
number of such additional shares of Common Stock so issued.
For the purpose of this Section 4.3(a), the issuance of any warrants,
options or other subscription or purchase rights with respect to shares of
Common Stock of any class and the issuance of any Convertible Securities (or the
issuance of any warrants, options or any rights with respect to such Convertible
Securities) shall be deemed an issuance at such time of such Common Stock if the
Net Consideration Per Share (determined as provided in Section 4.7(a)) which may
be received by the Company for such Common Stock shall be less than the Assigned
Value at the time of such issuance and, except as hereinafter provided, an
adjustment in each of the Current Warrant Price and Assigned Value shall be made
upon each such issuance of warrants, options, rights or Convertible Securities
in the manner provided in this
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Section 4.3(a) as if such Common Stock were issued at such Net Consideration per
Share. No adjustment of the Current Warrant Price or Assigned Value shall be
made under this Section 4.3(a) upon the issuance of any additional shares of
Common Stock which are issued pursuant to the exercise of any such warrants,
options or other rights or pursuant to the exercise of any conversion or
exchange rights in any such Convertible Securities if any adjustment shall
previously have been made upon the issuance of such warrants, options or other
rights or Convertible Securities. Any adjustment of the Current Warrant Price
and Assigned Value made in accordance with this paragraph of this Section 4.3(a)
shall be disregarded if, as, and when the rights to acquire shares of Common
Stock upon exercise or conversion of the warrants, options, rights or
Convertible Securities which gave rise to such adjustment expire or are canceled
without having been exercised, so that the Current Warrant Price and Assigned
Value, respectively, effective immediately upon such cancellation or expiration
shall be equal to the Current Warrant Price and Assigned Value in effect
immediately prior to the time of the issuance of the expired or canceled
warrants, options, rights or Convertible Securities, with such additional
adjustments as would have been made to that Current Warrant Price and Assigned
Value had the expired or canceled warrants, options, rights or Convertible
Securities never been issued. In the event that the terms of any warrants,
options, other rights or Convertible Securities previously issued by the Company
are changed (whether by their terms or for any other reason) so as to change the
Net Consideration Per Share payable with respect thereto (whether or not the
issuance of such warrants, options, rights or Convertible Securities originally
gave rise to an adjustment of the Current Warrant Price and Assigned Value), the
Current Warrant Price and Assigned Value shall be recomputed as of the date of
such change, so that the Current Warrant Price and Assigned Value, respectively,
effective immediately upon such change shall be equal to the Current Warrant
Price and Assigned Value in effect at the time of the issuance of the warrants,
options, rights or Convertible Securities subject to such change, adjusted for
the issuance thereof in accordance with the terms thereof after giving effect to
such change, and with such additional adjustments as would have been made to the
Current Warrant Price and Assigned Value had the warrants, options, rights or
Convertible Securities been issued on such changed terms.
(b) The terms of this Section 4.3 shall not apply to (i) the
issuance by the Company of options to acquire up to an aggregate of 1,090,878
shares of Common Stock to employees, directors or consultants of the Company or
any Subsidiary pursuant to stock purchase or stock option plans approved by the
Board of Directors (including shares which may be issued under options to
purchase an aggregate of 515,169 shares of Common Stock outstanding on the Date
of Issuance) and the shares of Common Stock issuable upon exercise thereof (such
number being subject to increase by the amount of shares purchasable under any
outstanding options which are terminated without being exercised, and subject to
adjustment for any stock dividend, stock split, subdivision, combination or
other recapitalization of the Common Stock of the Company), so long as the
exercise price of any such options granted after the Date of Issuance is not
less than the Current Value at the time of grant or (ii) any issuance of Common
Stock pursuant to the exercise of Warrants. The maximum number of shares which
shall not be deemed to be an issuance of additional shares pursuant to the
foregoing shall be subject to appropriate adjustment with respect to any as-yet
unissued shares
12
in the event of any Extraordinary Common Stock Event. No adjustment of the
Current Warrant Price or the Assigned Value shall be made under paragraph (a) of
this Section 4.3 under any of the circumstances which would constitute an
Extraordinary Common Stock Event.
Section 4.4 ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any warrants, options or other rights to subscribe
for or purchase any Common Stock or any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, then
the Current Warrant Price and the Assigned Value shall each be adjusted as
provided in Section 4.3 on the basis that the maximum number of shares of Common
Stock issuable pursuant to all such warrants, option or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such warrants, options or other rights. No further
adjustment of the Current Warrant Price or Assigned Value shall be made upon the
actual issuance of shares of Common Stock or Convertible Securities upon
exercise of such warrants, options or other rights.
Section 4.5 ISSUANCE OF CONVERTIBLE SECURITIES. If at any time Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, then the
Current Warrant Price and the Assigned Value shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such Convertible Securities. No adjustment of the Current
Warrant Price or the Assigned Value shall be made under this Section 4.5 upon
the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.4. No further adjustments of the
Current Warrant Price or the Assigned Value shall be made upon the actual issue
of such shares of Common Stock upon (i) conversion or exchange of such
Convertible Securities and, if any issue or sale of such Convertible Securities
is made upon exercise of any warrant or other right to subscribe for or to
purchase any such Convertible Securities for which adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price and the Assigned Value have been or are to be made pursuant to
other provisions of this Article IV, no further adjustments of tile Current
Warrant Price or the Assigned Value shall be made by reason of such issue or
sale or (ii) the actual conversion or exchange of Convertible Securities at less
than the Assigned Value at the
13
time of such conversion or exchange if such Convertible Securities were
initially issued at Assigned Value and no adjustment was required to be made at
the time of such issuance pursuant to the provisions of this Article IV.
Section 4.6 ADJUSTMENT OF NUMBER OF WARRANT SHARES. Upon each
adjustment of the Current Warrant Price and Assigned Value pursuant to this
Article IV, this Warrant shall thereupon evidence the right to purchase that
number of Warrant Shares (calculated to the nearest hundredth of a share)
obtained by multiplying the number of Warrant Shares purchasable immediately
prior to such adjustment upon exercise of this Warrant by the Assigned Value in
effect immediately prior to such adjustment and dividing the product so obtained
by the Assigned Value in effect immediately after such adjustment.
Section 4.7 OTHER PROVISIONS APPLICABLE TO ADJUSTMENT UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the Current Warrant Price and the Assigned Value provided for in
this Article IV:
(a) COMPUTATION OF CONSIDERATION. To the extent that any shares of
Common Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase any additional shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be deemed to be the amount of the cash
received by the Company therefor, or, if such additional shares of Common Stock
or Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such additional shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or accrued
dividends and without taking into account any compensation, discounts or
expenses paid or incurred by Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company (excluding
therefrom any director designated by the transferee thereof). In case any
additional shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such additional shares of Common
Stock or Convertible Securities shall be issued in connection with any merger in
which Company issues any securities, the amount of consideration therefor shall
be deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company (excluding therefrom any director designated by the
transferee thereof for the purpose of voting on such matter but not for the
purpose of determining whether a quorum is present at such meeting), of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such additional shares of
Common Stock, Convertible Securities, warrants or other rights, as the case may
be. The Net Consideration Per Share which may be received by the Company for any
additional shares of Common Stock issuable
14
pursuant to any warrant, option or other subscription or purchase right or any
Convertible Securities shall be determined as follows:
(i) The Net Consideration Per Share shall mean the amount
equal to the total amount of consideration, if any, received by the
Company for the issuance of such warrants, options, rights or
Convertible Securities, plus the minimum amount of consideration, if
any, payable to the Company upon exercise or conversion thereof,
divided by the aggregate number of shares of Common Stock that would
be issued if all such warrants, options or other rights or Convertible
Securities were exercised or converted at such Net Consideration Per
Share; and
(ii) The Net Consideration Per Share which may be received by
the Company shall be determined in each instance as of the date of
issuance of warrants, options, rights or Convertible Securities
without giving effect to any possible future price adjustments or rate
adjustments which may be applicable with respect to such warrants,
options, rights or Convertible Securities and which are contingent
upon future events; provided that in the case of an adjustment to be
made as a result of a change in terms of such warrants, options,
rights or Convertible Securities, the Net Consideration Per Share
shall be recalculated as of the date of such change.
In case of the issuance at any time of any additional shares of Common Stock or
Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Stock, the Company shall be deemed to have
received for such additional shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS SHALL BE MADE. The adjustments required by
this Article IV shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) WHEN ADJUSTMENT NOT REQUIRED. If Company shall take a record
of the holders of its shares of Common Stock for the purpose of entitling them
to receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before such distribution, legally abandon its plan to pay
or deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(d) WHEN ADJUSTMENTS CARRIED FORWARD. No adjustment in the Current
Warrant Price or the Assigned Value in accordance with the provisions of this
Article IV need be made unless such adjustment would amount to a change of at
least 1% therein; PROVIDED, HOWEVER, that the amount by which any adjustment is
not made by reason of the provisions of
15
this Section 4.7(d) shall be carried forward and taken into account at the time
of any subsequent adjustment in the Current Warrant Price or the Assigned Value.
(e) CERTIFICATE OF ADJUSTMENT. Whenever any adjustment is to be
made pursuant to this Article IV, the Company shall prepare and deliver to the
Holder a certificate executed by the Chief Financial Officer of the Company at
least fifteen (15) days prior thereto, such notice to include in reasonable
detail (i) the events precipitating the adjustment, (ii) the computation of any
adjustments (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or options, warrants
or other subscription or purchase rights referred to in this Article IV), (iii)
the Current Warrant Price and Assigned Value immediately before and immediately
after the adjustment, and (iv) the number of shares of Common Stock or the
securities or other property purchasable upon exercise of this Warrant before
and after giving effect to such adjustment. Such Certificate shall be
accompanied by the accountant's verification required by Section 4.10 hereof.
Section 4.8 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS.
(a) In case Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another partnership or
corporation, or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another partnership or corporation and,
pursuant to the terms of such reorganization reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of shares of Common Stock, then each Holder shall have the right
thereafter to receive, in the Holder's sole and absolute discretion, either (i)
a new Warrant from the successor company identical in substance and terms to
this Warrant or (ii) a new warrant upon exercise of which the Holder would
receive the number of shares of common stock or partnership interests of the
successor or acquiring corporation or partnership or of the Company, if it is
the surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be agreed between the Company and the Holder of this
Warrant in order to provide for adjustments of shares of Common Stock for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Article IV. For purposes of this Section
4.8, "common stock of the successor or acquiring corporation" shall
16
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible, into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of asset.
(b) If the Common Stock issuable upon exercise of this Warrant
shall be changed by the Company into the same or different number of shares of
any class or classes of stock, whether by reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Article IV), then and in each such event the Holder shall have
the right thereafter to exercise this Warrant for the kind and amount of shares
of stock and other securities and property receivable upon such reclassification
or other change, by holders of the number of shares of Common Stock for which
this Warrant might have been exercised immediately prior to such
reclassification or change, all subject to further adjustment as provided
herein.
Section 4.9 PAYMENT OF DIVIDENDS. If at any time when this Warrant is
outstanding, the Company shall declare one or more dividends on its Common Stock
payable in cash out of earnings or earned surplus legally available for the
payment of dividends under the laws of the jurisdiction of incorporation of the
Company, or payable in other property of the Company, the Company shall on the
payment date or dates for such dividend or dividends make a special distribution
in cash to the Holder of this Warrant on the record dated for such dividend or
dividends in an amount equal to the product of (a) with respect to cash
dividends, (i) the amount of cash to be paid pursuant to such dividend to each
share of Common Stock then outstanding multiplied by (ii) the number of shares
of Common Stock for which this Warrant is exercisable as of such record date or
(b) with respect to dividends payable in other property of the Company, (i) the
fair market value (determined in good faith by the Company's Board of Directors)
of such other property payable to each share of Common Stock then outstanding
multiplied by (ii) the number of shares of Common Stock for which this Warrant
is exercisable as of such record date.
Section 4.10 VERIFICATION OF COMPUTATIONS. The Company shall select a
nationally-recognized firm of independent public accountants (which may be the
Company's regular accountants), which selection may be changed from time to
time, to verify each computation and/or adjustment made in accordance with this
Article IV. The certificate, report or other written statement of any such firm
shall be conclusive evidence of the correctness of any computation made under
this Article IV. Promptly upon its receipt of such certificate, report or
statement from such firm of independent public accountants, the Company shall
deliver a copy thereof to the Holder.
17
Section 4.11 NOTICE OF CERTAIN ACTIONS. In the event the Company shall:
(a) declare any dividend payable in stock to the holders of its
Common Stock or make any other distribution in property other than cash to the
holders of its Common Stock; or
(b) offer to the holders of its Common Stock rights to subscribe
for or purchase any shares of any class of stock or any other rights or options;
or
(c) effect any reclassification of its Common Stock (other than a
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization or any consolidation or
merger (other than a merger in which no distribution of securities or other
property is made to holders of Common Stock), or any sale, transfer or other
disposition of its property, assets and business substantially as an entirety,
or the liquidation, dissolution or winding up of the Company;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to the Holder at least thirty (30) days prior to such action. Such
notice shall specify the date on which the books of the Company shall close, or
a record be taken, for determining holders of Common Stock entitled to receive
such stock dividend or other distribution or such rights or options, or the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution, winding up or exchange
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed.
ARTICLE V - REPURCHASE
Section 5.1 CONDITIONS OF REPURCHASE.
(a) If on or prior to February 20, 2001, neither a Qualified
Public Offering nor a Company Sale has been consumated, at any time between
February 21, 2001, and February 20, 2003, (the "Optional Repurchase Date"), the
Holder shall have the right to require the Company to purchase in whole or from
time to time in part, this Warrant or, if applicable, the unexercised portion of
this Warrant and, if this Warrant has been exercised in whole or in part prior
to the Optional Repurchase Date, the Warrant Shares purchased upon such exercise
or exercises in accordance with the following provisions. If the Holder desires
to exercise its rights pursuant to this Article V, the Holder shall notify the
Company in writing, indicating the number of Warrants and/or Warrant Shares to
be repurchased in such combined amounts of Warrants and Warrant Shares
representing at least 1,000 shares of Common Stock or integral multiples
thereof. The Company shall use its best efforts to determine the Current Value
as of the Optional Repurchase Date within 45 days after receipt of such notice
and shall notify the Holder of the Current Value in writing promptly following
18
its final determination. The Holder shall have the right to withdraw its notice
of repurchase within ten (10) days after receipt of the notice of determination
of the Current Value. The repurchase price shall be calculated and paid as set
forth in Section 5.2 hereof. In the event that repurchase pursuant to this
Article V shall be unlawful in whole or in part for any reason, the obligation
of the Company to make such repurchase shall continue in effect without
restriction as to date or year until such time or times as such repurchase (or
any portion thereof not yet made) shall no longer be unlawful, and the Company
shall promptly make such repurchase at such time as it becomes lawful, to the
extent it is lawful at that time.
Section 5.2 REPURCHASE PRICE AND PAYMENT.
(a) The repurchase price shall be equal to the product of the
Current Value multiplied by the sum of (i) the aggregate number of Warrant
Shares for which the unexercised portion of this Warrant is then exercisable and
which are to be repurchased pursuant to this Article V and (ii) the aggregate
number of Warrant Shares purchased upon exercise of this warrant which are to be
repurchased pursuant to this Article V.
