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EXHIBIT 99.4
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NOTE AND WARRANT PURCHASE AGREEMENT
among
DECORA, INCORPORATED
DECORA INDUSTRIES, INC.
XXXXXXXX STREET CAPITAL ADVISORS, L.L.C.,
as Agent
and
THE PURCHASERS NAMED HEREIN
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Dated as of September 26, 1997
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$18,000,000 Principal Amount of 13% Senior
Subordinated Notes due 2005 of Decora, Incorporated
Warrants to Purchase 2,136,534 Shares
of Common Stock of Decora Industries, Inc.
Warrants to Purchase 69,557 Shares of Series A
Convertible Preferred Stock of Decora Industries, Inc.
Contingent Warrants to Purchase Shares
of Common Stock of Decora Industries, Inc.
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NOTE AND WARRANT PURCHASE AGREEMENT dated as of September 26, 1997,
by and among DECORA INDUSTRIES, INC., a Delaware corporation ("Holdings");
DECORA, INCORPORATED, a Delaware corporation (the "Company"); XXXXXXXX STREET
CAPITAL ADVISERS, L.L.C., a Delaware limited liability company (the "Agent");
and each of the persons listed in Exhibit A (the "Purchasers").
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
hereby agree as follows:
SECTION 1. SALE AND PURCHASE OF NOTES AND WARRANTS
(a) The Company agrees to issue and sell to each Purchaser and,
subject to the terms and conditions hereof and in reliance upon the
representations and warranties of Holdings and the Company contained herein or
made pursuant hereto, each Purchaser agrees to purchase from the Company, on the
Closing Date, a Note or Notes in the aggregate principal amount set forth
opposite such Purchaser's name on Exhibit A. Holdings agrees to issue and sell
to each Purchaser and, subject to the terms and conditions hereof and in
reliance upon the representations and warranties of Holdings and the Company
contained herein or made pursuant hereto, each Purchaser agrees to purchase from
Holdings, on the Closing Date, (i) a Common Warrant or Common Warrants to
purchase the aggregate number of shares of Common Stock set forth opposite such
Purchaser's name on Exhibit A, (ii) a Preferred Warrant or Preferred Warrants to
purchase the aggregate number of shares of Series A Convertible Preferred Stock
set forth opposite such Purchaser's name on Exhibit A and (iii) a Contingent
Warrant or Contingent Warrants to purchase shares of Common Stock as set forth
opposite such Purchaser's name on Exhibit A. The aggregate purchase price to be
paid to Holdings and the Company by each Purchaser for such Notes and such
Warrants is 100% of the aggregate principal amount of the Notes to be purchased
by such Purchaser, which purchase price shall be allocated in accordance with
Section 2(c).
(b) As used herein, "Notes" means $18,000,000 aggregate principal
amount of the Company's 13% Senior Subordinated Notes Due 2005, together with
all Notes issued in exchange therefor or replacement thereof. Each Note shall be
substantially in the form of, and be payable as provided in, Exhibit B. Interest
on the Notes shall accrue from the Closing Date, shall compound quarterly and
shall be payable quarterly in arrears on the last day of March, June, September
and December of each year, except that the first such payment shall be due
September 30, 1998 (which first interest payment shall be for the period from
and including the Closing Date through and including September 30, 1998), at the
interest rates and in the manner specified in the form of Note attached hereto
as Exhibit B.
(c) If all or a portion of (i) the principal amount of the Notes,
(ii) the interest payable thereon or (iii) any fee or other amount payable
hereunder or under any other Loan Document shall not be paid when due (whether
at the stated maturity of the Notes or at a date fixed for prepayment or
otherwise), such overdue amount shall bear interest at a rate per annum
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equal to the Default Rate from the date of such nonpayment until paid in full
(both before and after judgment).
(d) As used herein, "Common Warrants" means Common Stock Purchase
Warrants to purchase an aggregate of 2,136,534 shares of Common Stock, together
with all Warrants issued in exchange therefor or replacement thereof. The Common
Warrants to be issued and sold to each Purchaser hereunder shall be evidenced by
one or more Common Warrant certificates substantially in the form of Exhibit C.
Each Common Warrant shall initially entitle the holder thereof to purchase one
share of Common Stock at a purchase price of $1.00 per share, with such number
of shares and such price being subject to adjustment as provided in the form of
Common Warrant certificate attached hereto as Exhibit C.
(e) As used herein, "Contingent Common Warrants" means Contingent
Common Stock Purchase Warrants to purchase a number of shares of Common Stock
equal to 21.2% of (i) the sum of the number of shares, if any, as may be issued
after the date hereof pursuant to the terms of the Cigna Exchange Agreement, the
number of shares of Common Stock, if any, which are issued by Holdings, either
in exchange for securities of Conny which are not owned by German Newco after
consummation of the purchase of Conny securities on the Closing Date under the
Conny Stock Purchase Agreement (the "Conny Minority Shares"), or to provide,
directly or indirectly, funds to make the offer by Holdings, German Newco or
Conny or any of their respective affiliates or subsidiaries to acquire the Conny
Minority Shares (the "Conny Minority Acquisition Shares") together with all
Contingent Common Warrants issued in exchange therefor or replacement thereof.
Without limiting the generality of the foregoing, the Conny Minority Acquisition
Shares shall include all shares issued in a public offering of Common Stock
after the date hereof and until the second anniversary of the completion of the
offer for the Conny Minority Shares under the German Takeover Code, to the
extent that the net proceeds therefrom, in the aggregate, do not exceed the
aggregate purchase price paid for the Conny Minority Shares, excluding that
portion of the purchase price paid from the proceeds of a financing from
Dresdner Bank pursuant to the terms of the Dresdner Bank Loan Agreement dated
September 29, 1997. The Contingent Common Warrants to be issued and sold to each
Purchaser hereunder shall be evidenced by one or more Contingent Common Warrant
certificates substantially in the form of Exhibit D. Each Contingent Common
Warrant shall initially entitle the holder thereof to purchase one share of
Common Stock at a purchase price of $1.00 per share, with such number of shares
and such price being subject to adjustment as provided in the form of the
Contingent Common Warrant certificate attached hereto as Exhibit D.
(f) As used herein, "Preferred Warrants" means Series A
Convertible Preferred Stock Purchase Warrants to purchase an aggregate of 69,557
shares of Series A Convertible *Preferred Stock, together with all Preferred
Warrants issued in exchange therefor or replacement thereof. The Preferred
Warrants to be issued and sold to each Purchaser hereunder shall be evidenced by
one or more Preferred Warrant certificates substantially in the form of Exhibit
E. Each Preferred Warrant shall initially entitle the holder thereof to purchase
one share of Series A Convertible Preferred Stock at a purchase price of $100.00
per share, with such number of shares
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and such price being subject to adjustment as provided in the form of Preferred
Warrant certificate attached hereto as Exhibit E. The Series A Convertible
Preferred Stock (the "Series A Preferred") shall have the rights, limitations,
privileges and preferences set forth in Exhibit F.
(g) The obligations of each Purchaser under this Agreement are
separate from the respective obligations of the other Purchasers under this
Agreement, and no Purchaser shall be liable for any obligation of any other
Purchaser under this Agreement.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the closing (the
"Closing") of the purchase and sale of the Notes, the Common Warrants, the
Contingent Common Warrants and the Preferred Warrants, will take place at the
offices of Xxxxxx, Xxxxx & Xxxxxxx LLP located at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, at such time and date as shall be mutually agreed to by the Company
and the Purchasers. Such date is herein referred to as the "Closing Date".
(b) Subject to the terms and conditions hereof, on the Closing
Date, (i) the Company shall deliver to each Purchaser a Note or Notes,
substantially in the form of Exhibit B, payable to such Purchaser (or its
nominee as notified to the Company) and dated the Closing Date, in the aggregate
principal amount set forth opposite such Purchaser's name on Exhibit A, (ii)
Holdings shall deliver to each Purchaser Common Warrants to purchase the number
of shares of Common Stock set forth opposite such Purchaser's name on Exhibit A,
evidenced by one or more Common Warrant certificates substantially in the form
of Exhibit C, registered in the name of such Purchaser (or its nominee as
notified to Holdings) and dated the Closing Date, (iii) Holdings shall deliver
to each Purchaser Preferred Warrants to purchase the number of shares of Series
A Preferred set forth opposite such Purchaser's name on Exhibit A, evidenced by
one or more Preferred Warrant certificates substantially in the form of Exhibit
D, registered in the name of such Purchaser (or its nominee as notified to
Holdings) and dated the Closing Date, (iv) Holdings shall deliver to each
Purchaser Contingent Common Warrants to purchase shares of Common Stock as set
forth opposite such Purchaser's name on Exhibit A, evidenced by one or more
Contingent Common Warrant certificates substantially in the form of Exhibit E,
registered in the name of such Purchaser (or its nominee as notified to
Holdings) and dated the Closing Date, and (iv) upon such Purchaser's receipt of
such Notes, Common Warrants, Preferred Warrants and Contingent Common Warrants,
such Purchaser shall deliver to the Company by wire transfer an amount equal to
the purchase price for such Notes, Common Warrants, Preferred Warrants and
Contingent Common Warrants (in each case as specified in Section 1(a)) in
federal or other immediately available funds.
(c) Each of the Purchasers, Holdings and the Company acknowledges
that the Notes, Common Warrants, the Preferred Warrants and the Contingent
Common Warrants constitute an "investment unit" within the meaning of Section
1273(c)(2) of the Code and thatHoldings and the Company will allocate the "issue
price" (within the meaning of Section 1273(b)
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of the Code) of such investment unit, for all federal, state, local and foreign
tax purposes, between the Notes, Common Warrants and Preferred Warrants as
follows: (i) the price at which all of the Common Warrants are to be sold by
Holdings is $186,502.00, (ii) the price at which all of the Preferred Warrants
are to be sold by Holdings is $607,123.00, (iii) the price at which all of the
Contingent Common Warrants are to be sold by Holdings is $1.00, and (iv) the
price at which all of the Notes are to be sold by the Company is $17,206,374.00.
Each of the Purchasers, Holdings and the Company agrees to abide by Treasury
Regulation ss. 1.1273-2(h)(2) with respect to such allocation of the issue
price.