(b) The Holder shall surrender the certificate or certificates
representing this Warrant and all Warrant Shares to be repurchased to the
Company and thereupon the repurchase price as set forth in this Section 5.2
shall be paid to the order of the Holder. The repurchase price shall be payable
at the option of the Company in cash or through delivery to the Holder of a
promissory note (the "Put Note") with the following terms: (i) final maturity:
three (3) years from date of issuance; (ii) interest: payable in cash quarterly
in arrears at the rate of 13.0% per annum; (ii) principal amortization: ten (10)
equal quarterly installments payable in cash, with the first installment due six
(6) months after the date of issuance and the last installment due on the final
maturity date; and (iv) ranking: subordinated to senior indebtedness on
substantially the same terms as the Notes. The Put Note shall contain such other
terms and conditions at least as favorable to the Holder as the Notes and
otherwise shall have such other terms and conditions as the Holder and the
Company shall reasonably agree.
ARTICLE VI - MISCELLANEOUS
Section 6.1 CHANGES TO AGREEMENT. The Company, when authorized by its
Board of Directors, with the written consent of the Holder may amend or
supplement this Agreement. The Company may, without the consent or concurrence
of the Holder, by supplemental agreement or otherwise, make any changes or
corrections in this Agreement that the Company shall have been advised by
counsel (i) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (ii) add to the covenants and agreements of the Company in this
Warrant such further covenants and agreements thereafter to be observed, or
(iii) result in the surrender of any right or power reserved to or conferred
upon the Company in this Warrant, in each case which changes or corrections do
not and will not adversely affect, alter or change the rights, privileges or
immunities of the Holder.
19
Section 6.2 ASSIGNMENT. All the covenants and provisions of this
Warrant by or for the benefit of the Company or the Holder shall bind and inure
to the benefit of their respective successors and assigns.
Section 6.3 NOTICES, ETC. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be in
writing and shall be delivered by courier, or mailed by a nationally recognized
overnight courier, postage prepaid addressed, (a) if to any of the Holders, at
the address specified on the signature pages attached hereto or such other
address as the Holder shall have furnished to the Company in writing, or (b) if
to the Company, at its address set forth on the signature page attached hereto,
to the attention of the Chief Executive Officer, or at such other address, or to
the attention of such other officer, as the Company shall have furnished to the
Holders in writing. This Agreement and the other Transaction Documents and all
documents delivered in connection herewith or therewith embody the entire
agreement and understanding between the Holders, and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
Section 6.4 DEFECTS IN NOTICE. Failure to file any certificate or
notice or to mail any notice, or any defect in any certificate or notice
pursuant to this Agreement shall not affect in any way the rights of the Holder
or the legality or validity of any adjustment made pursuant to Article IV
hereof, or any transaction giving rise to any such adjustment, or the legality
or validity of any action taken or to be taken by the Company.
Section 6.5 GOVERNING LAW AND FORUM. This Warrant shall be governed by
the laws of State of Florida without regard to principles of conflicts of laws
thereof. Each of the Company and the Holders (a) hereby irrevocably submits
itself to the jurisdiction of the state courts of the State of Florida and to
the jurisdiction of the United States District Courts for the District of
Florida, for the purpose of any suit, action or other proceeding arising out of
or based upon this Warrant or any part or parts hereof brought by any of the
parties hereto, (b) hereby waives, and agrees not to assert, by way of motion,
as a defense, or otherwise, in any such suit, action or proceeding, any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or that this Warrant or the
subject matter hereof may not be enforced in or by such court, and (c) hereby
waives any offsets or counterclaims in any such action, suit or proceeding
(other than compulsory counterclaims). Each of the Company and the Holders
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the Company and the Purchasers agrees that its
submission to jurisdiction and its consent to service of process by mail is made
for the express benefit of the other parties hereto. Final judgment against any
of the Company or the Holders in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of any indebtedness or
liability of such party therein described or in any other manner provided by or
pursuant to the laws of such other jurisdiction. Except with respect to the
enforcement of a final judgment as
20
set forth in the immediately preceding sentence, the Company agrees that any
action, suit or other proceeding arising out of or based upon this Warrant,
whether at law or in equity, shall be brought and maintained exclusively in the
courts referenced in this Section 6.5 and the appellate courts thereto, as
applicable.
Section 6.6 STANDING. Nothing in this Warrant expressed and nothing
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other firm the
Company and the Holder of any right, remedy or claim under or by reason of this
Warrant or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors, and the Holder.
Section 6.7 HEADINGS. The descriptive headings of the articles and
sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
Section 6.8 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDER
HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS WARRANT, OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF;
PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM THE COMPANY
OR THE HOLDER, AS APPLICABLE, SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY
COUNTERCLAIM IN ANY SUCH LITIGATION.
[End of Text]
21
WARRANT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the day and year first above written,
OUTSOURCE INTERNATIONAL, INC,. a
Florida Corporation
By: ____________________________
Name: Xxxx X. Xxxxxxx
Title: President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
WARRANT
PURCHASER SIGNATURE PAGE
Accepted and Agreed as of the
date first written above
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P., its
general partner
By: Bala Equity, Inc., its general
partner
By: ______________________________
Name:
Title:
Address: Three Xxxx Xxxxx Xxxx
0xx Xxxxx
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: _______________________
EXHIBIT A
SUBSCRIPTION AGREEMENT
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase _______ of the shares of Common Stock issuable upon the exercise of
said Warrant, and requests that certificates for such shares of Common Stock be
issued and delivered as follows:
ISSUE TO:______________________________________________________________________
(NAME)
_______________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
_______________________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:____________________________________________________________________
(NAME)
at ____________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock issued hereby is less than all
the shares of Common Stock represented by this Warrant, the undersigned requests
that a new Warrant representing the number of full shares of Common Stock not
exercised be issued and delivered as set forth below.
In full payment of the purchase price with respect to the shares of
Common Stock exercised and transfer taxes, if any, the undersigned hereby
tenders payment of $ ____________ (i) by wire transfer, cash, certified check,
cashiers check or money order payable in United States currency to the order of
the Company, (ii) by authorizing the Company to withhold from such issuance a
number of shares of Common Stock issuable upon exercise of the Warrant which
when multiplied by the Current Value of the Common Stock is equal to the Warrant
Price (and such withheld shares shall no longer be issuable under the Warrant),
or (iii) by a combination of the foregoing.
A-1
SUBSCRIPTION FORM
PURCHASER SIGNATURE PAGE
Date:_____________, ___
_________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant.)
A-2
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the percentage of
Common Stock Deemed Outstanding set forth below:
NAME AND ADDRESS OF ASSIGNEE PERCENTAGE
and does hereby irrevocably constitute and appoint ____________ attorney-in-fact
to register such transfer on the books of OutSource International, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:________________ Print Name: ________________________
Signature: _________________________
Witness: ___________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without altercation or enlargement or any change whatsoever.
B-1
EXHIBIT C
-------------------------------------------------------------------------------
EXHIBIT C
FORM OF
ESCROW AGREEMENT
BY AND AMONG
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION
("ESCROW AGENT")
AND
CERTAIN SHAREHOLDERS OF OUTSOURCE INTERNATIONAL, INC.
("SHAREHOLDERS")
CERTAIN INVESTORS IN SENIOR SUBORDINATED NOTES AND
WARRANTS OF OUTSOURCE INTERNATIONAL, INC.
("INVESTORS")
AND
OUTSOURCE INTERNATIONAL, INC.
("COMPANY")
February 21, 1997
-------------------------------------------------------------------------------
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement"), dated February 21, 1997, is
entered into by and among State Street Bank and Trust Company of Connecticut,
National Association, as escrow agent (the "Escrow Agent"), OutSource
International, Inc., a Florida corporation (the "Company"), certain investors in
Notes of the Company and the Initial Warrants listed on the signature pages and
EXHIBIT A hereto (collectively, the "Investors" and each individually a
"Investor") and certain holders of common stock, par value $.001 per share, of
the Company ("Common Stock") listed on the signature pages and EXHIBIT B hereto
(collectively the "Shareholders" and each individually a "Shareholder").
WHEREAS, on the date hereof, the Investors have purchased from the
Company the Initial Warrants pursuant to that certain Securities Purchase
Agreement dated as of the date hereof;
WHEREAS, in connection with such investment, the Investors have
required that the Escrow Agent and the Shareholders execute this Agreement
pursuant to which warrants to purchase an aggregate of 882,751 shares of Common
Stock be issued in the name of the Escrow Agent and held in escrow under this
Agreement, whereby after the date hereof at the times and upon the occurrence of
the event set forth herein the Escrow Agent shall distribute the Additional
Warrants to the Shareholders and/or to the Investors in accordance herewith;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS.
In addition to any terms defined elsewhere herein, as used in this
Agreement the following terms have the respective meanings set forth below:
"Additional Warrants" shall mean warrants to purchase 882,751 shares
(subject to adjustment pursuant to the terms of such warrants) of Common Stock
at an exercise price of $.01 per share, in the form attached hereto as EXHIBIT
C, which warrants have on this day been issued to the Escrow Agent pursuant to
the Purchase Agreement to be held hereunder for the benefit of the Investors
and/or the Shareholders, as their interest may appear.
"Agreement among Shareholders and Investors" means that certain
Agreement among Shareholders and Investors, dated February 21, 1997, by and
among the Company, the Shareholders and the Investors.
"Arbitration Process" shall mean the process to be used by the Company,
the Shareholders and the Investors to resolve disputes under this Agreement as
follows: the Company, the Shareholders and the Investors shall choose a
nationally recognized,
independent investment bank (the "Arbitrator") mutually acceptable to such
parties, which shall proceed to resolve the dispute and deliver to each party an
opinion with respect thereto. If the parties cannot agree on a mutually
acceptable Arbitrator, the Shareholders as a group by Required Shareholder
Action and the Investors as a group by Required Investor Action shall each
select a nationally recognized investment banking firm, the two firms so
selected shall select a third nationally recognized, independent investment
banking firm, and such third firm shall be the Arbitrator. The Arbitration
Process shall proceed on a timely basis with all parties using their best
efforts to resolve such disputes as soon as practicable. The fees and expenses
of the Arbitrator and all other expenses with respect to the Arbitration Process
shall be paid by the party (I.E., the Shareholders as a group, on the one hand,
or the Investors as a group, on the other hand) whose last proposed offer for
the settlement of the items in dispute, taken as a whole, was farther away from
the final determination of the Arbitrator; PROVIDED HOWEVER, that if the
allocation of such fees and expenses pursuant to the foregoing sentence is not
feasible, the Arbitrator shall determine such allocation among the parties in
its discretion based on the principle that the non-prevailing parties should
bear the cost of the Arbitration Process.
"Asset Acquisition" shall mean (i) an investment by the Company or any
Subsidiary in any other Person pursuant to which such Person shall become a
Subsidiary of the Company or of any Subsidiary of the Company, or shall be
merged with or into the Company or any Subsidiary, or (ii) the acquisition by
the Company or any Subsidiary of the assets of any Person which constitute all
or substantially all of the assets of such Person, any division, line of
business or other identifiable operating unit or segment of such Person other
than in the ordinary course of business.
"Asset Sale" shall mean any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other disposition by the Company or
by any of its Subsidiaries (including any sale and leaseback transaction) to any
Person other than to the Company or to a direct or indirect wholly-owned
Subsidiary of the Company of (i) any capital stock of any Subsidiary of the
Company or (ii) any other property or assets of the Company or of any Subsidiary
of the Company.
"Assigned Value" shall mean initially $8.87, subject to adjustment
pursuant to Article IV of the Warrants.
"Bona Fide Offer" shall mean an offer by the Company or one or more
other Persons which meets each of the following conditions: (i) it is a fully
financed or fully funded, unconditional offer to purchase for cash up to all
Warrants and Warrant Shares then held by the Investors, (ii) it can be
consummated within 15 days after the date it is submitted to the Investors,
PROVIDED, HOWEVER, that if the parties are proceeding diligently and in good
faith toward such consummation and the closing can not practically be
accomplished within such 15-day period, up to an additional 30 days will be
available to consummate the Transaction, (iii) it does not require any Investor
to make representations or warranties or to provide any indemnities in
connection therewith other than customary representations, warranties and
2
indemnities as to the ownership of and title to the Warrants or Warrant Shares
to be sold, the binding nature and enforceability of the agreement of sale and
the authority of the Investors to enter into such agreement and (iv) it is
accompanied by appropriate evidence reasonably satisfactory to two-thirds in
interest of the Investors of the offeror's ability, financial and otherwise, to
consummate the transaction contemplated by such offer and that consummation
thereof will not violate any provision of the charter documents of the Company
or any of its Subsidiaries or any applicable laws or result in a breach of,
constitute a default under, cause a termination under, or give rise to a right
of termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit, authorization,
order, writ, judgment, injunction, decree, determination or arbitration award,
whether written or oral, to which the Company or any of its Subsidiaries is a
party or by which their respective properties are bound or affected.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Closing Price" on any date shall mean the last sale price of the
Common Stock reported in THE WALL STREET JOURNAL or other trade publication
regular way on the principal national securities exchange on which the Common
Stock is admitted to trading or listed if that is the principal market for the
Common Stock or, if not listed or admitted to trading on any national securities
exchange or if such national securities exchange is not the principal market for
the Common Stock, the last sale price as reported by the Nasdaq Stock Market,
Inc. ("NASDAQ") or its successor.
"Commission" shall mean the Securities and Exchange Commission on or
any other federal agency then administering the Securities Act, the Exchange Act
and other federal securities laws.
"Common Stock" shall mean the common stock of the Company's Common
Stock, par value $0.001 per share, and any capital stock of any class of the
Company hereafter authorized which is not limited to a fixed sum or percentage
of par, stated or liquidation value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Company.
"Company" shall have the meaning set forth in the preamble hereof.
"Company Sale" shall mean any merger or consolidation of the Company,
sale of all outstanding Common Stock (including shares issuable upon the
exercise of all Warrants) or sale of all or substantially all of the assets of
the Company determined on a consolidated basis.
"Consolidated Interest Expense" shall mean, with respect to any Person,
for any period, the aggregate amount, to the extent such amount was deducted in
computing Consolidated Net Income, of interest (without deduction of interest
income), whether expensed or capitalized, paid, accrued or scheduled to be paid
or accrued during such period (except to the extent accrued in a prior period)
in respect of all Indebtedness of such Person and its
3
Subsidiaries (including, without duplication, (a) original issue discount on any
Indebtedness (including, in the case of the Company, any original issue discount
on the Notes) to the extent attributable to such period); (b) all capitalized
interest; (c) interest paid by the borrower during such period on debt which is
guaranteed by such Person, and (d) the interest portion of any deferred payment
obligations for such period. For purposes of this definition, (a) interest on a
capital lease obligation shall be deemed to accrue at an interest rate
reasonably determined by the Board of Directors of such Person (as evidenced by
a resolution of such Board of Directors) to be the rate of interest implicit in
such capital lease obligation in accordance with GAAP, and (b) interest shall be
increased or reduced by the net cost (including amortization of fees and
discounts) or benefit associated with interest rate or currency risk protection
agreements attributable to such period.
"Consolidated Net Income" shall mean, with respect to any Person, for
any period, the aggregate of the net income (or loss) of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that (a) the net income of any other Person in which such
Person or any of its Subsidiaries has an interest (which interest does not cause
the net income of such other Person to be consolidated with the net income of
such Person and its Subsidiaries in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions actually paid to such
Person or such Subsidiary by such other Person in such period; (b) the net
income of any Subsidiary of such Person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction actually
prevented the payment of an amount that otherwise could have been paid to, or
received by, such Person or a Subsidiary of such Person not subject to any
Payment Restriction, and (c) there shall be excluded the following: (i) such
Person's share, determined in accordance with GAAP, of the net loss of any other
Person in which such Person or any of its Subsidiaries has an interest (which
interest does not cause the net loss of such other person to be consolidated
with the net income or loss of such Person and its Subsidiaries in accordance
with GAAP), (ii) the net income (or loss) of any other Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition, (iii) all gains realized upon or in connection with or as a
consequence of the issuance of the capital stock of such Person or any of its
Subsidiaries and any gains on pension reversions received by such Person or any
of its Subsidiaries, (iv) all gains and losses, together with any related
provision for taxes, realized in connection with any sale of assets by such
Person during such period (including, without limitation, dispositions pursuant
to sale and leaseback transactions), (v) all extraordinary gains or losses,
together with any related provision for taxes, realized by such Person during
such period, and (vi) the cumulative effect of a change in accounting principles
in the year of adoption of such change.
"Date of Issuance" shall mean the date of issuance of the Warrants;
provided that the Date of Issuance shall be deemed to be the date of issuance of
the Warrants regardless of the number of times new certificates representing the
Warrants shall be issued or reissued.
"Disqualified Capital Stock" shall mean any capital stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event (other than an event
which would constitute a change of control),
4
(i) matures or is mandatorily redeemable, pursuant to a sinking fund obligation
or otherwise, or is redeemable at the sole option of the holder thereof (except
upon the occurrence of a change of control), in whole or in part, on or prior to
the final stated maturity date of the Notes or (ii) is convertible into or
exchangeable for (whether at the option of the issuer or the holder thereof) (a)
debt securities or (b) any capital stock referred to in (i) above, in each case
at any time prior to the final stated maturity date of the Notes; provided, that
only a portion of capital stock which so matures or is mandatorily redeemable,
is so convertible or exchangeable or is so redeemable at the option of the
holder thereof shall be deemed to be Disqualified Capital Stock.
"EBITDA" means, with respect to any Person, for any period, the
Consolidated Net Income of such Person and its Subsidiaries for such period,
plus, to the extent that any of the following shall have been taken into
account, in computing such Consolidated Net Income (a) provision for taxes based
on income or profits (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions of assets outside the ordinary course of business), (b)
Consolidated Interest Expense for such period, (c) depreciation and
amortization, and (d) other non-cash items (other than non-cash interest)
reducing Consolidated Net Income, other than any non-cash item which requires
the accrual of or a reserve for cash charges for any future period, less other
non-cash items increasing Consolidated Net Income.
"Escrow Fund" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are applicable as of the
date of determination; provided, however, that these definitions and all ratios
and calculations contained in any covenants set forth in this Agreement shall be
determined in accordance with GAAP as in effect and applied by the Company on
the Issue Date, consistently applied.
"Initial Warrants" shall mean warrants to purchase 1,210,025 shares
(subject to adjustment pursuant to the terms of such warrants) of Common Stock
at an exercise price of $.01 per share, issued to the Investors pursuant to the
Purchase Agreement; PROVIDED, HOWEVER, that the term Initial Warrants shall
under no circumstances include any Additional Warrants that may after the date
hereof be distributed to the Investors by the Escrow Agent under the terms
hereof.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (i) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness evidenced by
securities, debentures, bonds or other similar
5
instruments (including purchase money obligations) for payment of which such
Person is responsible or liable; (ii) all capitalized lease obligations of such
Person in accordance with GAAP; (iii) all obligations of such Person issued or
assumed as the deferred purchase price of property (but excluding trade accounts
payable arising in the ordinary course of business); (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) all Indebtedness of
others (including all dividends of other Persons for the payment of which is)
guaranteed, directly or indirectly, by such Person or that is otherwise its
legal liability, other than the guarantee by the Company of Indebtedness in an
aggregate principal amount of $1,750,126 with respect to a first and a second
mortgage on a property located at 0000 X. Xxxxxxx Xxxxxxx, Xxxx Xxxxx, Xxxxxxx,
owned by SMSB, a partnership owned by certain former or current shareholders of
the Company, or that is secured by any lien on any asset or property of such
Person, whether or not such Indebtedness is assumed by such Person or is not
otherwise such Person's legal liability; and (vi) all Disqualified Capital Stock
issued by such Person. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above or such other amount on account of the relevant liability,
including without limitation contingent obligations at such date or Indebtedness
issued with original issue discount, as shall be determined in accordance with
GAAP.
"Investor Percentage" shall mean the percentage set forth next to each
Investor in EXHIBIT A hereto.
"Notes" shall mean the Senior Subordinated Notes issued to the
Investors on the Date of Issuance pursuant to the Purchase Agreement in the
original principal amount of $25,000,000.
"Payment Restriction" shall mean, with respect to a Subsidiary of any
Person, any encumbrance, restriction or limitation, whether by operation of the
terms of its charter or by reason of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation, on the ability of (i)
such Subsidiary to (a) pay dividends or make other distributions on its capital
stock or make payments on any obligation, liability or Indebtedness owed to such
Person or any other Subsidiary of such Person, (b) make loans or advances to
such Person or any other Subsidiary of such Person, or (c) transfer any of its
properties or assets to such Person or any other Subsidiary of such Person, or
(ii) such Person or any other Subsidiary of such Person to receive or retain any
such (a) dividends, distributions or payments, (b) loans or advances, or (c)
transfer of properties or assets.
"Per Share Sale Proceeds" shall mean the quotient of (i) the aggregate
amount (or value as determined pursuant to the definition of "Proceed") of
Proceeds actually received, directly or indirectly through dividend,
distribution, redemption, liquidation, winding up or dissolution of the Company,
in connection with a Company Sale by all holders of Common Stock (including
amounts set aside for Shareholders who exercise their dissenters' or appraisal
rights under applicable corporate law), all holders of then outstanding
unexpired rights, options or warrants to subscribe for, to purchase or to
receive Common Stock and all holders of Convertible Securities, regardless of
whether any of the foregoing are actually exercisable
6
or vested at such time, divided by (ii) the sum of (x) the number of shares of
Common Stock actually outstanding on the date of a Company Sale (excluding
treasury stock), plus (y) the maximum number of shares of Common Stock that are
issuable upon the exercise, exchange or conversion of all outstanding unexpired
rights, options or warrants to subscribe for, to purchase or to receive Common
Stock or Convertible Securities, regardless of whether any of the foregoing are
actually exercisable or vested at such time.
"Person" shall mean any natural person, sole proprietorship,
partnership, joint venture, trust, incorporated organization, limited liability
company, association, corporation, institution, public benefit corporation,
entity or government body (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
commission or department thereof).
"Pro Forma Basis" shall mean, with respect to the determination of
EBITDA of any Person or Persons on a combined or consolidated basis as of any
date (the "Determination Date"), such determination during the four full fiscal
quarters for which financial information for such Person or Persons is available
(the "Four Quarter Period") ending on or prior to the Determination Date (but in
no event ending more than 135 days prior to the date of such transaction or
event) on a pro forma basis, giving effect, without limitation, on a pro forma
basis for the period of such calculation to (i) the incurrence or repayment of
any Indebtedness of such Person or Persons or any of their respective
Subsidiaries or any Person of which such Person or Persons are or upon
consummation of an Asset Acquisition become a Subsidiary (and the application of
the proceeds thereof), including Indebtedness incurred in connection with or in
contemplation of an Asset Acquisition, other than the incurrence or repayment of
Indebtedness in the ordinary course of business pursuant to working capital
facilities, at any time subsequent to the first day of the Four Quarter Period
and on or prior to the Determination Date, as if such incurrence or repayment,
as the case may be (and the application of the proceeds thereof), occurred on
the first day of the Four Quarter Period, and (ii) any Asset Sales or Asset
Acquisitions which occurred at any time subsequent to the first day of the Four
Quarter Period and on or prior to the Determination Date, as if such Asset Sale
or Asset Acquisition occurred on the first day of the Four Quarter Period. With
respect to the determination of EBITDA on a Pro Forma Basis of any business or
businesses acquired by the Company in an Asset Acquisition, the Company may add
to the actual historical EBITDA of such business or businesses any verifiable
non-recurring expenses. With respect to the determination of EBITDA on a Pro
Forma Basis of the Company for the year ending December 31, 1997, the Company
may add to its actual historical EBITDA for such period any compensation
(including the related cost of benefits and similar charges) paid to any
shareholder during such period as long as such shareholder is not continuing in
any capacity with the Company or any Subsidiary after the Date of Issuance.
"Proceeds" in connection with a Company Sale shall mean any of the
following: (i) cash, (ii) cash equivalents or (iii) freely tradeable, marketable
securities listed on a national securities exchange, quoted on the NASDAQ or
traded in the over-the-counter market, which shall be valued on the basis of
publicly reported trading prices on the date of determination;
7
provided that in the case of equity securities the "public float" of the issuer
calculated consistently with the definition of "Qualified Public Float" is at
least $50.0 million.
"Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of February 21, 1997, among Company, the Investors and the
other parties thereto named therein, as modified, supplemented or amended from
time to time.
"Qualified Public Float" means that the Common Stock is registered
under Section 12 of the Exchange Act and the average of the daily Closing Prices
of the Common Stock for thirty (30) consecutive Trading Days ending on the date
of determination multiplied by the number of shares of Common Stock then held by
non-affiliates of the Company (as the term is defined under the Exchange Act)
and freely transferable in the public market is at least $30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock in which at least one of the "lead"
or managing underwriters is one of the so called "bulge bracket Wall Street
firms".
"Realizable Market Value" for any Trading Day within a Valuation Period
shall mean the product of (i) the total number of Warrant Shares that can be
acquired by the Investors upon exercise of the Initial Warrants (1,210,025
shares as of the Date of Issuance, subject to adjustment pursuant to the terms
of the Warrants) multiplied by (ii) the Closing Price on such Trading Day.
"Realized Sale Value" in connection with a Company Sale shall mean the
product of (i) the total number of Warrant Shares that can be acquired by the
Investors upon exercise of the Initial Warrants (1,210,025 shares as of the Date
of Issuance, subject to adjustment pursuant to the terms of the Warrants)
multiplied by (ii) the Per Share Sale Proceeds.
"Required Investor Action" shall mean any exercise of any rights or
privileges of the Investors hereunder or any other action on behalf of the
Investors called for hereby which has been taken with the approval by Investors
representing at least two-thirds of the aggregate Investor Percentage.
"Required Shareholder Action" shall mean any exercise of any rights or
privileges of the Shareholders hereunder or any other action on behalf of the
Shareholders called for hereby which has been taken with the approval by
Shareholders representing at least a majority of the aggregate Shareholder
Percentage.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
8
"Subsidiary" shall mean with respect to any Person, any corporation,
association or other business entity of which securities representing more than
50% of the combined voting power of the total voting capital stock (or in the
case of an association or other business entity which is not a corporation, more
than 50% of the equity interest) is at the time owned or controlled, directly or
indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof. When used herein without reference to any Person,
Subsidiary means a Subsidiary of the Company.
"Shareholder Percentage" shall mean the percentage set forth next to
each Shareholder in EXHIBIT B hereto.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system or (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business.
"Valuation Period" shall be a period of thirty (30) consecutive Trading
Days ending on the Trading Day immediately prior to the date of determination,
so long as for each such Trading Day a Closing Price of the Common Stock is
available; PROVIDED, HOWEVER, that if there shall have occurred prior to the
date of determination any event described in Section 4.1, 4.2, 4.3, 4.4 or 4.5
of the Warrants which shall have become effective with respect to market
transactions at any time (the "Market-Effect Date") on or within such 30-Trading
Day period, the Closing Price for each Trading Day preceding the Market-Effect
Date shall be adjusted, for purposes of this Agreement, by multiplying such
Closing Price by a fraction, of which the numerator shall be the Assigned Value
(as defined in the warrants) as in effect immediately prior to the date of
determination and the denominator of which shall be the Assigned Value as in
effect immediately prior to the Market-Effect Date, it being understood that the
purpose of this proviso is to ensure that the effect of such event on the
trading market prices of the Common Stock during such 30-Trading Day period
shall, as nearly as possible, be eliminated.
"Warrants" shall mean collectively the Initial Warrants and the
Additional Warrants.
"Warrant Shares" shall mean shares of Common Stock purchasable or
purchased upon the exercise of the Warrants. Whenever this Agreement makes
reference to a specific number of Warrant Shares, such number is determined
pursuant to the Warrants as in effect on the date hereof and is therefore
subject to adjustment after the date hereof under the terms of the Warrants.
2. ESTABLISHMENT OF ESCROW.
2.1 ESTABLISHMENT OF ESCROW. The Company has herewith issued in the
name of and delivered to the Escrow Agent and the Escrow Agent acknowledges
receipt of the Additional Warrants. The Additional Warrants deposited hereunder,
together with any
9
Warrant Shares resulting from the exercise thereof or other securities, cash or
other property delivered to or held by the Escrow Agent under the terms hereof,
shall be referred to as the "Escrow Fund." Any Common Stock or other securities
from time to time held in the Escrow Fund shall be registered in the name of the
Escrow Agent as escrow agent or its nominee, subject to the terms and conditions
set forth herein. Until otherwise directed by the parties hereto in accordance
with Section 5, the Escrow Agent shall hold the Warrants deposited in escrow and
any Warrant Shares or other securities included in the Escrow Fund in a vault or
similar secure location.
2.2 DIVIDENDS AND DISTRIBUTIONS; INVESTMENT OF CASH; VOTING OF SHARES.
Any securities or other property issued with respect to, or in exchange for, any
securities held in the Escrow Fund, shall become a part of the Escrow Fund and
shall be held hereunder upon the same terms as the securities with respect to or
in exchange for which such securities shall have been issued. Any dividends,
distributions or rights to purchase securities distributed from time to time
with respect to any Additional Warrants, Warrants Shares or other securities
held in the Escrow Fund shall be held by the Escrow Agent until such time as the
Additional Warrants are distributed pursuant to the terms hereof and then
distributed proportionately with the Additional Warrant and/or Warrant Shares.
The Escrow Agent shall invest cash held in the Escrow Fund in U.S. Government
obligations, bank certificates of deposit or money market funds as directed by
the Investors (acting by Required Investor Action) and the Shareholders (acting
by Required Shareholder Action), and it shall not be responsible for any loss
incurred upon any such investment made in accordance with this Section 2.2. The
Escrow Agent shall send to the Investors and the Shareholders, promptly (but in
no event later than seven (7) days after receipt by the Escrow Agent from the
Company), copies of any notices, proxies and proxy material received by it in
connection with any meeting of the shareholders of the Company. The Escrow Agent
shall vote any Warrant Shares held in the Escrow Fund as directed in writing by
the Company in accordance with the terms of the Agreement Among Shareholders and
Investors or shall, upon written request by the Company, execute and deliver to
Persons named by the Company in accordance with the terms of the Agreement Among
Shareholders and Investors a proxy authorizing such Persons to vote the whole
number of shares of Common Stock in the Escrow Fund. Any of the shares of Common
Stock held in the Escrow Fund as to which the Escrow Agent receives no such
direction or request shall not be voted.
2.3 EXERCISE OF WARRANTS; OTHER ACTION UNDER WARRANTS. The Escrow Agent
shall not exercise any of the Additional Warrants held in the Escrow Fund unless
(a) either (i) such Warrants would terminate if not exercised or (ii) exercise
thereof is otherwise required under the terms of the Warrants and such exercise
is requested in writing by any Investor or Shareholder, or (b) such exercise is
requested by an Investor or Shareholder and, following notice of such request
given by the Escrow Agent to all Investors and all Shareholders, such exercise
is approved by Required Investor Action and Required Shareholder Action. The
Escrow Agent shall send to the Investors and the Shareholders promptly (but in
no event later than seven (7) days after receipt by the Escrow Agent from the
Company) copies of any notices or other materials received by it with respect to
the Additional Warrants and shall take
10
such action, or refrain to take such action, as directed by Required Investor
Action and Required Shareholder Action.
3. FIRST PARTIAL DISTRIBUTION OF THE ESCROW FUND.
3.1 DETERMINATION OF ADDITIONAL WARRANTS DISTRIBUTION TO INVESTORS,
SHAREHOLDERS.