SECTION 3. DEFINITIONS
(a) For purposes of the Loan Documents, the following definitions
shall apply (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"Accounting Changes" has the meaning set forth in Section 21.10.
"Acquisition Documents" means, collectively, the Conny Stock
Purchase Agreements and all other agreements, documents and instruments
entered into on or prior to the Closing Date in connection with the Conny
Stock Purchase Agreements as such other agreements, documents and
instruments may be amended, supplemented or otherwise modified from time
to time in accordance with the provisions thereof and hereof.
"Acquisition Transactions" means the acquisition by Holdings of all
of the outstanding securities which represent at least 73% of all Voting
Stock of Conny and at least 73% of all securities which are entitled to
share without limitation in the earnings of Conny (the "Participating
Securities").
"ADA" means the Americans with Disabilities Act of 1990 (42 U.S.C.
ss. 12101, et seq.) and all applicable rules, regulations, codes,
ordinances and guidance documents promulgated or published thereunder.
"Affiliate" means, with respect to any person, (i) each person
(other than the Purchasers, the lenders under the Senior Loan Documents
and their respective affiliates) that, directly or indirectly, owns or
controls, whether beneficially, or as a trustee, guardian or other
fiduciary, 5% or more of the Stock having ordinary voting power in the
election of directors of such person, (ii) each person (other than the
Purchasers, the lenders under the Senior Loan Documents and their
respective affiliates) that controls, is controlled by or is under common
control with such person or any Affiliate of such person and (iii) each of
such person's officers, directors, joint venturers and general or limited
partners (other than, in the case of Holdings, a director nominated by the
Purchasers pursuant to Section 7.31). For the purpose of this definition,
"control" of a person shall mean the possession,
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directly or indirectly, of the power to direct or cause the direction of
its management or policies, whether through the ownership of voting
securities, by contract or otherwise. Under no circumstances shall any
Purchaser, the Agent, any lender or agent under the Senior Loan Documents
or their respective affiliates be deemed an "Affiliate" of or affiliated
with Holdings, the Company or any of their respective Subsidiaries.
"Agent" means Xxxxxxxx Street Capital Advisors, L.L.C. and any
successor agent hereunder.
"Blue Sky Application" has the meaning set forth in Section 17.6(a).
"Board" or "Board of Directors" means, with respect to any person
which is a corporation, business trust or other entity, the board of
directors or other group, however designated, which is charged with legal
responsibility for the management of such person, or any committee of such
board of directors or group, however designated, which is authorized to
exercise the power of such board or group in respect of the matter in
question.
"Business" means the business currently conducted by the Company and
Conny and their respective Subsidiaries on the date hereof, and all other
activities ancillary or related thereto.
"Business Day" means a day that is not a Saturday, a Sunday or a day
on which banks are required or permitted to be closed in New York, New
York.
"Capital Lease" means, with respect to any person, any Lease of any
property (whether real, personal or mixed) by such person as lessee that,
in accordance with GAAP, would be required to be classified and accounted
for as a capital Lease on a balance sheet of such person.
"Capital Lease Obligation" means, with respect to any Capital Lease,
the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of
such capital lease.
"Change of Control Event" means:
(i) Holdings shall fail to own, of record and beneficially,
with full power to vote, all shares of capital stock of the Company
entitling Holdings to cast at least 80% of the votes for the
election of directors of the Company and at any meeting of the
shareholders of the Company;
(ii) Any person or group of related persons for purposes of
Section 13(d) of the Securities Exchange Act (a "Group") either (A)
is or becomes, by purchase,
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tender offer, exchange offer, open market purchases, privately
negotiated purchases or otherwise, the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act,
whether or not applicable, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable immediately
or after the passage of time only), directly or indirectly, of more
than 30% of the total then outstanding Voting Stock of Holdings (for
the purpose of this clause (ii), such person or Group will be deemed
to "beneficially own" (determined as aforesaid) any Voting Stock of
a corporation (the "specified corporation") held by any other
corporation (the "parent corporation") if such person or Group
"beneficially owns," directly or indirectly, a majority of the
voting power of the Voting Stock of such parent corporation), or (B)
otherwise has the ability to elect, directly or indirectly, a
majority of the members of the Board of Directors of Holdings;
(iii) Holdings consolidates with or merges into another person
and the stockholders immediately prior to such merger or
consolidation hold less than a majority of the Voting Stock of the
resulting entity;
(iv) Xxxxxxx X. Xxxxxxx shall fail to be substantially
involved in the management and operations of the Company; or
(v) Xxxxxx Xxxxxxx shall fail to be substantially involved
in the management and operations of Holdings.
provided, however, that a Change in Control Event shall not be
deemed to have occurred if, with respect to Xxxxxxx X. Xxxxxxx and
Xxxxxx Xxxxxxx, either shall fail to be substantially involved in
the management and operations of the Company and Holdings,
respectively, and the Company and/or Holdings, as the case may be,
shall within 90 days of such failure replace Xxxxxxx and/or Hevrony,
as the case may be, with a person acceptable to the Majority
Noteholders.
"Charges" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including, without limitation, taxes
owed to the PBGC at the time due and payable), levies, assessments or
Liens upon or relating to (i) the Obligations, (ii) the employees,
payroll, income or gross receipts of the Company, Holdings or any
Subsidiary thereof, (iii) the Company's, Holdings' or any such
Subsidiary's properties and assets or its ownership or use thereof or (iv)
any other aspect of the Business.
"Cigna Exchange Agreement" means the Exchange Agreement dated March
31, 1996 by and among the Company, CIGNA Mezzanine Partners, Inc., and
CIGNA Property and Casualty Insurance Company of North America.
"Closing" has the meaning set forth in Section 2(a).
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"Closing Date" has the meaning set forth in Section 2(a).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and interpretations thereunder.
"Collateral Documents" means, collectively, the (i) Mortgage dated
as of the date hereof between the Company and Agents; (ii) Assignment,
Pledge and Security Agreement dated as of the date hereof between the
Company and Agent relating to that certain BDA Management Agreement dated
March 27, 1997, that certain policy issued by Export-Import Bank of the
United States to the Company (policy no. ESC-147470), collateral listed on
Schedule A thereto; (iii) Assignment, Pledge and Security Agreement dated
as of the date hereof between the Company and Agent relating to various
equipment leases; (iv) Assignment, Pledge and Security Agreement dated as
of the date hereof between the Company and Agent relating to two
promissory notes in the amounts of $15,207,000 and $6,000,000 from
Holdings to the Company; (v) Assignment, Pledge and Security Agreement
between Holdings and Agent regarding the capital stock of the Company
owned by Holdings, to be entered into after the Closing pursuant to
Section 7.11 hereof; (vi) Assignment, Pledge and Security Agreement dated
the date hereof between Holdings and Agent relating to the ComTel Notes
and fees payable under that certain Management Agreement dated April 1,
1995 between Holdings and the Company (the "Management Agreement"); and
(vii) all other documents instruments and agreements entered into on or
prior to the Closing Date in connection with the foregoing, as such other
agreements, documents and instruments may be amended, supplemented or
otherwise modified from time to time in accordance with the provisions
hereof or thereof..
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering
the Securities Act or the Securities Exchange Act.
"Common Share" or "Common Shares" means shares of Common Stock, or
other securities, which can be obtained or have been obtained by an
exercise in whole or in part of any Common Warrant or Contingent Common
Warrant or are obtained upon an exchange of Shares pursuant to the terms
of a Common Warrant or Contingent Common Warrant or upon conversion of
Preferred Shares pursuant to the terms thereof.
"Common Stock" means the Common Stock, par value $.01, of Holdings.
"Common Warrant" has the meaning set forth in Section 1(d).
"Company" has the meaning set forth in the preamble hereto. For
purposes of this Agreement, the "Company" shall be deemed to include,
without limitation, the Company's successors and permitted assigns and any
debtor-in-possession on behalf of the Company.
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"Company Common Stock" means the common stock, par value $.01 per
share, of the Company.
"ComTel Notes" shall mean the Secured Promissory Note I and the
Secured Promissory Note II, each dated as of March 31, 1995, by ComTel
Systems Corporation to ComTel Industries, Inc. which have been assigned
to, and are currently held by, Holdings.
"Conny" shall mean Xxxxxx Xxxxxxxxxx AG, a German corporation.
"Conny Stock Purchase Agreement" means those certain Stock Purchase
Agreements dated as of September 3, 1997 and August 18, 1997 between
Holdings and Baden-Wurttenbergische Bank AG and between Holdings and der
Xxxx Holding GmbH & Co. KG, respectively, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
the provisions thereof and hereof.
"Contingent Common Warrant" has the meaning set forth in Section
1(e).
"Credit Agreement" means the Loan and Security Agreement dated as of
April 18, 1990, among the Company and the Senior Lender, as the same has
been (as described in the Subordination Agreement) and may be extended,
renewed, refinanced, refunded, replaced, amended, supplemented or
otherwise modified from time to time in accordance with the provisions
thereof and hereof.
"Default Rate" means a rate per annum equal to the interest rate on
the Notes plus two percent (2%).
"Disclosure Materials" has the meaning set forth in Section 4.18.
"Environmental Laws" shall have the meaning ascribed thereto in the
Environmental Compliance and Indemnification Agreement of even date
herewith by the Company.
"Equipment" means all of the Company's, Holdings' or any
Subsidiary's present and future (i) equipment, including without
limitation machinery, manufacturing, distribution, selling, data
processing and office equipment, assembly systems, tools, molds, dies,
fixtures, appliances, furniture, furnishings, vehicles, vessels, aircraft,
aircraft engines and trade fixtures, (ii) other tangible personal property
(other than the Company's, Holdings' or any Subsidiary's Inventory), and
(iii) any and all accessions, parts and appurtenances attached to any of
the foregoing or used in connection therewith, and any substitutions and
replacements for any of the foregoing.
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"ERISA" means the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time, and
any regulations promulgated thereunder.
"ERISA Affiliate" means (a) each "person" (as defined in Section
3(a) of ERISA) which is under "common control" with the Company (within
the meaning of Section 414(b), (c), (m) or (o) of the Code) and (b) each
other person that is a Subsidiary of the Company or Holdings.
"ERISA Event" means, with respect to the Company or any ERISA
Affiliate: (i) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan; (ii) the withdrawal of the Company or any ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a
plan year in which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (iii) the complete or partial withdrawal of the
Company or any ERISA Affiliate from any Multiemployer Plan; (iv) the
filing of a notice of intent to terminate a Title IV Plan or the treatment
of a plan amendment as a termination under Section 4041 of ERISA; (v) the
institution of any proceeding to terminate a Title IV Plan or
Multiemployer Plan by the PBGC; (vi) the failure to make any required
contribution to a Qualified Plan subject to Section 412 of the Code; or
(vii) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Title IV Plan or
Multiemployer Plan or for the imposition of any liability under Title IV
of ERISA, other than PBGC premiums due but not delinquent under Section
4007 of ERISA.
"Event of Default" has the meaning set forth in Section 14.
"Fair Market Value" of any property means the fair market sale value
which a willing buyer of such property would pay a willing seller, each
under no compulsion to buy or sell and in full possession of all relevant
facts.
"Financials" means the historical and pro forma financial statements
referred to in Schedule 4.6(a).
"Fiscal Month" means the approximately one-month accounting periods
of Holdings, the Company and their respective Subsidiaries ending nearest
the last day of each calendar month. Subsequent changes of the fiscal
months of Holdings, the Company or any such Subsidiary shall not change
the term "Fiscal Month," unless the Majority Noteholders shall consent in
writing to such change.
"Fiscal Quarter" means the approximately 3-month quarterly
accounting periods of Holdings, the Company and their respective
Subsidiaries ending nearest March 31st, June 30th, September 30th and
December 31st of each year. Subsequent changes of the fiscal
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quarters of Holdings, the Company or any such Subsidiary shall not change
the term "Fiscal Quarter," unless the Majority Noteholders shall consent
in writing to such change.
"Fiscal Year" means the 12-month accounting periods of Holdings, the
Company and their respective Subsidiaries ending on March 31st (or
December 31st in the case of Conny) of each year. Except for a change in
such fiscal year of Holdings or the Company or any Subsidiary to December
31st of each year, subsequent changes of the fiscal year of Holdings, the
Company or any such Subsidiary shall not change the term "Fiscal Year,"
unless the Majority Noteholders shall consent in writing to such change.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, consistently
applied with the accounting principles used in the preparation of the
Financials, changing as and when provided pursuant to the terms of Section
23.10.
"German Newco" means Decora Industries Deutscheland GmbH, a German
GmbH.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" means as to any person, any obligation of
such person guaranteeing any Indebtedness, Lease, dividend or other
obligation ("primary obligations") of any other person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such person (i) to purchase or repurchase any such primary
obligation, (ii) to advance or supply funds (a) for the purchase or
payment of any such primary obligation or (b) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net
worth or solvency or any balance sheet condition of the primary obligor,
(iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation
or (iv) to indemnify the owner of any such primary obligation against loss
in respect thereof.
"Guaranty" means that certain Guaranty dated as of the Closing Date
by Holdings of the Obligations, in substantially the form of Exhibit G, as
the same may be amended, supplemented or otherwise modified from time to
time in accordance with the provisions hereof and thereof.
"Holdings" has the meaning set forth in the recitals hereto. For
purposes of this Agreement, "Holdings" shall be deemed to include, without
limitation, its successors and permitted assigns and any
debtor-in-possession on behalf of Holdings.
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"Indebtedness" of any person means (i) all indebtedness of such
person for borrowed money or for the deferred purchase price of property
or services (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured, but not including obligations to
trade creditors incurred in the ordinary course of business), (ii) all
obligations evidenced by notes, bonds, debentures or similar instruments,
(iii) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale
of such property), (iv) all Capital Lease Obligations, (v) all Guaranteed
Indebtedness with respect to the Indebtedness referred to in clauses (i),
(ii), (iii) and (iv) above and (vi) all Indebtedness referred to in clause
(i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including, without limitation,
accounts and contract rights) owned by such person, even though such
person has not assumed or become liable for the payment of such
Indebtedness.
"Indemnified Person" has the meaning as set forth in Section 18(b).
"Initiating Holders" has the meaning set forth in Section 17.1(a).
"Inventory" means any "inventory," as such term is defined in the
UCC, now or hereafter owned or acquired by Holdings, the Company and its
Subsidiaries, wherever located, including without limitation all
inventory, merchandise, goods and other personal property which are held
by or on behalf of Holdings, the Company and its Subsidiaries for sale or
Lease or are furnished or are to be furnished under a contract of service
or which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in the Business or in the processing,
production, packaging, promotion, delivery or shipping of the same.
"IRS" means the Internal Revenue Service, or any successor thereto.
"Leases" means all of those leasehold estates in real property now
owned or hereafter acquired by Holdings, the Company or any Subsidiary
thereof, whether as lessor, lessee, sublessee or assignee.
"Lien" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention agreement,
any financing lease having substantially the same economic effect as any
of the foregoing and the filing of, or agreement to give, any financing
statement perfecting a security interest under the UCC or comparable law
of any jurisdiction).
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"Loan Documents" means, collectively, (a) this Agreement, (b) the
Notes, (c) the Common Warrant certificates, (d) the Contingent Common
Warrant certificates, (e) the Preferred Warrant Certificates, (f) the
Guaranty, (g) the Subordination Agreement, (h) the Collateral Documents
and (i) all other agreements, instruments and documents entered into in
connection with this Agreement, as such other agreements, instruments and
documents may be extended, renewed, refinanced, refunded, replaced,
amended, supplemented or otherwise modified from time to time in
accordance with the provisions hereof and thereof.
"Losses" has the meaning set forth in Section 18(b).
"Majority Noteholders" means, at any time of determination, the
holders of Notes evidencing more than 50% of the aggregate principal
amount of all Notes then outstanding.
"Material Adverse Effect" means (a) a material adverse effect on (i)
the business, assets, operations, prospects or financial condition of
Holdings, the Company and their Subsidiaries, taken as a whole, (ii) the
Company's ability to pay the Obligations in accordance with the terms
thereof or (iii) the rights and remedies of any Purchaser or other holder
of any Note, Warrant or Share under the Loan Documents or (b) the
incurrence by Holdings, the Company or any Subsidiary thereof of material
liability, contingent or liquidated, that is not permitted by the terms
hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which the Company or any ERISA
Affiliate is making, is obligated to make, has made, or has been obligated
to make, contributions on behalf of participants who are or were employed
by the Company or any ERISA Affiliate.
"Net Worth" means, at a particular date, all amounts which would be
included under consolidated shareholders' equity for Holdings, the Company
and their Subsidiaries as of such date, determined in accordance with
GAAP.
"Notes" has the meaning set forth in Section l(b).
"Obligations" means all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for
payment of monetary amounts (whether or not such performance is then
required or contingent, or such amounts are liquidated or determinable)
owing by Holdings or the Company to any holder of a Note, and all
covenants and duties regarding such amounts, of any kind or nature,
present or future, whether or not evidenced by any note, agreement or
other instrument, in each case arising under any of the Loan Documents
(other than the Warrants). This term includes, without limitation, all
principal, interest (including without limitation any interest that, but
for the provisions of any federal or state bankruptcy, insolvency or
similar laws, would have
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accrued), fees, Charges, expenses, attorneys' fees and other sums
chargeable to the Company under any of the Loan Documents (other than the
Warrants).
"Outstanding" or "outstanding" means, when used with reference to
the Notes, Warrants or Shares as of a particular time, all Notes, Warrants
or Shares as the case may be, theretofore duly issued except (i) Notes,
Warrants represented by Warrants, certificates or Shares represented by
stock certificates, theretofore reported as lost, stolen, mutilated or
destroyed or surrendered for transfer, exchange or replacement, in respect
of which new or replacement Notes, Warrant certificates or stock
certificates have been issued by the Company or Holdings, as the case may
be, (ii) Notes theretofore paid in full, (iii) Warrants theretofore fully
exercised, (iv) any such Shares then held in treasury by Holdings or
theretofore acquired for value and canceled by Holdings and (v) Notes
theretofore canceled by the Company, whether upon an exercise of Warrants
or otherwise; except that for the purpose of determining whether holders
of the requisite amount of Notes, Warrants or Shares have made or
concurred in any declaration, waiver, consent, approval, notice, annulment
of acceleration or other communication under this Agreement or under any
Notes or Warrants, Notes, Warrants and Shares registered in the name of,
or owned beneficially by, Holdings, the Company or any of their respective
Affiliates (other than the Purchasers) shall not be deemed to be
outstanding.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" means an employee pension benefit plan, as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which
the Company or any ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were
employed by the Company or any ERISA Affiliate.
"Permitted Encumbrances" means the following Liens: (i) Liens for
taxes or assessments or other governmental Charges or levies, either not
yet delinquent and payable or to the extent that nonpayment thereof is
permitted by the terms of Section 7.6(b); (ii) pledges or deposits
securing obligations under workmen's compensation, unemployment insurance,
social security or public liability laws or similar legislation; (iii)
pledges or deposits securing bids, tenders, contracts (other than
contracts for the payment of money) or Leases to which the Company or any
Subsidiary thereof is a party as lessee made in the ordinary course of
business; (iv) deposits securing public or statutory obligations of the
Company, Holdings or any Subsidiary thereof; (v) inchoate and unperfected
workers', mechanics', suppliers' or similar liens arising in the ordinary
course of business; (vi) carriers', warehousemen's or other similar
possessory liens arising in the ordinary course of business and securing
Indebtedness not yet due and payable in an outstanding aggregate amount
not in excess of $100,000 at any time; (vii) deposits securing, or in lieu
of, surety, appeal or customs bonds in proceedings to which the
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Company, Holdings or any Subsidiary thereof is a party; (viii) any
attachment or judgment lien, unless the judgment it secures shall not,
within 30 days after the entry thereof, have been discharged or stayed
pending appeal, or shall not have been discharged within 30 days after the
expiration of any such stay; (ix) zoning restrictions, easements, licenses
or other restrictions on the use of real property or other minor
irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value or marketability of such
real property, Leases or leasehold estates; (x) purchase money Liens
(including the interest of a lessor under a Capital Lease and Liens to
which any property is subject at the time of the acquisition thereof)
securing Indebtedness permitted under Section 8.5; provided that such
Liens shall not apply to any property of the Company, Holdings or any
Subsidiary thereof other than that purchased or subject to such Capital
Lease; (xi) precautionary filings under the UCC by bailors, lessors or
consignors to the extent that the transaction giving rise thereto is
permitted pursuant to the terms of this Agreement and the other Loan
Documents; (xii) Liens currently existing and securing the Obligations of
the Company and Holdings under the Senior Loan Documents; and (xiii) Liens
currently existing and securing the Obligations of the Company under the
Loan Agreement, dated September 20, 1995, between the Company and
Washington County Local Development Corporation.