(a) Upon the terms and conditions set forth in this Article 3 and
in Article 5, on a single occasion during the period from the Date of Issuance
to and including the earlier of (i) the date on which audited consolidated
financial statements of the Company for the year ended December 31, 1997 are
made available to the Investors or (ii) March 31, 1998 (the "First Escrow
Period"), upon the occurrence of any of the sets of events described in Section
3.2(a), 3.2(b), 3.2(c) or 3.2(d) (each a "Measuring Event"), Additional Warrants
to purchase up to 278,295 Warrant Shares (subject to adjustment pursuant to the
terms of the Warrants), as specifically set forth with respect to the applicable
Measuring Event, shall be distributed out of the Escrow Fund to the Investors as
a group (in proportion to their respective Investor Percentage) or the
Shareholders as a group (in proportion to their respective Shareholder
Percentage); PROVIDED, HOWEVER, that if prior to the applicable date of
distribution the Additional Warrants have been exercised in part or in whole,
the applicable number of Warrant Shares acquired upon such exercise shall
instead be distributed out of the Escrow Fund.
(b) If no Measuring Event shall have occurred during the First
Escrow Period, on the last day of the First Escrow Period, Additional Warrants
to purchase 278,295 Warrant Shares (subject to adjustment pursuant to the terms
of the Warrants) shall be distributed out of the Escrow Fund to the Investors as
a group (in proportion to their respective Investor Percentage).
3.2 MEASURING EVENTS.
(a) If prior to August 21, 1997, the Company either (i)
successfully consummates that certain Asset Acquisition in the Phoenix market
described in Exhibit D.1 and at least four (4) of the Asset Acquisitions
described in EXHIBIT D.2 substantially on the terms described therein or (ii)
successfully consummates each of the six (6) Asset Acquisitions described in
EXHIBIT D.2 substantially on the terms described therein, then Additional
Warrants to purchase 278,295 Warrant Shares (subject to adjustment pursuant to
the terms of the Warrants) shall be distributed to the Shareholders as a group
(in proportion to their respective Shareholder Percentage).
(b) If prior to August 21, 1997, the Company successfully
consummates a single or multiple Asset Acquisitions, whether or not described in
EXHIBIT D, and each of the following conditions is satisfied with respect to all
such Asset Acquisitions on a combined basis:
11
(i) the EBITDA calculated on a Pro Forma Basis attributable to the
acquired business or businesses ("Acquired EBITDA"), as set forth in reasonable
detail (including all adjustments to actual historical EBITDA, if any) in a
written certificate signed by the chief executive officer and chief financial
officer of the Company delivered to the Shareholders and the Investors, is at
least $6,000,000, and
(ii) the aggregate consideration paid by the Company (including
without limitation (w) the purchase price paid for equity securities, debt
securities, assets or other properties, tangible or intangible, (x) any
contingent or deferred consideration in the form of a so called "earn-out"
arrangement, whether or not receipt of such consideration is subject to vesting
or the achievement of performance milestones (it being understood that if the
amount of such contingent or deferred consideration has not been fixed as of the
time of the determination required by this Section 3.2(b), such amount shall be
calculated in accordance with GAAP, (y) the aggregate consideration payable over
the term of any related non-competition, consulting, employment or other similar
agreements, other than reasonable salary and bonus payable to personnel of the
acquired business or businesses after the Asset Acquisitions with respect to
actual services to be performed, and (z) the amount of any Indebtedness or any
other obligation or liability of the acquired business or businesses assumed in
connection with or in contemplation of such Asset Acquisition, except for
current trade payables in the ordinary course of business) does not exceed five
(5.0) times the Acquired EBITDA, then Additional Warrants to purchase 278,295
Warrant Shares (subject to adjustment pursuant to the terms of the Warrants)
shall be distributed to the Shareholders as a group (in proportion to their
respective Shareholder Percentage).
(c) If the amount calculated by:
(i) multiplying the Company's EBITDA for the year ending
December 31, 1997 calculated on a Pro Forma Basis times seven and one-half
(7.5), and
(ii) subtracting from the resulting amount the aggregate
amount of all outstanding Indebtedness of the Company and its Subsidiaries on a
consolidated basis as of December 31, 1997 (the "Implied Value"),
is at least $20,000,000,
then Additional Warrants to purchase the respective numbers of Warrant Shares
(subject to adjustment pursuant to the terms of the Warrants) set forth in the
following chart shall be distributed to the Investors as a group (in proportion
to their respective Investor Percentage) and the Shareholders as a group (in
proportion to their respective Shareholder Percentage) based on the level of the
Implied Value:
12
ADDITIONAL ADDITIONAL
WARRANTS WARRANTS
IMPLIED VALUE TO INVESTORS TO SHAREHOLDERS
$20,000,000 or more,
but less than $27,500,000........... 222,636 55,659
$27,500,000 or more,
but less than $35,000,000 .......... 166,977 111,318
$35,000,000 or more,
but less than $42,500,000........... 111,318 166,977
$42,500,000 or more,
but less than $50,000,000 .......... 55,659 222,636
more than $50,000,000............... zero 278,295
(d) If prior to December 31, 1997 the Company completes a
Qualified Public Offering and the initial public offering price per share of
Common Stock in such offering is such that, when multiplied by the total number
of Warrant Shares that can be acquired by the Investors upon exercise of the
Initial Warrants (1,210,025 shares as of the Date of Issuance subject to
adjustment pursuant to the terms of the Warrants) would be at least $10,750,000,
then Additional Warrants to purchase 278,295 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
4. SECOND PARTIAL DISTRIBUTION OF THE ESCROW FUND.
4.1 DETERMINATION OF ADDITIONAL WARRANTS DISTRIBUTION TO INVESTORS,
SHAREHOLDERS.
(a) Upon the terms and conditions set forth in this Article 4 and
in Article 5, on a single occasion during the period from the Date of Issuance
to and including the second anniversary of the Date of Issuance (the "Second
Escrow Period"), upon the occurrence of any of the sets of events described in
Section 4.2(a), 4.2(b), 4.2(c), 4.2(d), 4.2(e) or 4.2(f) hereof (each a
"Triggering Event"), Additional Warrants to purchase up to 604,456 Warrant
Shares (subject to adjustment pursuant to the terms of the Warrants), as
specifically set forth with respect to the applicable Triggering Event, shall be
distributed out of the Escrow Fund to the Investors as a group (in proportion to
their respective Investor Percentage) or the Shareholders as a group (in
proportion to their respective Shareholder Percentage); PROVIDED, HOWEVER, that
if prior to the applicable date of distribution the Additional Warrants have
been exercised in part or in whole, the applicable number of
13
Warrant Shares acquired upon such exercise shall instead be distributed out of
the Escrow Fund; and PROVIDED, FURTHER, that any such distribution to the
Shareholders shall be subject to rescission as provided in Section 4.3.
(b) If no Triggering Event shall have occurred during the Second
Escrow Period, on the second anniversary of the Date of Issuance 604,456 Warrant
Shares (subject to adjustment pursuant to the terms of the Warrants) shall be
distributed out of the Escrow Fund to the Investors as a group (in proportion to
their respective Investor Percentage).
4.2 TRIGGERING EVENTS.
(a) If during the Second Escrow Period:
(i) a Company Sale is consummated,
(ii) either before such Company Sale or simultaneously
therewith all indebtedness of the Company under the Notes shall
have been repaid and all other monetary obligations under the
Notes duly performed in full, and
(iii) the Realized Sale Value is more than $29,900,000, but
less than $32,600,000,
then
(A) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Investors as a group (in
proportion to their respective Investor Percentage), and
(B) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Shareholders as a group (in
proportion to their respective Shareholder Percentage).
(b) If during the Second Escrow Period:
(i) a Company Sale is consummated,
(ii) either before such Company Sale or simultaneously
therewith all indebtedness of the Company under the Notes shall
have been repaid and all other monetary obligations under the
Notes duly performed in full, and
(iii) the Realized Sale Value is $32,600,000 or more,
14
then Additional Warrants to purchase 604,456 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
(c) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall
have been repaid and all other obligations under the Notes duly
performed in full,
(ii) each of the following conditions (clauses (A) and B
below collectively, the "Liquidity Conditions") is satisfied:
(A) there has been a Qualified Public Offering; and
(B) the Company has a Qualified Public Float during an
entire Valuation Period, and
(iii) the Realizable Market Value is more than $29,900,000,
but less than $32,600,000 for at least 20 Trading Days during the
same Valuation Period as in clause (ii)(B) above,
then
(A) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Investors as a group (in
proportion to their respective Investor Percentage), and
(B) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Shareholders as a group (in
proportion to their respective Shareholder Percentage).
(d) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall
have been repaid and all other obligations under the Notes duly
performed in full,
(ii) each of the Liquidity Conditions is satisfied during an
entire Valuation Period, and
(iii) the Realizable Market value is $32,600,000 or more for
at least 20 Trading Days during the same Valuation Period used for
testing the Liquidity Condition in clause (ii)(B) above,
15
then Additional Warrants to purchase 604,456 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
(e) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall
have been repaid and all other obligations under the Notes duly
performed in full,
(ii) the Shareholders present the Investors with a Bona Fide
Offer at a purchase price per Warrant or Warrant Share which, when
multiplied by the number of Initial Warrants, would be more than
$29,900,000, but less than $32,600,000, and
(iii) those Investors who accept the Bona Fide Offer have all
Warrants and Warrant Shares that they elect to sell (including
Additional Warrants, if any) actually purchased by the offeror in
accordance with the terms of the Bona Fide Offer,
then
(A) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Investors as a group (in
proportion to their respective Investor Percentage), and
(B) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Shareholders as a group (in
proportion to their respective Shareholder Percentage).
(f) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall
have been repaid and all other obligations under the Notes duly
performed in full,
(ii) the Shareholders present the Investors with a Bona Fide
Offer at a purchase price per Warrant or Warrant Share which, when
multiplied by the number of Initial Warrants, would be $32,600,000
or more, and
(iii) those Investors who choose to accept the Bona Fide
Offer have all Warrants and Warrant Shares that they elect to sell
(including Additional Warrants, if any) actually purchased by the
offeror in accordance with the terms of the Bona Fide Offer,
16
then Additional Warrants to purchase 604,456 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
4.3 RESCISSION. Any distribution of Additional Warrants or Warrant
Shares to the Shareholders out the Escrow Fund pursuant to this Article Section
4 shall be rescinded and Additional Warrants and Warrant Shares so received by
the Shareholders shall be transferred free of all liens, claims or other
encumbrances back to the Escrow Agent for distribution to the Investors as a
group (in proportion to their respective Investor Percentage) in accordance with
Section 4.1(b) hereof if at any time after the occurrence of a Triggering Event
either (a) the payment by the Company of any portion of the principal of,
interest on or premium with respect to the Notes is rescinded or must otherwise
be restored or returned by any Investor to the Company or any representative or
fiduciary of the Company or any creditor of the Company for any reason,
including upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or as a result of the appointment of a receiver,
conservator, trustee or similar officer for the Company or any substantial part
of its property or otherwise or (b) the payment by the Company or any other
Person of any portion of the purchase price of Warrants or Warrant Shares
pursuant to a Bona Fide Offer is rescinded or must otherwise be restored or
returned by any Investor to the Company or such Person or any representative or
fiduciary or any creditor thereof for any reason, including upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company or such
Person or as a result of the appointment of a receiver, conservator, trustee or
similar officer for the Company or such person or any substantial part of its
property or otherwise (excluding the occurrence of any of the foregoing if
initiated by the Investors).
5. PROCEDURE FOR DISTRIBUTIONS FROM THE ESCROW FUND.
5.1 ESTABLISHMENT OF RIGHTS TO DISTRIBUTION OF THE ESCROW FUND.
Notwithstanding anything in Sections 3 or 4 hereof to the contrary, whenever the
provisions of this Agreement call for a distribution of any portion of the
Escrow Fund, the relative rights of the Investors as a group and the
Shareholders as a group shall be established by applying the relevant provisions
of this Agreement in accordance with the following procedure:
(a) Any Investor or Shareholder shall have the right to demand
from the Escrow Agent in writing (the "Initial Demand") that Additional Warrants
be distributed to the Investors or the Shareholders by giving the Escrow Agent
written notice thereof, which Initial Demand must specify in reasonable detail:
(i) the provision of this Agreement giving the demanding party the
right to such distribution and the basis for such demand in terms of
the documented occurrence or non-occurrence of particular Measuring
Events or Triggering Events, and
17
(ii) the amount of Additional Warrants that the requesting
Investor or Shareholder demands to have distributed out of the Escrow
Fund to the Investors as a group and the Shareholders as a group.
(b) Upon receipt of an Initial Demand the Escrow Agent shall
promptly deliver copies thereof to all Investors and Shareholders and to the
Company;
(c) Each Investor and Shareholder and the Company shall then have
a period of 30 days after receipt of the Initial Demand to dispute it in writing
(the "Protest Notice") by giving the Escrow Agent written notice thereof, which
Protest Notice must specify in reasonable detail:
(i) the basis for such Investor or Shareholder disputing the
Initial Demand in terms of the documented occurrence or non-occurrence
of particular Measuring Events or Triggering Events or other relevant
circumstances, and
(ii) the amount of Additional Warrants that the disputing Investor
or Shareholder demands to have distributed out of the Escrow Fund to
the Investors as a group and the Shareholders as a group.
(d) If any Protest Notice is delivered to the Escrow Agent within
the period set forth in clause (c) above, the Escrow Agent shall set aside a
portion of the Escrow Fund equal to the Additional Warrants (and/or Warrant
Shares) to which the Initial Demand relates and shall not release them until the
Escrow Agent shall have received a joint written direction from the Investors
and the Shareholders or a binding arbitration award with respect to the
underlying dispute as provided in clause (f).
(e) If no Protest Notice is delivered within the period set forth
in clause (c) above, the Initial Demand shall be deemed to have been
acknowledged and assented to by all Investors and Shareholders and the Escrow
Agent shall proceed promptly with the distribution of a portion of the Escrow
Fund equal to the Additional Warrants (and/or Warrant Shares) to which the
Initial Demand related in accordance with the relevant provisions of this
Agreement and otherwise in the manner set forth in the Initial Demand to the
Investors as a group (in proportion to Investor Percentages) and/or to the
Shareholders as a group (in proportion to Shareholder Percentages).
(f) If the Initial Demand is disputed through delivery of a
Protest Notice within the period set forth in clause (c) above, the Investors,
the Shareholders and the Company shall promptly cooperate in good faith for the
purpose of resolving the dispute, which resolution, if in writing and approved
by Required Investor Action and Required Shareholder Action, shall be binding
upon all parties to this Agreement and not subject to further dispute or review.
If the parties cannot resolve the dispute to their mutual satisfaction within
forty-five (45) days after the expiration of the 30-day period set forth in
clause (c) above, then as their exclusive method of resolving such dispute, the
Investors, the Shareholders and the Company shall resort to the Arbitration
Process. This provision for arbitration shall be specifically
18
enforceable by the parties, and the determination of the Arbitrator in
accordance with the provisions hereof shall be final and binding upon the
parties with no right of appeal therefrom.
5.2 FINAL DISTRIBUTION OF ESCROW FUND. This Agreement shall terminate
30 days after the second anniversary of the Date of Issuance (the "Final Escrow
Date"); PROVIDED, HOWEVER, that if there are outstanding disputes concerning
disposition of the Escrow Fund on such date, this Agreement shall continue in
effect until the date on which all disputes shall have been disposed of in
accordance with Section 5.1. On the Final Escrow Date, (a) if no Initial Demand
has been received by the Escrow Agent, the entire balance of the Escrow Fund, if
any, not previously distributed to the Investors or the Shareholders shall be
distributed to the Investors as a group (in proportion to Investor Percentages)
and (b) if any portion of the Escrow Fund has been set aside pursuant to Section
5.1(d) above, such portion will continue to be held by the Escrow Agent until
distribution thereof can be made as provided in Section 5.1, but the Escrow
Agent shall distribute the balance, if any, of the Escrow Fund to the Investors
as a group (in proportion to Investor Percentages).