"person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or
department thereof).
"Plan" means, with respect to the Company or any ERISA Affiliate, an
employee benefit plan, as defined in Section 3(3) of ERISA, which the
Company or any ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were
employed by the Company or any ERISA Affiliate.
"Potential Default" means a condition or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"Preferred Shares" means shares of Series A Convertible Preferred
Stock, par value $.01 per share, of Holdings, or other securities, which
can be obtained or have been obtained by an exercise in whole or in part
of any Preferred Warrant or are obtained upon an exchange of Preferred
Shares pursuant to the terms of a Preferred Warrant.
"Preferred Warrant" has the meaning set forth in Section 1(f)
hereof.
"Prospectus" has the meaning set forth in Section 17.6(a).
"Projections" means the projections referred to in Schedule 4.6(b).
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"Purchasers" means the persons listed on Schedule A hereto and the
future holders of Notes and/or Warrants and/or Shares.
"Qualified Plan" means an employee pension benefit plan, as defined
in Section 3(2) of ERISA, which is intended to be tax-qualified under
Section 401(a) of the Code, and which the Company or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf
of participants who are or were employed by the Company or any ERISA
Affiliate.
"Redemption Percentage" means, with respect to any prepayment of
Notes pursuant to Section 6.2(a) during any period set forth below, the
percentage of the aggregate principal amount of Notes to be prepaid set
forth opposite such period:
Redemption
Period Percentage
------ ----------
October 1, 1999-September 30, 2000................. 105%
October 1, 2000-September 30, 2001................. 104%
October 1, 2001-September 30, 2002................. 103%
October 1, 2002-September 30, 2003................. 102%
October 1, 2003-September 30, 2004................. 101%
Thereafter......................................... 100%
"Registrable Securities" has the meaning set forth in Section
17.1(c).
"Requesting Holder" has the meaning set forth in Section 17.4(b).
"Reportable Event" means any of the events described in Section
4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Restricted Payment" means (i) the declaration or payment of any
dividend or the occurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of the
Company's Stock, (ii) any payment on account of the purchase, redemption,
defeasance, sinking fund or other retirement of the Stock of Holdings, the
Company or any of their respective Subsidiaries, or any other payment or
distribution made in respect of any such Stock, either directly or
indirectly, (iii) any payment, loan, contribution or other transfer of
funds or other property by the Company or any Subsidiary thereof to
Holdings or any Subsidiary of Holdings (other than the Company and its
Subsidiaries); and (iv) any payment of management fees (or other fees of a
similar nature) by the Company to Holdings, any Stockholder of Holdings or
their respective Affiliates, other than to the extent permitted by Section
8.2; provided, however,
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that the following shall not constitute a Restricted Payment: (x) the
advance by the Company to Holdings and the contribution by Holdings to the
capital of German Newco of up to $15.1 million to be used to pay the
purchase price under the Conny Stock Purchase Agreements, (y) the offer of
German Newco or Conny to purchase the outstanding equity securities of
Conny not owned by German Newco or (z) the advance by Company to Holdings
of $107,000 to repay debt of Holdings to the Senior Lender.
"Retiree Welfare Plan" means any Welfare Plan providing for
continuing coverage or benefits for any participant or any beneficiary of
a participant after such participant's termination of employment, other
than continuation coverage provided pursuant to Section 4980B of the Code.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and the rules, regulations and
interpretations thereunder.
"Senior Indebtedness" means "Fleet Obligations" (as defined in the
Subordination Agreement).
"Senior Lender" means Fleet Bank, a New York bank.
"Senior Loan Documents" means (a) the Credit Agreement, (b) the
Subordination Agreement and (c) all other documents, instruments and
agreements entered into on or prior to the Closing Date in connection with
the Credit Agreement as described in the Subordination Agreement, as such
other documents, instruments and agreements may be extended, renewed,
refinanced, refunded, replaced, amended, supplemented or otherwise
modified from time to time in accordance with the provisions thereof and
hereof.
"Share" or "Shares" means Common Shares and Preferred Shares.
"Solvent" has the meaning set forth in Section 4.25.
"Stock" means all shares, options, warrants, general or limited
partnership interests, participations or other equivalents (regardless of
how designated) of or in a corporation, partnership or other entity,
whether voting or nonvoting, including, without limitation, common stock,
preferred stock or any other "equity security" (as such term is defined in
Rule 3a11-1 of the General Rules and Regulations promulgated by the
Commission under the Securities Exchange Act).
"Subordination Agreement" means that certain Subordination Agreement
dated as of the date hereof among the Purchasers and the Senior Lender, in
substantially the form
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of Exhibit H, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the provisions thereof.
"Subject Property" means all real property owned, Leased or operated
by Holdings, the Company or any Subsidiary of the Company, which is
comprised solely of the Company's facility at Xxx Xxxx Xxxxxx, Xxxx
Xxxxxx, Xxx Xxxx.
"Subsidiary" means with respect to any person, (i) any corporation
of which an aggregate of 50% or more of the outstanding Stock having
ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether, at the time, Stock of any other
class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such person and one or more
Subsidiaries of such person, or with respect to which such person and one
or more Subsidiaries of such person have at the time the right to vote or
designate the vote of an aggregate of 50% or more of such Stock, whether
by proxy, agreement, operation of law or otherwise, and (ii) any
partnership or other entity (other than a corporation) in which such
person and one or more Subsidiaries of such person have at the time an
aggregate interest (whether in the form of voting, participation in
profits or capital contributions or otherwise) of 50% or more or of which
any such person or any of its Subsidiaries is at the time a general
partner, trustee or similar official or may exercise the powers of a
general partner, trustee or similar official; provided, however, that
neither Conny nor German Newco shall be a Subsidiary and provided further
that an entity shall not be deemed a Subsidiary so long as on the date
hereof and at all times hereafter such entity conducts no business or
investment activities and has no assets or liabilities in each case in
excess of $10,000 in the aggregate.
"Taxes" means all taxes, levies, imposts, deductions, Charges and
withholdings of any kind, and all liabilities with respect thereto.
"Termination Event" means: (i) a Reportable Event; (ii) the
withdrawal of the Company or any ERISA Affiliate from a Title IV Plan
during a plan year in which the Company or such ERISA Affiliate was a
"substantial employer" as defined in Section 4001(a)(2) or 4062(e) of
ERISA; (iii) the imposition of an obligation on the Company or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties with
written notice of intent to terminate a Title IV Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by
the PBGC of proceedings to terminate a Title IV Plan; or (v) any event or
condition which might constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Title IV Plan.
"Title IV Plan" means a Pension Plan, other than a Multiemployer
Plan, which is covered by Title IV of ERISA.
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"Transaction Documents" means (a) all Loan Documents, (b) all
Acquisition Documents and (c) all Senior Loan Documents.
"Transaction Parties" has the meaning set forth in Section 4.2.
"UCC" means the Uniform Commercial Code as the same may, from time
to time, be in effect in the State of New York.
"Unfunded Pension Liability" means, at any time, the aggregate
amount, if any, of the sum of (i) the amount by which the present value of
all accrued benefits under each Title IV Plan exceeds the fair market
value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for such Title IV Plan using the actuarial assumptions in
effect under such Title IV Plan, and (ii) for a period of five (5) years
following a transaction reasonably likely to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by
the Company or any ERISA Affiliate as a result of such transaction.
"Voting Stock" means, with respect to any person, securities of any
class or classes of capital stock in such person entitling the holders
thereof (whether at all times or only so long as no senior class of stock
has voting power by reason of any contingency) to vote in the election of
members of the Board of Directors of such person.
"Warrants" means the Common Warrants, the Contingent Common Warrants
and the Preferred Warrants.
"Welfare Plan" means any welfare plan, as defined in Section 3(1) of
ERISA, which the Company or any ERISA Affiliate maintains, contributes to
or has an obligation to contribute to on behalf of participants who are or
were employed by the Company or any ERISA Affiliate.
"Withdrawal Liability" means, at any time, the aggregate amount of
the liabilities, if any, pursuant to Section 4201 of ERISA, and any
increase in contributions pursuant to Section 4243 of ERISA, with respect
to all Multiemployer Plans.
(b) For all purposes of the Loan Documents, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to the particular Loan Document as a whole
and not to any particular Section or other subdivision thereof;
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(ii) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP;
(iii) all computations provided for herein shall be made in
accordance with GAAP consistently applied, unless another method of
computation is herein specified;
(iv) any uses of the masculine, feminine or neuter gender
shall also be deemed to include any other gender, as appropriate; and
(v) any exhibit, annex or schedule to any Loan Document
shall be deemed a part of such Loan Document, and all references in any
Loan Document to exhibits, annexes and schedules refer to exhibits,
annexes and schedules to such Loan Document.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE COMPANY
Holdings and the Company jointly and severally represent and warrant
as follows as of the date hereof and as of the Closing Date (after giving effect
to the consummation of the Acquisition Transactions and the other transactions
contemplated hereby):
4.1. Corporate Existence; Compliance with Law. The Company and each
of its Subsidiaries: (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of organization, in the case
of the Company is duly qualified to do business and in good standing under the
laws of the State of New York as Decora Manufacturing, and is duly qualified to
do business as a foreign corporation and in good standing under the laws of each
other jurisdiction where its ownership or Lease of property or the conduct of
its business requires such qualification and except where the failure to be so
qualified and in good standing would not have or result in a Material Adverse
Effect; (ii) has the requisite corporate power and authority and the legal right
to own, pledge, mortgage or otherwise encumber and operate its properties, to
Lease the property it operates under Lease, and to conduct its business as now
and proposed to be conducted; (iii) except as set forth on Schedule 4.1, has all
licenses, permits, consents or approvals from or by, and has made all filings
with, and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent they are material to such ownership, operation and
conduct; (iv) is in compliance with its certificate or articles of incorporation
and By-laws; and (v) is in compliance with all applicable provisions of law and
all licenses, permits, consents and approvals described in clause (iii) above
where the failure to comply, individually or together with all such other
failures, could have or result in a Material Adverse Effect.