6. REPRESENTATION AND WARRANTIES.
Each of the parties to this Agreement severally hereby represent and
warrant to each other party hereto that, as of the Date of Issuance and as of
the date of any distribution of any portion of the Escrow Fund, such party has
full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby; this Agreement and each agreement, document
and instrument to be executed and delivered by such party pursuant to or as
contemplated by this Agreement constitute, or when executed and delivered by
such party will constitute, valid and binding obligations of the party,
enforceable in accordance with their respective terms.
7. THE ESCROW AGENT
7.1 THE ESCROW AGENT. Notwithstanding anything herein to the contrary,
the Escrow Agent shall promptly dispose of all or any part of the Escrow Fund as
directed in writing jointly signed by the Investors and the Shareholders. The
reasonable fees and expenses of the Escrow Agent, including the fees and
disbursements of its counsel, if any, in connection with its performance of this
Agreement shall be paid by the Company. The Escrow Agent shall not be liable
for, and the Shareholders and the Investors shall jointly and severally
indemnify the Escrow Agent against, any losses or claims arising out of any
action taken or omitted in good faith hereunder and upon the advice of counsel,
except for its own gross negligence or willful misconduct. The Escrow Agent may
decline to act and shall not be liable for failure to act if in doubt as to its
duties under this Agreement. The Escrow Agent may act upon any instrument or
signature reasonably believed by it to be genuine and may assume that any person
purporting to give any notice or instruction hereunder, reasonably believed by
it to be authorized, has been duly authorized to do so. The Escrow Agent's
duties shall be determined only with reference to this Escrow Agreement and the
Warrants and applicable laws, and the Escrow Agent is not charged with knowledge
of, or any duties or
19
responsibilities in connection with, any other document or agreement, including
the Purchase Agreement or any agreements executed in connection therewith.
The Escrow Agent shall have the right at any time to resign hereunder
by giving written notice of its resignation to the parties hereto, at the
addresses set forth herein or at such other address as the parties shall
provide, at least thirty (30) Business Days prior to the date specified for such
resignation to take effect. If the parties hereto do not designate a successor
escrow agent within said thirty (30) Business Days, the Escrow Agent may appoint
a successor escrow agent. Upon the effective date of such resignation, all cash
and other payments and all other property then held by the Escrow Agent
hereunder shall be delivered by it to such successor escrow agent or as
otherwise shall be designated in writing by the parties hereto.
In the event that the Escrow Agent should at any time be confronted
with inconsistent or conflicting claims or demands by the parties hereto, the
Escrow Agent shall have the right to interplead said parties in any court of
competent jurisdiction and request that such court determine such respective
rights of the parties with respect to this Escrow Agreement, and upon doing so,
the Escrow Agent shall be released from any obligations or liability to either
party as a consequence of any such claims or demands.
The Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder, either directly or by or through
its agents or attorneys. The Escrow Agent shall not be responsible for and shall
not be under a duty to examine into or pass upon the validity, binding effect,
execution or sufficiency of this Escrow Agreement or of any agreement amendatory
or supplemental hereto.
The Company, the Shareholders and the Investors acknowledge and agree
that the Escrow Agent (i) shall not be responsible for any of the agreements
referred to herein but shall be obligated only for the performance of such
duties as are specifically set forth in this Escrow Agreement; (ii) shall not be
obligated to take any legal or other action hereunder which might in its
judgment involve any expense or liability unless it shall have been furnished
with acceptable indemnification; (iii) may rely on and shall be protected in
acting or refraining from acting upon any written notice, instruction,
instrument, statement, request or document furnished to it hereunder and
reasonably believed by it to be genuine and to have been signed or presented by
the proper person, and shall have no responsibility for determining the accuracy
thereof, and (iv) may consult counsel satisfactory to it, including house
counsel, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the opinion of such
counsel.
Neither the Escrow Agent nor any of its directors, officers or
employees shall be liable to anyone for any action taken or omitted to be taken
by it or any of its directors, officers or employees hereunder except in the
case of gross negligence or willful misconduct. The Company, the Shareholders
and the Investors, jointly and severally, covenant and agree to indemnify the
Escrow Agent and hold it harmless without limitations from and against any
20
loss, liability or expense of any nature incurred by the Escrow Agent arising
out of or in connection with this Agreement or with the administration of its
duties hereunder, including but not limited to legal fees and other costs and
expenses of defending or preparing to defend against any claim or liability in
the premises, unless such loss, liability or expense shall be caused by the
Escrow Agent's willful misconduct or gross negligence. In no event shall the
Escrow Agent be liable for indirect, special or consequential damages.
The Company, the Shareholders and the Investors, jointly and severally,
agree to assume any and all obligations imposed now or hereafter by any
applicable tax law with respect to payments from the Escrow Fund under this
Agreement, and to indemnify and hold the Escrow Agent harmless from and against
any taxes, additions for late payment, interest, penalties and other expenses,
that may be assessed against the Escrow Agent on any such payment or other
activities under this Agreement. The Company, the Shareholders and the Investors
undertake to instruct the Escrow Agent in writing with respect to the Escrow
Agent's responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting in connection
with its acting as Escrow Agent under this Agreement. The Company, the
Shareholders and the Investors, jointly and severally, agree to indemnify and
hold the Escrow Agent harmless from any liability on account of taxes,
assessments or other governmental charges, including without limitation the
withholding or deduction or the failure to withhold or deduct same, and any
liability for failure to obtain proper certifications or to properly report to
governmental authorities, to which the Escrow Agent may be or become subject in
connection with or which arises out of this Agreement, including costs and
expenses (including reasonable legal fees), interest and penalties.
The Company agrees to pay or reimburse the Escrow Agent for any legal
fees incurred in connection with the preparation of this Agreement and to pay
the Escrow Agent's reasonable compensation for its normal services hereunder in
accordance with the fee schedule set forth in the letter attached hereto as
EXHIBIT E. The Escrow Agent shall be entitled to reimbursement on demand for all
reasonable expenses incurred in connection with the administration of the escrow
created hereby which are in excess of its compensation for normal services
hereunder, including without limitation, payment of any legal fees incurred by
the Escrow Agent in connection with resolutions of any claim by any party
hereunder.
8. MISCELLANEOUS
8.1 GOVERNING LAW AND FORUM. This Agreement shall be governed by the
laws of State of Florida without regard to principles of conflicts of laws
thereof. Each of the Company, the Investors and the Shareholders (a) hereby
irrevocably submits themselves to the jurisdiction of the state courts of the
State of Florida and to the jurisdiction of the United States District Courts
for the District of Florida, for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement or any part or parts
hereof, and (b) hereby waive, and agree not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that
they are not subject personally to the jurisdiction of the above-named courts,
that their property is exempt or immune from
21
attachment or execution, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court. Each of the Company, the Investors and the Shareholders hereby
consent to service of process by registered mail at the address to which notices
are to be given. Each of the Company, the Investors and the Shareholders agree
that their submission to jurisdiction and their consent to service of process by
mail is made for the express benefit of the other parties hereto. Final judgment
against any party hereto in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of any liability of such party
therein described or in any other manner provided by or pursuant to the laws of
such other jurisdiction. Except with respect to the enforcement of a final
judgment as set forth in the immediately preceding sentence, each of the
Company, the Investors and the Shareholders agree that any action, suit or other
proceeding arising out of or based upon this Agreement, whether at law or in
equity, shall be brought and maintained exclusively in the courts referenced in
this Section 8.1 and the appellate courts thereto, as applicable.
8.2 NOTICES, ETC. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing and
shall be delivered by courier, or mailed by a nationally recognized overnight
courier, postage prepaid, addressed, (a) if to any of the Investors, at the
address specified on the signature pages attached hereto or such other address
as the Investor shall have furnished to the other parties hereto in writing, or
(b) if to any of the Shareholders, at the address specified on the signature
pages attached hereto or such other address as the Shareholder shall have
furnished to the other parties hereto in writing, or (c) if to the Company, at
its address set forth on the signature page attached hereto, to the attention of
the Chief Executive Officer, or at such other address, or to the attention of
such other officer, as the Company shall have furnished to the other parties
hereto in writing, or (d) if to the Escrow Agent, at its address set forth on
the signature pages hereto or such other address as the Escrow Agent shall have
furnished to the other parties hereto in writing.
8.3 PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes all prior
understandings and agreements among the parties relating to the subject matter
hereof.
8.4 ASSIGNABILITY. This Agreement shall be binding upon and enforceable
by, and shall inure to the benefit of (a) the Investors and their respective
successors and permitted assigns, (b) the Shareholders and their respective
successors and permitted assigns and (c) the Company and its successors and
permitted assigns. Notwithstanding the foregoing, nothing in this Agreement is
intended to give any person not named herein the benefit of any legal or
equitable right, remedy or claim under this Agreement, except as expressly
provided herein.
8.5 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
22
8.6 EXECUTION IN COUNTERPARTS. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
8.7 NON-WAIVER. The failure in any one or more instances of a party
hereto to insist upon performance of any of the terms, covenants or conditions
of this Agreement, to exercise any right or privilege conferred in this
Agreement or the waiver by said party of any breach of any of the terms,
covenants or conditions of this Agreement, shall not be construed as a
subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred. No waiver shall be effective
unless it is in writing and signed by an authorized representative of the
waiving party.
8.8 AMENDMENTS. This Agreement (including EXHIBIT B) may not be amended
or modified except in writing by Required Investor Action, Required Shareholder
Action and the Company. Should the Investors and the Shareholders attempt to
change this Agreement in a manner that would either increase the duties or
responsibilities of the Escrow Agent or that, in the sole and absolute
discretion of the Escrow Agent, it deems undesirable, the Escrow Agent may
resign as Escrow Agent in accordance with the terms of Article 7 above.
8.9 WAIVER OF JURY TRIAL. THE INVESTORS AND THE SHAREHOLDERS HEREBY
WAIVE TRIAL BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF;
PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM, EACH PARTY
HERETO SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY COUNTERCLAIM IN ANY SUCH
LITIGATION.
[End of Text]
23
ESCROW AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OUTSOURCE INTERNATIONAL, INC.,
a Florida corporation
By:/s/ XXXX X. XXXXXXX
------------------------
Name: Xxxx X. Xxxxxxx
Title: President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
ESCROW AGREEMENT
INVESTORS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIUMPH-CONNECTICUT
LIMITED PARTNERSHIP
By: Triumph-Connecticut Capital
Advisors, L.P., its general partner
By:
---------------------------
Name:
Title:
Address: Sixty Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Telephone:(000) 000-0000
Telecopy: (000) 000-0000
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P.,
its general partner
By: Bala Equity, Inc., its general
partner
By:
---------------------------
Name:
Title:
Address: Three Xxxx Xxxxx Xxxx
0xx Xxxxx
Xxxx Xxxxxx, XX 00000
Telephone:(000) 000-0000
Telecopy: (000) 000-0000
ESCROW AGREEMENT
SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
-------------------------------------
Xxxx X. Xxxxxxx
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xx.
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
-------------------------------------
Xxxxxx X. Xxxxxxx
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xx.
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
-------------------------------------
Xxxxxx X. Xxxxxxx as Co-Trustee of the
Xxxxxx X. Xxxxxxx Irrevocable Trust
dated February 28, 1996
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xx.
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
ESCROW AGREEMENT
ESCROW AGENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION
By:
---------------------------
Name:
Title:
Address: 000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
EXHIBIT A
NAME OF INVESTOR INVESTOR PERCENTAGE
Triumph-Connecticut Limited Partnership 56%
Bachow Investment Partners III, L.P. 44%
EXHIBIT B
NAME OF SHAREHOLDER SHAREHOLDER PERCENTAGE
Xxxx X. Xxxxxxx 11.57%
Xxxxxx X. Xxxxxxx 2.11%
Xxxxxx X. Xxxxxxx Trust 1.05%
Xxxxxxxx X. Xxxxxxxx Trust 9.27%
Xxxxx Xxxxxxxx Trust 9.27%
Xxxx X. Echubert 26.06%
Xxxxxxx X. Xxxxxxxx 1.02%
Xxxxx Xxxxxx 1.03%
Xxxxxxx Xxxxxxxx Trust 4.67%
Xxxxx X. Xxxxxxxx Trust 5.69%
Xxxxx X. Xxxxxxx 12.93%
Xxxxxxxx Xxxxxxx 4.78%
Xxxxxxxx Xxxxxxx Trust 1.03%
Xxxxx X. Xxxxxxx 3.74%
Xxxxx X. Xxxxxxx Trust 1.02%
Xxxxxxx X. Xxxxxxx 4.76%
-------
TOTAL 100.00%
=======
================================================================================
COMMON STOCK WARRANT
TO PURCHASE COMMON STOCK OF
OUTSOURCE INTERNATIONAL, INC.
Certificate No. W-____
February 21, 1997
================================================================================
TABLE OF CONTENTS
PAGE
ARTICLE I - DEFINITIONS .............................................. 1
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS ......... 6
Section 2.1 Manner of Exercise .................................... 6
Section 2.2 Payment of Taxes ...................................... 7
Section 2.3 Fractional Shares of Common Stock ..................... 7
Section 2.4 Certain Rights and Obligations of Holders ............. 8
Section 2.5 Reservation of Warrant Shares ......................... 8
Section 2.6 No Impairment ......................................... 8
ARTICLE III - TRANSFERS, EXCHANGE .................................... 8
Section 3.1 Exchange and Transfer of Warrant Certificates ......... 8
Section 3.2 Division and Combination .............................. 9
Section 3.3 Lost, Stolen, Mutilated or Destroyed Warrants ......... 9
Section 3.4 Cancellation of Warrant................................ 9
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS 9
Section 4.1 Subdivisions and Combinations ......................... 9
Section 4.2 Certain Other Distributions ........................... 10
Section 4.3 Issuance of Additional Shares ......................... 11
Section 4.4 Issuance of Warrants, Options or Other Rights ......... 13
Section 4.5 Issuance of Convertible Securities .................... 13
Section 4.6 Adjustment of Number of Warrant Shares ................ 14
Section 4.7 Other Provisions Applicable to Adjustments
under this Section .................................... 14
Section 4.8 Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets ................ 16
Section 4.9 Payment of Dividends .................................. 17
Section 4.10 Verification of Computations .......................... 17
Section 4.11 Notice of Certain Actions ............................. 18
ARTICLE V - REPURCHASE ............................................... 18
Section 5.1 Conditions of Repurchase .............................. 18
Section 5.2 Repurchase Price and Payment .......................... 19
ARTICLE VI - MISCELLANEOUS ........................................... 19
Section 6.1 Changes to Agreement .................................. 19
Section 6.2 Assignment ............................................ 20
Section 6.3 Notices, Etc .......................................... 20
Section 6.4 Defects in Notice ..................................... 20
Section 6.5 Governing Law and Forum ............................... 20
(i)
PAGE
----
Section 6.6 Standing............................................... 21
Section 6.7 Headings............................................... 21
Section 6.8 WAIVER OF JURY TRIAL .................................. 21
SIGNATURES
Exhibit A Subscription Agreement
Exhibit B Assignment Form
(ii)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE WITH
APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (II) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (III) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN ON FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
Date of Issuance: February 21, 1997 Certificate No. W-__
WARRANT
To Purchase Shares Of Common Stock Of
OUTSOURCE INTERNATIONAL, INC.