4.2. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by each of the Company, Holdings and German
Newco (collectively, the "Transaction Parties"), of the Transaction Documents,
to the extent such Transaction Party is a party thereto, and the consummation of
the transactions contemplated by the Transaction Documents (including, without
limitation, the issuance of the Notes on the Closing Date): (i) are
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within such Transaction Party's power (individual, corporate, partnership or
otherwise); (ii) have been duly authorized by all necessary or proper corporate
or partnership and shareholder or partner action, as applicable; (iii) are not
in contravention of any provision of any Transaction Party's certificate or
articles of incorporation, By-laws, partnership agreement or other constitutive
documents; (iv) will not violate any law or regulation, or any order or decree,
of any Governmental Authority applicable to any Transaction Party; (v) will not
conflict with or result in the breach or termination of, constitute a default
under or accelerate any performance required by, any indenture, mortgage, deed
of trust, Lease, agreement or other instrument to which any Transaction Party is
a party or by which any Transaction Party or any of its property is bound; (vi)
will not result in the creation or imposition of any Lien upon any of the
property of any Transaction Party, other than Liens granted on the Closing Date
pursuant to the Collateral Documents in favor of the Agent; (vii) except as set
forth on Schedule 4.2 hereof, will not cause anti-dilution clauses of any
outstanding securities to become operative or give rise to any preemptive
rights; and (viii) do not require the consent or approval of, or any
registration, declaration, qualification or filing by or with, any Governmental
Authority or any other person, except those which were duly obtained, made or
complied with prior to the Closing Date. At or prior to the Closing Date, each
of the Transaction Documents was duly executed and delivered by or on behalf of
the Transaction Parties and Xxxxx Holding GmbH & Co. KG and Baden-
Wurtternbergische Bank A.G. (the "German Sellers") which are parties thereto and
each constitutes a legal, valid and binding obligation of each such Transaction
Party and German Sellers, enforceable against each such Transaction Party and
German Sellers in accordance with its terms.
4.3. Stock Ownership. On the Closing Date, the authorized capital
stock of the Company will consist of 20,000,000 shares of Company Common Stock.
On the Closing Date, (a) 1,000 shares of Company Common Stock will be issued and
outstanding, (b) such outstanding shares will be duly authorized, validly issued
and outstanding and fully paid and nonassessable, free and clear of all
preemptive rights, and (c) such outstanding shares will be owned beneficially
and of record entirely by Holdings free and clear of all Liens other than those
granted under the Senior Loan Documents and the Loan Documents, and (d) such
outstanding shares will constitute all of the issued and outstanding Stock of
the Company. There are no outstanding options, warrants, rights, convertible
securities or other agreements, commitments or plans under which the Company may
become obligated to issue, sell or transfer any shares of its capital stock or
any other Stock of the Company.
4.4. Subsidiaries; Joint Ventures; Indebtedness. The Company and
Holdings do not have any Subsidiaries and are not engaged in any joint venture
or partnership with any other person, and have no outstanding Indebtedness, in
each case except as described on Schedule 4.4.
4.5. Business. The Company and its Subsidiaries are solely engaged
in the Business.
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4.6. Financial Statements and Projections. (a) True and complete
copies of all the historical and pro forma balance sheets and other historical
financial statements identified in Schedule 4.6(a) have been furnished by or on
behalf of Holdings and the Company to the Purchasers prior to the Closing Date.
Such historical balance sheets and other historical financial statements (i)
have been, except as expressly set forth therein or in the footnotes thereto,
prepared in accordance with GAAP, and (ii) present fairly in all material
respects the consolidated financial position of the Company and Holdings at the
respective dates thereof, and the consolidated results of operations and cash
flows of the Company and Holdings for the respective periods then ended
(subject, in the case of any unaudited interim financial statements, to normal
year-end audit adjustments and the absence of footnotes). Each such pro forma
balance sheet (assuming the acquisition of Conny as described therein) has been
prepared in accordance with GAAP (assuming that the financial statements of
Conny prepared under German accounting principles were prepared in accordance
with GAAP except to the extent adjustments were made in such pro forma
financials to reflect differences in GAAP and German accounting principles) to
the extent applicable to such balance sheet. Except as set forth in Schedule
4.6, Holdings is not aware of any material changes which need to be made to the
Conny financial statements to cause them to be in accordance with GAAP, and, in
the opinion of Holdings and the Company, the assumptions on which the pro forma
adjustments reflected in each such pro forma balance sheet are based provide a
reasonable basis for presenting the significant effects of the transactions
contemplated by such pro forma balance sheet (including, without limitation, the
Acquisition Transactions) and such pro forma adjustments give appropriate effect
to such assumptions and are properly applied in such pro forma balance sheet.
(b) True and complete copies of the projections identified in
Schedule 4.6(b) have been furnished by or on behalf of Holdings and the Company
to the Purchasers prior to the Closing Date. The Projections disclose all
assumptions made with respect to general economic, financial and market
conditions in formulating the Projections. The Projections are based upon
reasonable estimates and assumptions, all of which are fair in light of current
conditions, have been prepared on the basis of the assumptions stated therein
and reflect the reasonable estimate of Holdings and the Company of the results
of operations and other information projected therein (assuming the acquisition
of Conny as described therein).
4.7. Material Adverse Change. The Company, Holdings and their
Subsidiaries, as of the Closing Date, do not have any obligations or liabilities
(contingent or otherwise) for Charges, long-term Leases or unusual forward or
long-term commitments which are not reflected in the pro forma balance sheet of
the Company dated as of the Closing Date and described on Schedule 4.6(a). There
has been no event or series of events which has had or could reasonably be
expected to have a material adverse effect on the business, condition (financial
or otherwise), operations, performance, projections, properties or prospects of
the Company, Holdings, their Subsidiaries or the industry in which it operates
since June 30, 1997. Except as permitted hereunder or set forth in Schedule 4.7,
since June 30, 1997 no dividends, advances or other distributions have been
declared, paid or made upon any Stock of the Company or Holdings, and
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no shares of Stock of the Company or Holdings have been, or are now required to
be redeemed, retired, purchased or otherwise acquired for value by the Company
or Holdings.
4.8. Ownership of Property; Liens. Except as described on Schedule
4.8, the real property listed on Schedule 4.8 constitutes all of the real
property owned, Leased or used by the Company, Holdings or their Subsidiaries.
The Company, Holdings or their Subsidiaries owns (i) good and marketable fee
simple title to all of the real property owned by it, and valid and marketable
Leasehold interests in all of its Leases (both as lessor and lessee, sublessee
or assignee), all as described on Schedule 4.8, and (ii) good and marketable
title to, or valid Leasehold interests in, all of its other properties and
assets. Except as described on Schedule 4.8, none of the properties and assets
of the Company, Holdings or their Subsidiaries are subject to any Liens, except
Permitted Encumbrances. Except as described on Schedule 4.8, the Company has
received all deeds, assignments, waivers, consents, non-disturbance and
recognition or similar agreements, bills of sale and other documents, and duly
effected all recordings, filings and other actions, necessary to establish,
protect and perfect the Company's, Holdings' or their Subsidiaries' right, title
and interest in and to all such real property and other assets or property.
Except as described on Schedule 4.8, (A) neither the Company, Holdings or their
Subsidiaries nor any other party to any Lease described on Schedule 4.8 is in
default of its obligations thereunder or has delivered or received any notice of
default under any such Lease, and no event has occurred which, with the giving
of notice, the passage of time or both, would constitute a default under any
such Lease; (B) the Company, Holdings or their Subsidiaries do not own or hold,
and are not obligated under or a party to, any option, right of first refusal or
other contractual right to purchase, acquire, sell, assign or dispose of any
real property owned or Leased by the Company, Holdings or their Subsidiaries;
and (C) no portion of any real property owned or Leased by the Company, Holdings
or their Subsidiaries has suffered any material damage by fire or other casualty
loss which has not heretofore been completely repaired and restored to its
original condition. All material permits required to have been issued or
appropriate to enable the real properties owned or Leased by the Company,
Holdings or their Subsidiaries to be lawfully occupied and used for all of the
purposes for which they are currently occupied and used, have been lawfully
issued and are, as of the Closing Date, in full force and effect. There are no
pending or, to Holdings' and the Company's knowledge, threatened condemnation or
eminent domain proceedings affecting or which could reasonably be expected to
affect all or any material part of the real properties owned or leased by the
Company, Holdings or their Subsidiaries.
4.9. Restrictions; No Default. (a) No contract, Lease, agreement or
other instrument to which the Company, Holdings or their Subsidiaries is a party
or by which it or any of its properties or assets is bound or affected, and no
provision of any applicable law or governmental regulation, has or results in a
Material Adverse Effect or, insofar as Holdings or the Company can reasonably
foresee, could have or result in a Material Adverse Effect. Except as set forth
on Schedule 4.9, the Company, Holdings or their Subsidiaries are not in default,
and to Holdings' and the Company's knowledge no third party is in default, under
or with respect to any contract, agreement, Lease or other instrument to which
the Company, Holdings or their Subsidiaries are a party or by which it or any of
its properties or assets is bound or affected,
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except for defaults which could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. No Potential Default or Event of
Default has occurred and is continuing.