FOR VALUE RECEIVED, OutSource International, Inc., a Florida corporation (the
"Company"), hereby grants to __________________ (the "Purchaser"), or registered
assigns, the right to purchase from the Company _____________ shares of the
Company's Common Stock (as hereinafter defined), at a purchase price of $0.01
per share, all on the terms and conditions and pursuant to the provisions
hereinafter set forth. Certain capitalized terms used herein are defined in
Article I hereof. The amount of securities purchasable pursuant to the rights
granted hereunder and the purchase price for such securities are subject to
adjustment pursuant to the provisions contained in this Warrant.
ARTICLE I - DEFINITIONS
In addition to any terms defined elsewhere herein, as used in this warrant
the following terms have the respective meanings set forth below:
"AASI" Shall mean that certain agreement among shareholders and investors,
dated February 21, 1997, by and among the company, each of its current
shareholders and each of the holders of Warrants.
"Approval Process" shall mean the process to be used by the Company and the
Holder to determine the Current Value in the event that there is a dispute
regarding such Current
Value as follows: the Company and the Holder shall choose a nationally
recognized, independent investment bank (the "Appraiser") mutually acceptable to
such parties, which will determine the Current Value and deliver to each party a
fairness opinion with respect to such Current Value. If the parties cannot agree
on a mutually acceptable Appraiser, each of the Company and the Holder shall
select a third nationally recognized investment banking firm, the two firms so
selected shall select a third nationally recognized investment banking firm, and
such third firm shall be the Appraiser; PROVIDED, HOWEVER, that if the Approval
Process in a particular instance relates to a dispute involving holders of
warrants issued pursuant to the Purchase Agreement to the "Purchasers" (as
defined therein) in addition to the Holder, then all such holders (including the
Holder) must act as a group with the approval of two-thirds-in-interest of all
such holders) All expenses with respect to the Approval Process shall be borne
by the Company. The Appraiser will consider the cost of the appraisal and
fairness opinion when determining the Current Value. The Approval Process shall
proceed on a timely basis with all parties using their best efforts to resolve
such disputes as soon as practicable.
"Assigned Value" shall mean initially $8.87, subject to adjustment pursuant
to Article IV hereof.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"Charter Documents" shall mean the Company's Articles of Incorporation and
the Company's by-laws, each as amended and in effect from time to time.
"Closing Price" on any date shall mean the last sale price of the Common
Stock reported in THE WALL STREET JOURNAL or other trade publication regular way
or, in case no such reported sale takes place on such date, the average of the
last reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading or
listed if that is the principal market for the Common Stock or, if not listed or
admitted to trading on any national securities exchange or if such national
securities exchange is not the principal market for the Common Stock, the last
sale price as reported by the Nasdaq Stock Market ("NASDAQ") or its successor,
if any, or if the Common Stock is not so reported, the average of the reported
bid and asked prices in the over-the-counter market, as furnished by the
National Quotation Bureau, Inc., or if such firm is not then engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business and selected by the Holder or, if there is no such firm, as
furnished by any NASD member selected by the Holder.
"Commission" or "SEC" shall mean the Securities and Exchange Commission on
or any other federal agency then administering the Securities Act, the Exchange
Act and other federal securities laws.
"Common Stock" shall mean the Company's Common Stock, par value $0.001 per
share, and any capital stock of any class of the Company hereafter authorized
which is not
2
limited to a fixed sum or Percentage of par, stated or liquidation value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"Company" shall mean OutSource International, Inc., a Florida corporation,
and any successor to the business or assets thereof.
"Company Sale" shall mean any merger or consolidation of the Company, sale
of substantially all outstanding Common Stock, sale of all or substantially all
of the assets of the Company or a recapitalization transaction.
"Convertible Securities" shall mean any and all evidences of indebtedness,
shares of capital stock or other securities which are convertible or exercisable
into or exchangeable for, with or without payment of additional consideration in
cash or property, Common Stock, either immediately or upon the occurrence of a
specified date or a specified event or events, other than the Warrants.
"Current Value" as of any given date shall mean the fair market value of
the Common Stock on such date determined as follows: (a) if there has been a
Qualified Public Offering, the Company has a Qualified Public Float and the
Closing Price for the Common Stock is available, the average of the daily
Closing Price of the Common Stock for the twenty (20) consecutive Trading Days
ending on the Trading Day immediately prior to the date of determination;
PROVIDED, HOWEVER, that if there shall have occurred prior to the date of
determination any event described in Sections 4.1 through 4.5 hereof which shall
have become effective with respect to market transactions at any time (the
"Market-Effect Date") on or within such 20-day period, the Closing Price for
each Trading Day preceding the Market-Effect Date shall be adjusted, for
purposes of calculating such average, by multiplying such Closing Price by a
fraction, of which the numerator shall be the Assigned Value as in effect on the
Trading day preceding the date of determination and the denominator of which
shall be the Assigned Value as in effect on the Trading Day preceding the
Market-Effect Date, it being understood that the purpose of this provision is to
ensure that the effect of such event on the market price of the Common Stock
shall, as nearly as possible, be eliminated in order that the distortion in the
calculation of the Current Value may be minimized; or (b) if there has not been
a Qualified Public Offering, the Company does not have a Qualified Public Float
or the Closing Price for the Common Stock is not available, the Board of
Directors of the Company and the Holder shall independently determine Current
Value on the basis of an assumed Company Sale as a whole reflecting external
market conditions and the unique characteristics of the Company, as if the
Common Stock were freely tradeable in a liquid public market (i.e. without any
discount for lack of liquidity or restrictions on free trading or due to the
fact that the Company has no class of equity securities registered under the
Exchange Act, if such is the case). The value of individual subsidiaries of the
Company may be considered but any final determination of Current Value shall
derive from a valuation of the Company and its subsidiaries taken as a whole. In
the event that clause (b) above applies, each of the Board of Directors of the
Company and the Holder shall deliver to the other a report stating the Current
3
Value as of a specified date and setting forth a brief statement as to the
nature and scope of the examination or investigation upon which the
determination of such Current Value was made. In the event that such reports
disagree as to Current Value, the Company and the Holder shall promptly consult
with each other to resolve such disagreement; PROVIDED that, at any time during
such consultations, either the Board of Directors of the Company or the Holder
may request that the parties determine Current Value pursuant to the Approval
Process and upon such request each party shall be obligated to proceed with the
Approval Process.
"Current Warrant Price" shall mean, as of any date, the price at which a
share of Common Stock may be purchased pursuant to this Warrant on such date,
which initially shall be $0.01, subject to adjustment pursuant to Article IV.
"Date of Issuance" shall mean the date of issuance of this Warrant set
forth above; provided that the Date of Issuance shall be deemed to be the date
of issuance of this Warrant regardless of the number of times new certificates
representing the unexercised and unexpired rights formerly represented by this
Warrant shall be issued.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean February 20, 2002.
"Holder" shall initially mean the Purchaser and, thereafter, any Person in
whose name this Warrant is registered on the books of the Company maintained for
such purpose.
"Majority Holders" shall mean the Holders of Warrants exercisable for in
excess of 66.667 % of the aggregate number of shares of Common Stock then
purchasable upon exercise of all outstanding Warrants.
"Notes" shall mean the Senior Subordinated Notes issued to the Purchasers
on the Date of Issuance pursuant to the Purchase Agreement in the original
aggregate principal amount of $25,000,000.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any natural person, sole proprietorship, partnership,
joint venture, trust, incorporated organization, limited liability company,
association, corporation, institution, public benefit corporation, entity or
government body (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, commission
or department thereof).
4
"Purchase Agreement" shall mean that certain Securities Purchase Agreement,
dated as of February 21, 1997, among the Company, the Purchaser and the other
parties thereto named therein, as modified, supplemented or amended from time to
time.
"Qualified Public Float" shall mean that the Common Stock is registered
under Section 12 of the Exchange Act and the average of the daily Closing Price
of the Common stock for thirty (30) consecutive Trading Days ending on the date
of determination multiplied by the number of shares of Common Stock outstanding
(excluding those held by affiliates as the term is defined under the Exchange
Act) and freely transferable in the public market is at least $30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering (i)
pursuant to an effective registration statement under the Securities Act cover
the offer and sale of Common Stock (ii) in which the proceeds received by the
Company, net of underwriting discounts and commissions, equal or exceed $25.0
million, (iii) the initial public offering price per share of Common Stock is at
least equal to the Assigned Value then in effect and (iv) at least one of the
"lead" or managing underwriters is one of the so called "bulge bracket Wall
Street firms".
"Registration Rights Agreement" shall mean that certain Registration Rights
Agreement, dated February 21, 1997, by and among the Company and each of the
Holders of Common Stock Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system, (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business, or (iii) otherwise any Business Day.
"Transfer" shall mean any disposition of any Warrant or the shares of
Common Stock acquired by the exercise of any purchase rights hereunder or of any
interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Common Stock Warrants" or "Warrant" shall mean this Warrant and the other
Common Stock Warrants issued on the Date of Issuance pursuant to the Purchase
Agreement, and all warrants to purchase Common Stock issued upon transfer,
division or combination of, or in substitution for, any thereof.
"Voting Securities" shall mean the Common Stock and any other class of
equity securities of the Company which, pursuant to the Company's Charter
Documents are entitled
5
to notice of any shareholders' meeting or solicitation of consents and to vote
upon matters submitted to shareholders for a vote.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of this Warrant pursuant to Section
2.1 hereof, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Shares" shall mean the shares of Common Stock purchasable or
purchased by the Holder upon the exercise hereof.
ARTICLE II- WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 MANNER OF EXERCISE.
(a) GENERAL. The Holder may exercise, in whole or in part (but
not as to a factional share of Common Stock), the purchase rights represented by
by this Warrant at any time and from time to time after the Date of Issuance to
and including 5:00 p.m., New York City time, on the Expiration Date (such
period, the "Exercise Period") on any Business Day.
(b) SUBSCRIPTION AND PAYMENT OF WARRANT PRICE. In order to
exercise this Warrant, in whole or in part, the Holder shall deliver to the
Company at its principal office at 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx, Xxxxxxxxx
Xxxxx, Xxxxxxx 00000, or at the office or agency designated by Company pursuant
to Section 6.3, (i) a written notice of election to exercise this Warrant
substantially in the form of Subscription Agreement attached as EXHIBIT A to
this Warrant (the "Subscription Agreement"), duly executed by the Holder
exercising all or part of the purchase rights represented by this Warrant or
such Holder's authorized agent or attorney, which notice shall specify the
number of shares of Common Stock to be purchased, (ii) payment of the Warrant
Price, (iii) this Warrant, and (iv) if this Warrant is not registered in the
name of the Purchaser, an Assignment or Assignments substantially in the form of
the Assignment attached as EXHIBIT B to this Warrant (the "Assignment")
evidencing the assignment of this Warrant to the Person exercising all or part
of the purchase rights represented hereby in which case the Holder shall have
complied with all requirements of Section 3.1 hereof. Such Warrant Price shall
be paid in full (i) by wire transfer, cash, check, or money order, payable in
United States currency to the order of the Company, (ii) by the Holder
authorizing the Company to withhold from issuance that number of shares of
Warrant Shares issuable upon such exercise of this Warrant which when multiplied
by the Assigned Value of the Warrant Shares is equal to the Warrant Price (and
such withheld shares shall no longer be issuable under this Warrant) or (iii) by
any combination of the foregoing.
(c) DELIVERY OF CERTIFICATES. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within ten (10) Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to the Holder a certificate or certificates representing the aggregate
number of shares of Common Stock issuable upon such
6
exercise, together with cash in lieu of any fraction of a share, as hereinafter
provided. The certificates so delivered shall be, to the extent possible, in
such denomination or denominations as such Holder shall request in the notice
and shall be registered in the name of such Holder or such other name as shall
be designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
the Holder or any other Person so designated to be named therein shall be deemed
to have become a holder of record of such shares of Common Stock for all
purposes, as of the date the notice, together with the Warrant Price and this
Warrant, is received by the Company as described above. The issuance of
certificates for shares of Common Stock shall be made without charge to the
Holder for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Common Stock.
(d) NEW WARRANTS. If the Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to the Holder a new Warrant
evidencing the unexercised rights of the Holder to purchase the balance of the
shares of Common Stock for which this Warrant is then exercisable, which new
Warrant shall in all other respects be identical with this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register Warrant Shares issued
hereunder in the name of any Person who acquired this Warrant (or part hereof)
or any Warrant Shares otherwise than in accordance with this Warrant.
Section 2.2 PAYMENT OF TAXES. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and non-assessable and free from all liens and charges with
respect to the issuance thereof. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof; provided, however, that
the Company shall not be required to pay any federal, state or local income
taxes by the Holder in connection with the issuance or delivery of such shares.
In addition, the Company shall not be required to pay any tax or other charge
imposed in connection with any transfer involved in the issuance of any Warrant
Shares issuable upon exercise of this Warrant in any name other than that of the
Holder, and in such case the Company shall not be required to issue or deliver
any certificate representing Warrant Shares until such tax or other charge has
been paid or it has been established to the satisfaction of Company that no such
tax or other charge is due.
Section 2.3 FRACTIONAL SHARES OF COMMON STOCK. The Company shall not be
required to issue fractional shares of Common Stock upon exercise of any
Warrant. As to any fraction of a share of Common Stock which the Holder of one
or more Warrants, the rights under which are exercised in the same transaction,
would otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction (which shall be deemed
to be a fraction of the last share of Common Stock issued) in an
7
amount equal to the same fraction of the Current Value per share of Common Stock
on the date of exercise.
Section 2.4 CERTAIN RIGHTS AND OBLIGATIONS OF HOLDERS. The Holders of
the Warrants and the Warrant Shares shall (a) have such rights with respect to
the registration thereof under the Securities Act as are set forth in the
Registration Rights Agreement and such rights with respect to corporate
governance of the Company and transactions involving Common Stock as are set
forth in the AASI and (b) have such obligations with respect to the sale of a
portion of this Warrant and/or the Warrant Shares as are set forth in the Call
Agreement.
Section 2.5 RESERVATION OF WARRANT SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, for issuance upon
the exercise of Warrants, the maximum number of its authorized but unissued
shares or treasury shares, or both, of Common Stock which may then be issuable
upon the exercise in full of all outstanding Warrants. The Company shall from
time to time take all action which may be necessary or appropriate so that the
Warrant Shares, immediately upon their issuance following an exercise of
Warrants, will be listed or quoted, as the case may be, on the principal
securities exchanges or markets within the United States of America, if any, on
which other shares of Common Stock are then listed.
Section 2.6 NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its Charter Documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Warrants, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holders against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant
Shares receivable upon the exercise of the Warrants above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable Warrant
Shares upon the exercise of any Warrant, and (c) use its best efforts to obtain
all such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under the Warrants. Notwithstanding the foregoing paragraph, the
Company shall not be required to issue Warrant Shares upon the exercise of any
Warrant if such issuance would result in a violation by the Company of any
applicable law.
ARTICLE III - TRANSFERS, EXCHANGES
Section 3.1 EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES. The Warrants
(and any Warrant Shares issued upon exercise of the Warrants) shall bear such
restrictive legend or legends as may be required by the Purchase Agreement and
as may be required by law and
8
shall be transferable only in accordance with the terms of this Agreement, the
Purchase Agreement and the AASI. Subject to such restrictions, this Warrant and
all rights hereunder are transferable, in whole or in part, without charge to
the Holder, upon surrender of this Warrant with a properly executed Assignment
at the principal office of the Company. Upon such surrender, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be canceled. A Warrant,
if properly assigned in compliance herewith, may be exercised by a new Holder
without having a new warrant issued.
Section 3.2 DIVISION AND COMBINATION. This Warrant may be divided or
combined with other Warrants upon presentation hereof at the aforesaid office or
agency of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 3.1 as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
Section 3.3 LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If any
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue,
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated Warrant, or in lieu of or in substitution for a lost, stolen or
destroyed Warrant, a new Warrant representing equivalent rights of the Holder.
If required by the Company, the Holder of the mutilated, lost, stolen or
destroyed Warrant must provide indemnity sufficient to protect the Company from
any loss which it may suffer if the Warrant is replaced. Any such new Warrant
shall constitute an original contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any
time enforceable by anyone.
Section 3.4 CANCELLATION OF WARRANT. Any Warrant surrendered upon the
exercise or for exchange or transfer, or purchased or otherwise acquired by the
Company, shall be canceled and shall not be reissued by the Company; and, except
as provided herein in case of the partial exercise of the Warrants or upon an
exchange or transfer, no Warrant shall be issued hereunder in lieu of such
canceled Warrant. Any Warrant so canceled shall be destroyed by the Company.
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS
Section 4.1 SUBDIVISIONS AND COMBINATIONS. If at any time Company shall:
(a) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock;
9
(b) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
(c) issue any shares of equity securities pursuant to a
reclassification of shares of Common Stock; or
(d) declare a dividend or make a distribution on outstanding
shares of Common Stock in shares of Common Stock;
(any of the events described in the foregoing clauses (a) through (d) an
"Extraordinary Common Stock Event"), then the Current Warrant Price and the
Assigned Value shall each be adjusted by multiplying the then effective Current
Warrant Price or Assigned Value, as applicable, by a fraction, the numerator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately before such Extraordinary Common Stock Event and the denominator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Current Warrant Price and Assigned Value,
respectively. The Current Warrant Price and Assigned Value, as so adjusted,
shall be readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events.
Section 4.2 CERTAIN OTHER DISTRIBUTIONS. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash (other than a cash distribution or dividend payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of Company which the Holder
shall receive pursuant to Section 4.9 hereof);
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Common Stock); or
(c) any warrants or other rights to subscribe for or purchase
any evidence of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Common Stock);
then the Current Warrant Price and the Assigned Value shall each be adjusted, so
that in each such event lawful and adequate provision shall be made so that the
Holder shall receive upon exercise of this Warrant, in addition to the number of
shares of Common Stock receivable thereupon, the amount or quantity of cash,
evidences of indebtedness, securities, warrants, rights or other property which
they would have received had this Warrant been exercised on the date of and
immediately prior to such event and had they thereafter, during the period from
the date of such event to and including the date of actual exercise of this
Warrant, retained
10
such cash, evidences of indebtedness, securities, warrants, rights or other
property receivable by them as aforesaid during such period, giving application
to all adjustments called for during such period under this Article IV with
respect to the rights of the Holder of this Warrant. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
Section 4.3 ISSUANCE OF ADDITIONAL SHARES.
(a) Except as provided below in clause (b) of this Section 4.3,
if the Company shall, at any time while this Warrant is outstanding, issue any
additional shares of Common Stock of any class at a price per share less than
the Assigned Value in effect immediately prior to such issuance or sale, then in
each such case the Current Warrant Price or Assigned Value shall each be reduced
to an amount determined by multiplying the Current Warrant Price or Assigned
Value, as applicable, by a fraction:
(i) the numerator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of Common
Stock, plus (y) the number of shares of Common Stock issuable upon
exercise in full of all outstanding Warrants, plus (z) the number of
shares of Common Stock which the net aggregate consideration received by
the Company for the total number of such additional shares of Common
Stock so issued would purchase at the Assigned Value (prior to
adjustment), and
(ii) the denominator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of Common
Stock, plus (y) the number of shares of Common Stock issuable upon
exercise in full of all outstanding Warrants, plus (z) the actual number
of such additional shares of Common Stock so issued.
For the purpose of this Section 4.3(a), the issuance of any warrants,
options or other subscription or purchase rights with respect to shares of
Common Stock of any class and the issuance of any Convertible Securities (or the
issuance of any warrants, options or any rights with respect to such Convertible
Securities) shall be deemed an issuance at such time of such Common Stock if the
Net Consideration Per Share (determined as provided in Section 4.7(a)) which may
be received by the Company for such Common Stock shall be less than the Assigned
Value at the time of such issuance and, except as hereinafter provided, an
adjustment in each of the Current Warrant Price and Assigned Value shall be made
upon each such issuance of warrants, options, rights or Convertible Securities
in the manner provided in this
11
Section 4.3(a) as if such Common Stock were issued at such Net Consideration per
Share. No adjustment of the Current Warrant Price or Assigned Value shall be
made under this Section 4.3(a) upon the issuance of any additional shares of
Common Stock which are issued pursuant to the exercise of any such warrants,
options or other rights or pursuant to the exercise of any conversion or
exchange rights in any such Convertible Securities if any adjustment shall
previously have been made upon the issuance of such warrants, options or other
rights or Convertible Securities. Any adjustment of the Current Warrant Price
and Assigned Value made in accordance with this paragraph of this Section 4.3(a)
shall be disregarded if, as, and when the rights to acquire shares of Common
Stock upon exercise or conversion of the warrants, options, rights or
Convertible Securities which gave rise to such adjustment expire or are canceled
without having been exercised, so that the Current Warrant Price and Assigned
Value, respectively, effective immediately upon such cancellation or expiration
shall be equal to the Current Warrant Price and Assigned Value in effect
immediately prior to the time of the issuance of the expired or canceled
warrants, options, rights or Convertible Securities, with such additional
adjustments as would have been made to that Current Warrant Price and Assigned
Value had the expired or canceled warrants, options, rights or Convertible
Securities never been issued. In the event that the terms of any warrants,
options, other rights or Convertible Securities previously issued by the Company
are changed (whether by their terms or for any other reason) so as to change the
Net Consideration Per Share payable with respect thereto (whether or not the
issuance of such warrants, options, rights or Convertible Securities originally
gave rise to an adjustment of the Current Warrant Price and Assigned Value), the
Current Warrant Price and Assigned Value shall be recomputed as of the date of
such change, so that the Current Warrant Price and Assigned Value, respectively,
effective immediately upon such change shall be equal to the Current Warrant
Price and Assigned Value in effect at the time of the issuance of the warrants,
options, rights or Convertible Securities subject to such change, adjusted for
the issuance thereof in accordance with the terms thereof after giving effect to
such change, and with such additional adjustments as would have been made to the
Current Warrant Price and Assigned Value had the warrants, options, rights or
Convertible Securities been issued on such changed terms.
(b) The terms of this Section 4.3 shall not apply to (i) the
issuance by the Company of options to acquire up to an aggregate of 1,090,878
shares of Common Stock to employees, directors or consultants of the Company or
any Subsidiary pursuant to stock purchase or stock option plans approved by the
Board of Directors (including shares which may be issued under options to
purchase an aggregate of 515,169 shares of Common Stock outstanding on the Date
of Issuance) and the shares of Common Stock issuable upon exercise thereof (such
number being subject to increase by the amount of shares purchasable under any
outstanding options which are terminated without being exercised, and subject to
adjustment for any stock dividend, stock split, subdivision, combination or
other recapitalization of the Common Stock of the Company), so long as the
exercise price of any such options granted after the Date of Issuance is not
less than the Current Value at the time of grant or (ii) any issuance of Common
Stock pursuant to the exercise of Warrants. The maximum number of shares which
shall not be deemed to be an issuance of additional shares pursuant to the
foregoing shall be subject to appropriate adjustment with respect to any as-yet
unissued shares
12
in the event of any Extraordinary Common Stock Event. No adjustment of the
Current Warrant Price or the Assigned Value shall be made under paragraph (a) of
this Section 4.3 under any of the circumstances which would constitute an
Extraordinary Common Stock Event.
Section 4.4 ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any warrants, options or other rights to subscribe
for or purchase any Common Stock or any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, then
the Current Warrant Price and the Assigned Value shall each be adjusted as
provided in Section 4.3 on the basis that the maximum number of shares of Common
Stock issuable pursuant to all such warrants, options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such warrants, options or other rights. No further
adjustment of the Current Warrant Price or Assigned Value shall be made upon the
actual issuance of shares of Common Stock or Convertible Securities upon
exercise of such warrants, options or other rights.
Section 4.5 ISSUANCE OF CONVERTIBLE SECURITIES. If at any time Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, then the
Current Warrant Price and the Assigned Value shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such Convertible Securities. No adjustment of the Current
Warrant Price or the Assigned Value shall be made under this Section 4.5 upon
the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.4. No further adjustments of the
Current Warrant Price or the Assigned Value shall be made upon the actual issue
of such shares of Common Stock upon (i) conversion or exchange of such
Convertible Securities and, if any issue or sale of such Convertible Securities
is made upon exercise of any warrant or other right to subscribe for or to
purchase any such Convertible Securities for which adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price and the Assigned Value have been or are to be made pursuant to
other provisions of this Article IV, no further adjustments of the Current
Warrant Price or the Assigned Value shall be made by reason of such issue or
sale or (ii) the actual conversion or exchange of Convertible Securities at less
than the Assigned Value at the
13
time of such conversion or exchange if such Convertible Securities were
initially issued at Assigned Value and no adjustment was required to be made at
the time of such issuance pursuant to the provisions of this Article IV.
Section 4.6 ADJUSTMENT OF NUMBER OF WARRANT SHARES. Upon each adjustment
of the Current Warrant Price and Assigned Value pursuant to this Article IV,
this Warrant shall thereupon evidence the right to purchase that number of
Warrant Shares (calculated to the nearest hundredth of a share) obtained by
multiplying the number of Warrant Shares purchasable immediately prior to such
adjustment upon exercise of this Warrant by the Assigned Value in effect
immediately prior to such adjustment and dividing the product so obtained by the
Assigned Value in effect immediately after such adjustment.
Section 4.7 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the Current Warrant Price and the Assigned Value provided for in
this Article IV:
(a) COMPUTATION OF CONSIDERATION. To the extent that any shares
of Common Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase any additional shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be deemed to be the amount of the cash
received by the Company therefor, or, if such additional shares of Common Stock
or Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such additional shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or accrued
dividends and without taking into account any compensation, discounts or
expenses paid or incurred by Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company (excluding
therefrom any director designated by the transferee thereof). In case any
additional shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such additional shares of Common
Stock or Convertible Securities shall be issued in connection with any merger in
which Company issues any securities, the amount of consideration therefor shall
be deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company (excluding therefrom any director designated by the
transferee thereof for the purpose of voting on such matter but not for the
purpose of determining whether a quorum is present at such meeting), of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such additional shares of
Common Stock, Convertible Securities, warrants or other rights, as the case may
be. The Net Consideration Per Share which may be received by the Company for any
additional shares of Common Stock issuable
14
pursuant to any warrant, option or other subscription or purchase right or any
Convertible Securities shall be determined as follows:
(i) The Net Consideration Per Share shall mean the amount
equal to the total amount of consideration, if any, received by the
Company for the issuance of such warrants, options, rights or
Convertible Securities, plus the minimum amount of consideration, if
any, payable to the Company upon exercise or conversion thereof, divided
by the aggregate number of shares of Common Stock that would be issued
if all such warrants, options or other rights or Convertible Securities
were exercised or converted at such Net Consideration Per Share; and
(ii) The Net Consideration Per Share which may be received
by the Company shall be determined in each instance as of the date of
issuance of warrants, options, rights or Convertible Securities without
giving effect to any possible future price adjustments or rate
adjustments which may be applicable with respect to such warrants,
options, rights or Convertible Securities and which are contingent upon
future events; provided that in the case of an adjustment to be made as
a result of a change in terms of such warrants, options, rights or
Convertible Securities, the Net Consideration Per Share shall be
recalculated as of the date of such change.
In case of the issuance at any time of any additional shares of Common Stock or
Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Stock, the Company shall be deemed to have
received for such additional shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS SHALL BE MADE. The adjustments required by
this Article IV shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) WHEN ADJUSTMENT NOT REQUIRED. If Company shall take a
record of the holders of its shares of Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before such distribution, legally abandon its plan to
pay or deliver such dividend, distribution, subscription or purchase rights,
then thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(d) WHEN ADJUSTMENTS CARRIED FORWARD. No adjustment in the
Current Warrant Price or the Assigned Value in accordance with the provisions of
this Article IV need be made unless such adjustment would amount to a change of
at least 1% therein; PROVIDED, HOWEVER, that the amount by which any adjustment
is not made by reason of the provisions of
15
this Section 4.7(d) shall be carried forward and taken into account at the time
of any subsequent adjustment in the Current Warrant Price or the Assigned Value.
(e) CERTIFICATE OF ADJUSTMENTS. Whenever any adjustment is to
be made pursuant to this Article IV, the Company shall prepare and deliver to
the Holder a certificate executed by the Chief Financial Officer of the Company
at least fifteen (15) days prior thereto, such notice to include in reasonable
detail (i) the events precipitating the adjustment, (ii) the computation of any
adjustments (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or options, warrants
or other subscription or purchase rights referred to in this Article IV), (iii)
the Current Warrant Price and Assigned Value immediately before and immediately
after the adjustment, and (iv) the number of shares of Common Stock or the
securities or other property purchasable upon exercise of this Warrant before
and after giving effect to such adjustment. Such Certificate shall be
accompanied by the accountant's verification required by Section 4.10 hereof.
Section 4.8 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS.
(a) In case Company shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another partnership or
corporation, or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another partnership or corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of shares of Common Stock, then each Holder shall have the right
thereafter to receive, in the Holder's sole and absolute discretion, either (i)
a new Warrant from the successor company identical in substance and terms to
this Warrant or (ii) a new warrant upon exercise of which the Holder would
receive the number of shares of common stock or partnership interests of the
successor or acquiring corporation or partnership or of the Company, if it is
the surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be agreed between the Company and the Holder of this
Warrant in order to provide for adjustments of shares of Common Stock for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Article IV. For purposes of this Section
4.8, "common stock of the successor or acquiring corporation" shall
16
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible, into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
(b) If the Common Stock issuable upon exercise of this Warrant
shall be changed by the Company into the same or different number of shares of
any class or classes of stock, whether by reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Article IV), then and in each such event the Holder shall have
the right thereafter to exercise this Warrant for the kind and amount of shares
of stock and other securities and property receivable upon such reclassification
or other change, by holders of the number of shares of Common Stock for which
this Warrant might have been exercised immediately prior to such
reclassification or change, all subject to further adjustment as provided
herein.
Section 4.9 PAYMENT OF DIVIDENDS. If at any time when this Warrant is
outstanding, the Company shall declare one or more dividends on its Common Stock
payable in cash out of earnings or earned surplus legally available for the
payment of dividends under the laws of the jurisdiction of incorporation of the
Company, or payable in other property of the Company, the Company shall on the
payment date or dates for such dividend or dividends make a special distribution
in cash to the Holder of this Warrant on the record dated for such dividend or
dividends in an amount equal to the product of (a) with respect to cash
dividends, (i) the amount of cash to be paid pursuant to such dividend to each
share of Common Stock then outstanding multiplied by (ii) the number of shares
of Common Stock for which this Warrant is exercisable as of such record date or
(b) with respect to dividends payable in other property of the Company, (i) the
fair market value (determined in good faith by the Company's Board of Directors)
of such other property payable to each share of Common Stock then outstanding
multiplied by (ii) the number of shares of Common Stock for which this Warrant
is exercisable as of such record date.
Section 4.10 VERIFICATION OF COMPUTATIONS. The Company shall select a
nationally-recognized firm of independent public accountants (which may be the
Company's regular accountants), which selection may be changed from time to
time, to verify each computation and/or adjustment made in accordance with this
Article IV. The certificate, report or other written statement of any such firm
shall be conclusive evidence of the correctness of any computation made under
this Article IV. Promptly upon its receipt of such certificate, report or
statement from such firm of independent public accountants, the Company shall
deliver a copy thereof to the Holder.