(b) There are no adverse orders, judgments, writs, injunctions or
decrees of any Governmental Authority or arbitrator, domestic or foreign,
outstanding against the Company, Holdings or their Subsidiaries which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
4.10. Status Under Certain Statutes. None of the Company, Holdings
or any of their Subsidiaries is: (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding company," or
an "affiliate" of such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, (ii) a "public utility"
as defined in the Federal Power Act, as amended, (iii) an "investment company"
or an "affiliated person" thereof, or an "affiliated person" of any such
"affiliated person," or a person "controlled" by an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended, or
(iv) a "common carrier" as defined in the Interstate Commerce Act, as amended.
4.11. Labor Matters. (a) Except as set forth on Schedule 4.11, there
are no strikes, work stoppages, slow-downs, picketing or other labor disputes
against the Company, Holdings or their Subsidiaries that are pending or, to
Holdings' and the Company's knowledge, threatened which could have or result in
a Material Adverse Effect. Hours worked by and payments made to employees of the
Company, Holdings or their Subsidiaries have not been in violation of the Fair
Labor Standards Act or any other applicable law dealing with such matters, which
violations, individually or in the aggregate, could have or result in a Material
Adverse Effect. All premium payments due from the Company, Holdings or their
Subsidiaries on account of employee health and welfare insurance which could
have or result in a Material Adverse Effect if not paid have been paid or
accrued as a liability on the books of the Company and Holdings. There is no
organizing activity involving the Company, Holdings or their Subsidiaries
pending or, to Holdings' and the Company's knowledge, threatened by any labor
union or group of employees. Except as set forth on Schedule 4.11, there are no
representation or unfair labor practice proceedings pending or threatened with
the National Labor Relations Board, and no labor organization or group of
employees of the Company has made a pending demand for recognition. Except as
set forth on Schedule 4.11, there are no complaints, charges or grievances
against the Company, Holdings or their Subsidiaries pending or, to Holdings' and
the Company's knowledge, threatened to be filed with any federal, state, local
or foreign Governmental Authority or arbitrator based on, arising out of, in
connection with, or otherwise relating to, the employment or termination of
employment by the Company of any individual or the compliance with or violation
of the duty to bargain or the compliance with a violation of any collective.
(b) The Company, Holdings and their Subsidiaries have at all times
complied in all material respects with, and are currently in material compliance
with, all applicable federal,
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state and local laws, rules and regulations respecting employment, wages, hours,
compensation, benefits, occupational health and safety, and payment and
withholding of taxes in connection with employment. The Company, Holdings and
their Subsidiaries have withheld all amounts required by law or agreement to be
withheld from wages, salaries, commissions and other compensation to employees,
and the Company, Holdings and their Subsidiaries are not liable for any arrears
of wages or any taxes or penalties for failure to comply with any of the
foregoing.
4.12. Taxes. All federal, state, local and foreign tax returns,
reports and statements, including, but not limited to, information returns (Form
1120-S) required to be filed with any Governmental Authority by or with respect
to the Company, Holdings, or any of their Subsidiaries, their business or their
assets, have been duly filed, to the knowledge of the Company and Holdings each
such return correctly and completely reflects the liability for Charges and
other impositions and all other information required to be reported thereon, and
all Charges and other impositions shown thereon to be due and payable have been
paid, except to the extent permitted to be contested in accordance with the
terms of Section 7.6(b). All Charges and other impositions (in each case
together with all related fines, penalties and interest) (i) owed by the Company
or Holdings or any of their Subsidiaries, (ii) for which the Company or Holdings
or any of their Subsidiaries is or could otherwise be held liable, or (iii)
which are or could otherwise become chargeable as a Lien upon any property or
assets of Holdings, the Company or any of their Subsidiaries, have been duly and
timely paid. Proper and accurate amounts have been withheld by the Company,
Holdings and their Subsidiaries, as appropriate, from its employees for all
periods in full and complete compliance with the tax, social security and
unemployment withholding provisions of applicable federal, state, local and
foreign laws and such withholdings have been timely paid to the respective
Governmental Authorities. Schedule 4.12 sets forth those taxable years for which
the Company's or Holdings' or any of their Subsidiaries' tax returns are
currently being audited by the IRS or any other applicable Governmental
Authority and any assessments or threatened assessments in connection with any
such audit or otherwise currently outstanding. Except as described on Schedule
4.12, the Company, Holdings and their Subsidiaries have not executed or filed
with the IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges. The Company, Holdings and their Subsidiaries have not
filed a consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any dispositions of "subsection (f) assets" (as
such term is defined in Section 341(f)(4) of the Code). None of the property
owned by the Company is property which the Company, Holdings and their
Subsidiaries are required to treat as being owned by any other person pursuant
to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, and in effect immediately prior to the enactment of the Tax Reform Act
of 1986, or is "tax-exempt use property" within the meaning of Section 168(h) of
the Code. The Company, Holdings and their Subsidiaries have not agreed or been
requested to make any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise. The Company, Holdings and their
Subsidiaries are not a party to any obligation under any tax sharing agreement,
and the Company, Holdings and their Subsidiaries have not assumed any liability
of any person for Charges or other impositions payable by such person.
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4.13. ERISA. (a) Schedule 4.13 lists all Plans maintained or
contributed to by the Company or Holdings or their Subsidiaries and all
Qualified Plans maintained or contributed to by any ERISA Affiliate, and
separately identifies the Title IV Plans, Multiemployer Plans, any multiple
employer plans subject to Section 4064 of ERISA, unfunded Pension Plans, Welfare
Plans and Retiree Welfare Plans. Except as disclosed in Schedule 4.13, each Plan
is in compliance with the provisions of applicable law, including ERISA and the
Code, including the filing of reports required under the Code or ERISA which are
true and correct as of the date filed, or the failure to comply with all such
Plans would not result in a liability in excess of $50,000 and with respect to
each Plan, all required contributions and benefits have been paid in accordance
with the provisions of such Plan. Neither the Company nor any ERISA Affiliate
maintains or contributes to any Qualified Plan subject to Section 412 of the
Code or Section 302 of ERISA or Title IV. The Company and its ERISA Affiliates
do not maintain or contribute to any Retiree Welfare Plans. Except as set forth
in Schedule 4.13, neither the Company nor any ERISA Affiliate maintains or
contributes to any Pension Plan or Multiemployer Plan. Neither Holdings nor the
Company nor their Subsidiaries, to their knowledge, has engaged in a prohibited
transaction, as defined in Section 4975 of the Code or Section 406 of ERISA, in
connection with any Plan, which would subject the Company or Holdings or their
Subsidiaries (after giving effect to any exemption) to a material tax on
prohibited transactions imposed by Section 4975 of the Code or any other
material liability.
(b) Except as set forth on Schedule 4.13 and except to the extent
the following could not subject the Company or its ERISA Affiliates to liability
in excess of $50,000 individually or in the aggregate: (i) there are no pending,
or to the knowledge of Holdings and the Company, threatened claims, actions or
lawsuits (other than claims for benefits in the normal course) asserted or
instituted against (x) any Plan or its assets, (y) any fiduciary with respect to
any Plan or (z) the Company or any ERISA Affiliate with respect to any Plan;
(ii) within the last five years neither the Company nor any ERISA Affiliate has
engaged in a transaction which resulted in a Title IV Plan with Unfunded Pension
Liabilities being transferred outside of the "controlled group" (within the
meaning of Section 4001(a)(14) of ERISA) of any such entity; (iii) no plan which
is a Retiree Welfare Plan provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment (except as may be required by Section 4980B of the
Code and at the sole expense of the participant or the beneficiary of the
participant); and (iv) the Company and each ERISA Affiliate have complied with
the notice and continuation coverage requirements of Section 4980B of the Code
and the regulations thereunder, except where the failure to comply could not
have or result in any Material Adverse Effect.
(c) Assuming the accuracy of the representation contained in
Section 5(b), the execution, delivery and performance of the Loan Documents and
the consummation of the transactions contemplated thereby (including, without
limitation, (i) the offer, issue and sale by the Company and Holdings, and the
purchase by the Purchasers, of the Notes and the Warrants, and (ii) the issuance
of Shares upon the exercise from time to time of the Warrants) will not involve
any "prohibited transaction" within the meaning of ERISA or the Code.
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4.14. No Litigation. Except as set forth on Schedule 4.14, no
action, claim, suit, investigation or proceeding is now pending or, to the
knowledge of Holdings and the Company, threatened against the Company, Holdings
or their Subsidiaries, at law, in equity or otherwise, before any Governmental
Authority or any arbitrator or panel of arbitrators, which (i) challenges any
such person's or any of its Affiliates' right, power or competence to enter into
or perform any of its obligations under any Transaction Document, or the
validity or enforceability of any Transaction Document or any action taken
thereunder or (ii) could reasonably be expected to have or result in a Material
Adverse Effect, nor to the knowledge of Holdings and the Company does a state of
facts exist which could reasonably be expected to give rise to any such action,
claim, suit, investigation or proceeding.
4.15. Brokers. Except as set forth in Schedule 4.15, (i) no broker
or finder acting on behalf of Holdings or the Company brought about the making
or closing of the sale and purchase of the Notes and the Warrants pursuant to
this Agreement or the other transactions contemplated by the Transaction
Documents, and (ii) neither Holdings nor the Company have any obligation to any
person in respect of any finder's or brokerage fees in connection therewith.
4.16. Employment Matters. Except as set forth on Schedule 4.16,
there are no (i) employment, consulting, management or similar agreements
covering management of the Company, Holdings or their Subsidiaries or (ii)
collective bargaining agreements or other labor agreements, white papers or side
agreements covering any employees of the Company, Holdings or their
Subsidiaries. True and complete copies of each such agreement have been
furnished to the Purchasers.
4.17. Patents, Trademarks, Copyrights and Licenses. Except as
otherwise set forth on Schedule 4.17, the Company, Holdings and their
Subsidiaries own all material licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications and trade names
necessary to continue to conduct its business as heretofore conducted, now
conducted by it and proposed to be conducted by it, each of which is listed,
together with Patent and Trademark Office application or registration numbers,
where applicable, on Schedule 4.17. Schedule 4.17 lists all trade names or other
names under which the Company, Holdings and their Subsidiaries conduct business.