17
Section 4.11 NOTICE OF CERTAIN ACTIONS. In the event the Company shall:
(a) declare any dividend payable in stock to the holders of its
Common Stock or make any other distribution in property other than cash to the
holders of its Common Stock; or
(b) offer to the holders of its Common Stock rights to
subscribe for or purchase any shares of any class of stock or any other rights
or options; or
(c) effect any reclassification of its Common Stock (other than
a reclassification involving merely the subdivision or combination of
outstanding shares of Common Stock) or any capital reorganization or any
consolidation or merger (other than a merger in which no distribution of
securities or other property is made to holders of Common Stock), or any sale,
transfer or other disposition of its property, assets and business substantially
as an entirety, or the liquidation, dissolution or winding up of the Company;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to the Holder at least thirty (30) days prior to such action. Such
notice shall specify the date on which the books of the Company shall close, or
a record be taken, for determining holders of Common Stock entitled to receive
such stock dividend or other distribution or such rights or options, or the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution, winding up or exchange
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed.
ARTICLE V - REPURCHASE
Section 5.1 CONDITIONS OF REPURCHASE.
(a) If on or prior to February 20, 2001, neither a Qualified
Public Offering nor a Company Sale has been consummated, at any time between
February 21, 2001, and February 20, 2003, (the "Optional Repurchase Date"), the
Holder shall have the right to require the Company to purchase in whole or from
time to time in part, this Warrant or, if applicable, the unexercised portion of
this Warrant and, if this Warrant has been exercised in whole or in part prior
to the Optional Repurchase Date, the Warrant Shares purchased upon such exercise
or exercises in accordance with the following provisions. If the Holder desires
to exercise its rights pursuant to this Article V, the Holder shall notify the
Company in writing, indicating the number of Warrants and/or Warrant Shares to
be repurchased in such combined amounts of Warrants and Warrant Shares
representing at least 1,000 shares of Common Stock or integral multiples
thereof. The Company shall use its best efforts to determine the Current Value
as of the Optional Repurchase Date within 45 days after receipt of such notice
and shall notify the Holder of the Current Value in writing promptly following
18
its final determination. The Holder shall have the right to withdraw its notice
of repurchase within ten (10) days after receipt of the notice of determination
of the Current Value. The repurchase price shall be calculated and paid as set
forth in Section 5.2 hereof. In the event that repurchase pursuant to this
Article V shall be unlawful in whole or in part for any reason, the obligation
of the Company to make such repurchase shall continue in effect without
restriction as to date or year until such time or times as such repurchase (or
any portion thereof not yet made) shall no longer be unlawful, and the Company
shall promptly make such repurchase at such time as it becomes lawful, to the
extent it is lawful at that time.
Section 5.2 REPURCHASE PRICE AND PAYMENT.
(a) The repurchase price shall be equal to the product of the
Current Value multiplied by the sum of (i) the aggregate number of Warrant
Shares for which the unexercised portion of this Warrant is then exercisable and
which are to be repurchased pursuant to this Article V and (ii) the aggregate
number of Warrant Shares purchased upon exercise of this Warrant which are to be
repurchased pursuant to this Article V.
(b) The Holder shall surrender the certificate or certificates
representing this Warrant and all Warrant Shares to be repurchased to the
Company and thereupon the repurchase price as set forth in this Section 5.2
shall be paid to the order of the Holder. The repurchase price shall be payable
at the option of the Company in cash or through delivery to the Holder of a
promissory note (the "Put Note") with the following terms: (i) final maturity:
three (3) years from date of issuance; (ii) interest: payable in cash quarterly
in arrears at the rate of 13.0% per annum; (ii) principal amortization: ten (10)
equal quarterly installments payable in cash, with the first installment due six
(6) months after the date of issuance and the last installment due on the final
maturity date; and (iv) ranking: subordinated to senior indebtedness on
substantially the same terms as the Notes. The Put Note shall contain such other
terms and conditions at least as favorable to the Holder as the Notes and
otherwise shall have such other terms and conditions as the Holder and the
Company shall reasonably agree.
ARTICLE VI - MISCELLANEOUS
Section 6.1 CHANGES TO AGREEMENT. The Company, when authorized by its
Board of Directors, with the written consent of the Holder may amend or
supplement this Agreement. The Company may, without the consent or concurrence
of the Holder, by supplemental agreement or otherwise, make any changes or
corrections in this Agreement that the Company shall have been advised by
counsel (i) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (ii) add to the covenants and agreements of the Company in this
Warrant such further covenants and agreements thereafter to be observed, or
(iii) result in the surrender of any right or power reserved to or conferred
upon the Company in this Warrant, in each case which changes or corrections do
not and will not adversely affect, alter or change the rights, privileges or
immunities of the Holder.
19
Section 6.2 ASSIGNMENT. All the covenants and provisions of this Warrant
by or for the benefit of the Company or the Holder shall bind and inure to the
benefit of their respective successors and assigns.
Section 6.3 NOTICES, ETC. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be in
writing and shall be delivered by courier, or mailed by a nationally recognized
overnight courier, postage prepaid, addressed, (a) if to any of the Holders, at
the address specified on the signature pages attached hereto or such other
address as the Holder shall have furnished to the Company in writing, or (b) if
to the Company, at its address set forth on the signature page attached hereto,
to the attention of the Chief Executive Officer, or at such other address, or to
the attention of such other officer, as the Company shall have furnished to the
Holders in writing. This Agreement and the other Transaction Documents and all
documents delivered in connection herewith or therewith embody the entire
agreement and understanding between the Holders, and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
Section 6.4 DEFECTS IN NOTICE. Failure to file any certificate or notice
or to mail any notice, or any defect in any certificate or notice pursuant to
this Agreement shall not affect in any way the rights of the Holder or the
legality or validity of any adjustment made pursuant to Article IV hereof, or
any transaction giving rise to any such adjustment, or the legality or validity
of any action taken or to be taken by the Company.
Section 6.5 GOVERNING LAW AND FORUM. This Warrant shall be governed by
the laws of State of Florida without regard to principles of conflicts of laws
thereof. Each of the Company and the Holders (a) hereby irrevocably submits
itself to the jurisdiction of the state courts of the State of Florida and to
the jurisdiction of the United States District Courts for the District of
Florida, for the purpose of any suit, action or other proceeding arising out of
or based upon this Warrant or any part or parts hereof brought by any of the
parties hereto, (b) hereby waives, and agrees not to assert, by way of motion,
as a defense, or otherwise, in any such suit, action or proceeding, any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or that this Warrant or the
subject matter hereof may not be enforced in or by such court, and (c) hereby
waives any offsets or counterclaims in any such action, suit or proceeding
(other than compulsory counterclaims). Each of the Company and the Holders
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the Company and the Purchasers agrees that its
submission to jurisdiction and its consent to service of process by mail is made
for the express benefit of the other parties hereto. Final judgment against any
of the Company or the Holders in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of any indebtedness or
liability of such party therein described or in any other manner provided by or
pursuant to the laws of such other jurisdiction. Except with respect to the
enforcement of a final judgment as
20
set forth in the immediately preceding sentence, the Company agrees that any
action, suit or other proceeding arising out of or based upon this Warrant,
whether at law or in equity, shall be brought and maintained exclusively in the
courts referenced in this Section 6.5 and the appellate courts thereto, as
applicable.
Section 6.6 STANDING. Nothing in this Warrant expressed and nothing that
may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Holder of any right, remedy or claim under or by reason of this
Warrant or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors, and the Holder.
Section 6.7 HEADINGS. The descriptive headings of the articles and
sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
Section 6.8 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDER
HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS WARRANT, OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF;
PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM THE COMPANY
OR THE HOLDER, AS APPLICABLE, SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY
COUNTERCLAIM IN ANY SUCH LITIGATION.
[End of Text]
21
WARRANT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the day and year first above written.
OUTSOURCE INTERNATIONAL, INC., a
Florida Corporation
By:
------------------------
Name: Xxxx X. Xxxxxxx
Title: President
Address: 0000 Xxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
WARRANT
PURCHASER SIGNATURE PAGE
Accepted and Agreed as of the
date first written above
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P., its
general partner
By: Bala Equity, Inc., its general
partner
By:
---------------------
Name:
Title:
Address: Three Xxxx Xxxxx Xxxx
0xx Xxxxx
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention:
-------------------------
EXHIBIT A
SUBSCRIPTION AGREEMENT
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase ________________ of the shares of Common Stock issuable upon the
exercise of said Warrant, and requests that certificates for such shares of
Common Stock be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME)
--------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
--------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
---------------------------------------------------------------------
(NAME)
at
------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock issued hereby is less than all
the shares of Common Stock represented by this Warrant, the undersigned requests
that a new Warrant representing the number of full shares of Common Stock not
exercised be issued and delivered as set forth below.
In full payment of the purchase price with respect to the shares of
Common Stock exercised and transfer taxes, if any, the undersigned hereby
tenders payment of $________ (i) by wire transfer, cash, certified check,
cashiers check or money order payable in United States currency to the order of
the Company, (ii) by authorizing the Company to withhold from such issuance a
number of shares of Common Stock issuable upon exercise of the Warrant which
when multiplied by the Current Value of the Common Stock is equal to the Warrant
Price (and such withheld shares shall no longer be issuable under the Warrant),
or (iii) by a combination of the foregoing.
A-1
SUBSCRIPTION FORM
PURCHASER SIGNATURE PAGE
Date: __________, __ _____________________________
Signature
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant.)
A-2
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the percentage of
Common Stock Deemed Outstanding set forth below:
NAME AND ADDRESS OF ASSIGNEE PERCENTAGE
and does hereby irrevocably constitute and appoint ______________________
attorney-in-fact to register such transfer on the books of OutSource
International, Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated:_____________________ Print Name:________________________________
Signature:_________________________________
Witness:___________________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
altercation or enlargement or any change whatsoever.
B-1
EXHIBIT D.1
Acquisition to include Phoenix, Arizona d/b/a/ Labor Force under the following
terms:
Minimum Sales of $25 million
EDITDA of $3 million
Purchase Price of $15 million or a maximum of 5 times latest twelve
months' EDITDA (pro forma for this acquisition)
EXHIBIT D.2
APEX STAND-BY STAND-BY STAFF MGMT. LABOR WORLD LABOR WORLD
ANDOVER COL. SPRINGS DENVER NEW JERSEY ATLANTA SOUTH FLORIDA
FINANCIAL INFORMATION
Revenue $4,384,488 $5,341,391 $13,693,776 $17,204,047 $3,296,236 $14,102,780
Gross Profit 997,762 1,657,348 4,889,934 3,358,049 1,059,044 4,084,960
SG&A (includes
incremental support
center 588,103 783,341 3,438,511 2,386,796 480,885 1,595,858
---------- ---------- ----------- ----------- ---------- -----------
EBITDA 409,659 874,007 1,451,423 971,253 578,159 2,489,302
Depreciation &
Amortization 2,595 28,808 116,987 49,983 3,033 40,808
---------- ---------- ----------- ----------- ---------- -----------
EBIT 407,064 845,199 1,334,436 921,270 575,126 2,448,494
Less: Interest Expense 29,815 36,321 93,118 159,200 22,414 95,898
---------- ---------- ----------- ----------- ---------- -----------
Pre-Tax Income 377,249 808,878 1,241,318 762,070 552,712 2,352,596
Income Taxes 150,900 323,551 496,528 304,828 221,085 873,561
---------- ---------- ----------- ----------- ---------- -----------
Net Income $ 226,349 $ 485,327 $ 744,790 $ 457,242 $ 331,627 $ 1,479,035
========== ========== =========== =========== ========== ===========
PURCHASE PRICE
Tangible Portion $ 0 $ 0 $ 0 $ 0 $ 120,000 $ 0
Intangible Portion $1,015,000 $3,100,000 $ 5,500,000 $ 4,150,000 $1,180,000 9,000,000
---------- ---------- ----------- ----------- ---------- -----------
Total Purchase Price $1,015,000 $3,100,000 $ 5,500,000 $ 4,150,000 $1,300,000 $ 9,000,000
========== ========== =========== =========== ========== ===========
Projected Earnout $ 0 $ 48,653 $ 41,338 $ 0 $ 0 $ 0
---------- ---------- ----------- ----------- ---------- -----------
Adjusted Purchase Price $1,015,000 $3,148,653 $ 5,541,338 $ 4,150,000 $1,300,000 $ 9,000,000
========== ========== =========== =========== ========== ===========
EBITDA Multiple 2.5 3.6 3.8 4.3 2.2 3.6
Net Income Multiple 4.5 6.5 7.4 9.1 3.9 6.1
FINANCING
Bank Financing $ 203,000 $ 620,000 $ 1,100,000 $ 830,000 $ 260,000 $ 1,800,000
Seller Financing $ 0 $ 850,000 $ 1,500,000 $ 1,650,000 $ 650,000 $ 0
Subordinated Debt/Equity $ 812,000 $1,630,000 $ 2,900,000 $ 1,670,000 $ 390,000 $ 7,200,000
Cash for Earnout $ 0 $ 48,653 $ 41,338 $ 0 $ 0 $ 0
---------- ---------- ----------- ----------- ---------- -----------
Total Payments $1,015,000 $3,148,653 $ 5,541,338 $ 4,150,000 $1,300,000 $ 9,000,000
========== ========== =========== =========== ========== ===========
[RESTUBBED FROM TABLE ABOVE]
AQUIRED
GROSS FRANCHISE NET
AQUISITIONS ELIMINATIONS AQUISITIONS
FINANCIAL INFORMATION
Revenue $58,022,646 ($3,286,914) $54,735,732
Gross Profit 16,047,097 (754,416) 15,292,681
SG&A (includes
incremental support
center 9,273,294 0 9,273,294
----------- ---------- -----------
EBITDA 6,773,803 (754,416) 6,019,387
Depreciation &
Amortization 242,214 0 242,214
----------- ---------- -----------
EBIT 6,531,589 (754,416) 5,777,173
Less: Interest Expense 436,766 0 436,766
----------- ---------- -----------
Pre-Tax Income 6,094,823 (754,416) 5,340,407
Income Taxes 2,370,453 (301,766) 2,068,687
----------- ---------- -----------
Net Income $ 3,724,370 $ (452,650) $ 3,271,720
=========== ========== ===========
PURCHASE PRICE
Tangible Portion $ 120,000 $ 120,000
Intangible Portion $23,945,000 $23,945,000
----------- -----------
Total Purchase Price $24,065,000 $24,065,000
=========== ===========
Projected Earnout $ 89,991 $ 89,991
----------- -----------
Adjusted Purchase Price $24,154,991 $24,154,991
=========== ===========
EBITDA Multiple 3.6 4.0
Net Income Multiple 6.5 7.4
FINANCING
Bank Financing $ 4,813,000 $ 4,813,000
Seller Financing $ 4,650,000 $ 4,650,000
Subordinated Debt/Equity $14,602,000 $14,602,000
Cash for Earnout $ 89,991 $ 89,991
----------- -----------
Total Payments $24,154,991 $24,154,991
NOTE: AQUIRED FRANCHISE ELIMINATIONS ARE THOSE REVENUE ITEMS (ROYALTIES,
FUNDING FEES, PEO PROGRAM FEES) THAT WILL STOP UPON AQUISITION.
EXHIBIT E
ESCROW AGENT COMPENSATION
Acceptance Fee $1,000
Annual Administration Fee $3,000
Activity Fees
Investment Fee $65 per trade (waived if cash is
invested in a State Street Fund)
Wire Transfer $20 per wire
Out of Pocket Expenses Billed as incurred
Counsel Fees Billed as incurred