The Company, Holdings and their Subsidiaries conduct their business without
infringement or claim of infringement of any license, patent, copyright, service
xxxx, trademark, trade name, trade secret or other intellectual property right
of others, except where such infringement or claim of infringement, individually
or together with all such other infringements and claims, could not have or
result in a Material Adverse Effect. There is no infringement or claim of
infringement by others of any material license, patent, copyright, service xxxx,
trademark, trade name, trade secret or other intellectual property right of the
Company, Holdings and their Subsidiaries.
xxxx
4.18. Full Disclosure. No information contained in this Agreement,
the other Transaction Documents, the Projections, the Financials or any other
document furnished by or on behalf of the Company or Holdings pursuant to or in
contemplation of this Agreement which has
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been delivered to any Purchaser on or prior to the Closing Date (collectively,
the "Disclosure Materials"), contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. Except as described on Schedule 4.18
or in the Disclosure Materials, there are no facts known to the Company or
Holdings other than facts of a general economic nature not relating specifically
to the Company or the Business, which have or result in, or could reasonably be
expected to have or result in, a Material Adverse Effect.
4.19. Offering of Securities. None of the Transaction Parties or
Holdings or any agent or other person acting on any Transaction Party's or
Holdings' behalf, directly or indirectly, (i) offered any of the Notes, Warrants
or any similar security of the Company or Holdings (A) by any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or (B) for sale to, or solicited offers to buy any thereof
from, or otherwise approached with respect thereto or negotiated with respect
thereto with, any person other than the Purchasers and not more than 20 other
institutional investors each of which such Transaction Party or Holdings, as the
case may be, reasonably believed was an "accredited investor" within the meaning
of Regulation D under the Securities Act or (ii) has done or caused to be done
(or has omitted to do or to cause to be done) any act, which act (or which
omission) would result in bringing the issuance or sale of the Notes or Warrants
within the provisions of Section 5 of the Securities Act.
4.20. Holdings Orders. There are no adverse orders, judgements,
writs, injunctions or decrees of any Governmental Authority or arbitrator,
domestic or foreign, outstanding against Holdings.
4.21. Insurance Policies. Schedule 4.21 lists all insurance policies
of any nature maintained for current occurrences by the Company, Holdings or
their Subsidiaries, as well as a summary of the terms of such insurance
policies. Such insurance policies comply with the standards set forth in Section
7.5.
4.22. No Foreign Assets Control Regulation Violation. The
transactions contemplated by this Agreement will not result in a violation of
any of the foreign assets control regulations of the United States Treasury
Department, 31 C.F.R., Subtitle B, Chapter V, as amended, or any ruling issued
thereunder or any enabling legislation or other Presidential Executive Order
granting authority therefor, and the proceeds of the Notes and the Warrants will
not be used by the Company or Holdings in a manner which would violate any such
regulation.
4.23. Outstanding Securities. Since January 1, 1988, all
securities (as defined in the Securities Act) of each of Holdings and the
Company have been offered, issued, sold and delivered in compliance with, or
pursuant to exemptions from, all applicable federal and state laws, and the
rules and regulations of federal and state regulatory bodies, governing the
offering, issuance, sale and delivery of securities. Neither Holdings nor the
Company is required to file or has filed, pursuant to Section 12 of the
Securities Exchange Act, a registration statement relating
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to any class of its debt or equity securities, except as set forth on Schedule
4.23. Except as provided in Section 17 or as set forth on Schedule 4.23 hereof
neither Holdings nor the Company has registered or agreed to register any
securities under the Securities Act.
4.24. No Burdensome Agreements. Neither Holdings nor the Company is
a party to any contract or agreement with any of its Affiliates, the terms of
which are less favorable to Holdings or the Company, as the case may be, than
those which might have been obtained, at the time such contract or agreement was
entered into, from a person who was not such an Affiliate.
4.25. Solvency. (a) The Company is and, immediately after giving
effect to the issue and sale of the Notes and the Warrants and the consummation
of the other transactions contemplated hereby (including, without limitation,
the Acquisition Transactions), will be Solvent.
(b) For purposes of this Section 4.25, the term "Solvent" means,
with respect to any person, that:
(i) the assets of such person, at a fair valuation, exceed
the total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such person;
(ii) the cash flow of such person is sufficient to enable it
to pay its debts as they mature; and
(iii)such person does not have an unreasonably small capital
with which to engage in its anticipated business.
(c) For purposes of this Section 4.25, the "fair valuation" of the
assets of any person shall be determined on the basis of the amount which may be
realized within a reasonable time, either through collection or sale of such
assets at their Fair Market Value.
4.26. Americans with Disabilities Act of 1990. The Company's
employment practices and procedures are in compliance with the requirements of
the ADA in all material respects, and the Company, Holdings and their
Subsidiaries have received no notice or complaint alleging any noncompliance
with the ADA on its part or on the part of any of its facilities.
4.27. Additional Representations with Respect to Holdings. (a)
Except as set forth in Schedule 4.4, Holdings and each of its Subsidiaries: (i)
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of organization and is duly qualified to do business as
a foreign corporation and in good standing under the laws of each other
jurisdiction where its ownership or Lease of property or the conduct of its
business requires such qualification; (ii) has the requisite corporate power and
authority and the legal right to own, pledge, mortgage or otherwise encumber and
operate its properties, to Lease the property it operates under Lease, and to
conduct its business as now and proposed to be conducted; (iii) has
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all licenses, permits, consents or approvals from or by, and has made all
filings with, and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent they are material to such ownership, operation and
conduct; (iv) is in compliance with its certificate or articles of incorporation
and By-laws; and (v) is in compliance with all applicable provisions of law and
all licenses, permits, consents and approvals described in clause (iii) above.
(b) The execution, delivery and performance by Holdings of the
Transaction Documents to which it is a party, and the consummation of the
transactions contemplated by the Transaction Documents (including, without
limitation, the issuance of the Warrants on the Closing Date, and the issuance
of Shares upon the exercise from time to time of the Warrants): (i) are within
its corporate power; (ii) have been duly authorized by all necessary or proper
corporate and shareholder action; (iii) are not in contravention of any
provision of its certificate or articles of incorporation or By-laws; (iv) will
not violate any law or regulation, or any order or decree, of any Governmental
Authority applicable to it; (v) will not conflict with or result in the breach
or termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, Lease, agreement or other
instrument to which it is a party or by which it or any of its property is
bound; (vi) will not result in the creation or imposition of any Lien upon any
of its property, other than Liens granted by Holdings pursuant to the Collateral
Documents in favor of the Purchasers; (vii) except as set forth on Schedule 4.2,
will not cause anti-dilution clauses of any outstanding securities to become
operative or give rise to any preemptive rights; and (viii) do not require the
consent or approval of, or any registration, declaration, qualification or
filing by or with, any Governmental Authority or any other person, except those
which were duly obtained, made or complied with prior to the Closing Date. At or
prior to the Closing Date, each of the Transaction Documents to which Holdings
is a party was duly executed and delivered by or on behalf of Holdings and each
constitutes a legal, valid and binding obligation of Holdings, enforceable
against Holdings in accordance with its terms.
(c) The authorized capital stock of Holdings as of the date of
this Agreement and immediately prior to the Closing consists of 45,000,000
shares of common stock, par value $.01 per share, of which 35,719,390 are
outstanding, and 5,000,000 shares of series preferred stock, $.01 par value per
share, of which there have been validly designated by all requisite corporate
action only 69,557 shares of Series A Convertible Preferred Stock, having the
rights, limitations, privileges and preferences set forth in Exhibit F, none of
which are outstanding. All of the designated shares of Series A Preferred and
2,136,534 shares of Common Stock have been reserved for issuance upon exercise
of the Preferred Warrants and the Common Warrants, respectively. Schedule
4.27(c) sets forth a true and correct list of all outstanding options, warrants,
calls, puts, commitments and other rights to purchase, or securities or other
rights convertible or exchangeable into, capital stock of Holdings as of the
date of this Agreement contemplated hereby, indicating the record, and, to the
knowledge of Holdings and its Subsidiaries, the beneficial owner thereof, the
exercise, conversion or exchange price and period thereof, the term and any
vesting or other conditions thereon (excluding the rights under the Cigna
Exchange Agreement, the "Existing Converts").
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(d) On the Closing Date, Holdings will not (i) own any assets
other than as set forth on Schedule 4.27(d) and the shares of Company Common
Stock described in Section 4.3 hereof and the issued and outstanding shares of
German Newco capital stock set forth opposite its name on Schedule 4.27(d) or
(ii) be subject to any liabilities or obligations other than as set forth on
Schedule 4.27(d) and its obligations under the Transaction Documents. Since
1988, Holdings has not engaged in any business or activities other than those
connected with, arising out of or incidental to investing in the Company and
Conny and other business corporate entities.
(e) Holdings has previously furnished the Purchasers with true and
complete copies of each final prospectus and definitive proxy statement filed by
Holdings with the Commission, and each annual, quarterly or periodic report
filed by Holdings with the Commission since March 31, 1995. None of such
documents or other communications contained as of the date of such document any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
such documents which is subject to the Securities Act or the Securities Exchange
Act or the regulations promulgated thereunder, complied in all material respects
at the time of their filing in form and substance with such Acts and
regulations.
(f) The Board of Directors of Holdings, by unanimous vote of its
members has resolved to (i) amend the certificate of incorporation of the
Company to authorize a sufficient number of additional shares of Common Stock of
Holdings to permit the exercise in full of the Warrants and the conversion in
full of the Preferred Shares, (ii) submit such proposed amendment to the vote of
its stockholders at a stockholders meeting to be held as promptly as practicable
after the date hereof, (iii) recommend that the Holdings stockholders vote in
favor of such amendment and (iv) reserve for issuance a sufficient number of
additional shares of Common Stock of Holdings to permit the exercise in full of
the Warrants and the conversion in full of the Preferred Shares, as such number
may be adjusted in accordance with the terms of the Series A Preferred and the
Warrants.
SECTION 5. REPRESENTATIONS OF THE PURCHASERS
Each Purchaser, severally and not jointly represents and warrants to
Holdings and the Company, with respect to such Purchaser only, that:
(a) Such Purchaser has all requisite power, authority and legal
right to execute, deliver and perform the Loan Documents to which it is a party.
The execution, delivery and performance of the Loan Documents to which such
Purchaser is a party have been duly authorized by all required corporate and
other actions on the part of such Purchaser. Such Purchaser has duly executed
and delivered the Loan Documents to which it is a party, and the Loan Documents
to which it is a party constitute the legal, valid and binding obligation of
such Purchaser enforceable against such Purchaser in accordance with their
respective terms.
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(b) At least one of the following statements is an accurate
representation as to each source of funds (a "Source") to be used to pay the
purchase price of the Notes and Warrants to be purchased hereunder on the
Closing Date by such Purchaser:
(i) no part of the Source constitutes the assets of any
employee benefit plan subject to Title I of ERISA or any plan subject to
section 4975 of the Code;
(ii) the Source is either an insurance company pooled
separate account within the meaning of United States Department of Labor
Prohibited Transaction Class Exemption ("PTCE") 90-1, an insurance company
general account within the meaning of PTCE 95-60, a bank collective
investment fund within the meaning of PTCE 91-38, an investment fund
acting at the direction of a professional asset manager within the meaning
of PTCE 84-14, or an employee benefit plan subject to Title I of ERISA
acting at the direction of an in-house asset manager within the meaning of
PTCE 96-23; or
(iii)the Source constitutes the assets of one or more employee
benefit plans subject to Title I of ERISA or plans subject to section 4975
of the Code, each of which has been identified in Schedule 5(b).
(c) Such Purchaser is capable of evaluating the risk of its
investment in the Notes and Warrants being purchased by it hereunder and is able
to bear the economic risk of such investment. Such Purchaser is purchasing the
Notes and Warrants to be purchased by it hereunder for its own account, and such
Notes and Warrants are being purchased by it for investment and not with a
present view to any distribution thereof. Such Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
It is understood that the disposition of such Purchaser's property
shall, subject to the terms of this Agreement, at all times be within such
Purchaser's control. If such Purchaser should in the future decide to dispose of
any of its Notes, Warrants or Shares, it is understood that it may do so only in
compliance with the Securities Act and this Agreement.
SECTION 6. PREPAYMENTS AND REPAYMENTS
6.1. Prepayment at Holder's Option. (a) In the event of a Change of
Control Event, each holder of a Note or Notes shall have the right, at such
holder's option, to require the Company to prepay such holder's Note or Notes in
whole or in part at a price equal to (i) 100% of the aggregate principal amount
of Notes to be prepaid plus (ii) all accrued interest on such aggregate
principal amount of Notes to the date of prepayment. Such option shall be
exercised by written notice to the Company under Section 6.1(b) given at any
time before or after the Change of Control Event. As soon as possible after the
Company has knowledge that a Change of Control Event is reasonably likely to
occur, the Company shall give written notice to each holder of a Note or Notes
notifying each such holder of the likely occurrence of such Change of Control
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Event and informing each such holder of its right to require, at its option, a
prepayment under this Section 6.1(a).
(b) In order to exercise its right to require a prepayment under
this Section 6.1, a holder requiring such prepayment shall send to the Company a
written notice demanding prepayment under this Section 6.1 and specifying the
date of such prepayment (which must be a Business Day and which shall not be
earlier than the date of such Change of Control Event).
(c) In the event that on any date for prepayment pursuant to this
Section 6.1 the Company, for whatever reason, does not pay in full all such
prepayment amounts due to the holders of Notes who have exercised their rights
to require prepayment, then the amount actually prepaid by the Company to all
such holders of Notes pursuant to this Section 6.1 shall be allocated among all
such holders of Notes in proportion, as nearly as practicable, to the respective
aggregate principal amount of Notes as to which each such holder has exercised
its prepayment right; provided, however, such failure to pay all such prepayment
amounts in full shall constitute an Event of Default.
6.2. Optional Prepayments. (a) The Company may prepay at any time
on or after the second anniversary of the Closing Date all or a portion of the
Notes at a price equal to the Redemption Percentage of the principal amount
being prepaid plus all interest accrued thereon to the date of prepayment.
(b) The aggregate amount of each prepayment of the principal
amount of Notes pursuant to this Section 6.2 shall be allocated among all Notes
at the time outstanding, in proportion, as nearly as practicable, to the
respective unpaid principal amounts of such Notes.
(c) Any partial prepayment of Notes by the Company pursuant to
Section 6.2(a) shall be in a minimum amount of $500,000 and in integral
multiples of $500,000.
(d) The right of the Company to prepay Notes pursuant to this
Section 6.2 shall be conditioned upon its giving notice of prepayment, signed by
its principal financial officer, to the holders of Notes not less than 20 days
and not more than 60 days prior to the date upon which the prepayment is to be
made, specifying (i) the registered holder of each Note to be prepaid, (ii) the
aggregate principal amount of Notes being prepaid, (iii) the date of such
prepayment (which must be a Business Day), (iv) the accrued and unpaid interest
on such aggregate principal amount of Notes (to but not including the date upon
which the prepayment is to be made) and (v) that the prepayment of Notes is
being made pursuant to paragraph (a) or (b) of this Section 6.2, as the case may
be. Notice of prepayment having been so given, the prepayment price of the
aggregate principal amount of Notes so specified in such notice or the total
principal amount of the Notes, as applicable, shall become due and payable on
the specified prepayment date; provided, however, that the right to apply any or
all of the Notes as payment to exercise any Warrant or Warrants shall continue
to be exercisable by each holder of Notes to, but not including, the date of
such prepayment.
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(e) Except as set forth in Section 6.2(a), the Notes may not be
prepaid by or on behalf of the Company.
6.3. Obligations Unconditional. The Company hereby agrees and
confirms that its obligations under the Notes shall be deemed to constitute for
all purposes obligations for the payment of indebtedness for borrowed money and
shall accordingly be absolute and unconditional in accordance with the terms of
the Notes and this Agreement and shall not be affected by (and the Company
agrees not to assert) any right the Company may now or at any time hereafter
have in connection with the Acquisition Transactions or the Acquisition
Documents, including without limitation (i) any right of set-off, counterclaim,
recoupment or defense against any person, (ii) any right by reason of any defect
in the title to the assets acquired in connection with the Acquisition
Transactions and (iii) any right to terminate, cancel, quit or surrender this
Agreement or any Note except in accordance with the express terms hereof or
thereof.
SECTION 7. AFFIRMATIVE COVENANTS
The Company and Holdings jointly and severally covenant and agree
that unless the Majority Noteholders shall otherwise consent in writing, so long
as any Obligations remain outstanding:
7.1. Use of Proceeds; Mandatory Payment. The Company will apply the
proceeds of the loan provided for in this Agreement to prepay amounts
outstanding under the 14% Senior Subordinated Notes due April 15, 1998 of the
Company by $2,900,000 and advance the balance of such proceeds to Holdings which
shall contribute such balance to German Newco to fund the purchase of capital
stock of Conny under the Conny Stock Purchase Agreement. Promptly after the
Closing, Holdings shall pay to Fleet Bank $107,000 to repay in full all amounts
outstanding under the Business Purpose Note dated January 24, 1996 by Holdings
to Fleet Bank.
7.2. Taxes. The Company and Holdings will promptly pay or discharge
all Taxes imposed upon them or upon any of their property and all lawful claims
for labor, material, or supplies which, if unpaid, might become a Lien upon any
such property.
7.3. Existence. The Company and Holdings will do all things
necessary to preserve and keep in full force and effect their corporate
existences, rights, and franchises.
7.4. Financial Covenants. The Company and Holdings must be in
compliance with the following financial covenants, as would be shown on the
quarterly and fiscal year end financial statements of the Company and Holdings
prepared in accordance with GAAP:
(i) for the Company, a minimum current ratio of; 1.30 to
1.00 during fiscal year 1998; 1.50 to 1.00 during fiscal year 1999 and
thereafter. For the purposes of this Agreement, current ratio shall be
defined as the ratio of the Company's current assets (including the unused
formula loan availability under that certain $6,000,000.00 revolving
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line of credit loan extended by the Senior Lender to the Company and that
certain $1,000,000.00 revolving line of credit loan extended by the Senior
Lender to the Company dated March 27, 1997 [collectively, the "Revolver
Loans"]) to the Company's current liabilities (excluding the
aforementioned Revolver Loans) as would be shown on each fiscal quarter
end and fiscal year end balance sheets of the Company prepared in
accordance with GAAP;
(ii) for the Company, a minimum working capital of Four
Million and no/100 Dollars ($4,000,000.00) as of September 30, 1997
through December 31, 1997 and Five Million Five Hundred Thousand and
no/100 Dollars ($5,500,000.00) as at March 31, 1998. During fiscal year
1999 and thereafter, the Company must maintain a minimum working capital
of Seven Million and no/100 Dollars ($7,000,000.00), all as would be shown
on the fiscal quarter end and fiscal year end balance sheets of the
Company prepared in accordance with GAAP. For the purposes of determining
working capital, the Company's liability to the Senior Lender pursuant to
the Revolver Loans will be excluded, and the Company's current assets
shall be increased by the Company's unused formula loan availability under
the Revolver Loans;
(iii)a total debt to tangible net worth ratio at fiscal year
end March 31, 1998 of 5.00 to 1.00, at fiscal year end March 31, 1999 of
4.00 to 1.00, at fiscal year end March 31, 2000 of 3.00 to 1.00, and at
fiscal year end March 31, 2001 and thereafter at each March 31 fiscal year
end of 2.50 to 1.0. For the purposes of this Agreement, debt to tangible
net worth ratio shall be defined as the ratio of the Company's total
liabilities (less subordinated debt) divided by the sum of the Company's
tangible net worth plus subordinated debt less the amount of the
outstanding principal balance of the notes receivable from Holdings, as
would be shown on the fiscal quarter end and fiscal year end balance
sheets of the Company prepared in accordance with GAAP; for the purposes
of this subsection, the calculation for fiscal year ended March 31, 1998
shall exclude the one time charge to earnings from September 26, 1997 to
and including December 31, 1997, in an amount not to exceed $750,000.00
for efficiencies realized as a result of "right sizing" of the business of
the Company, Holdings and German Newco which reduce the Company's
consolidated stockholders equity;
(iv) a minimum debt service coverage ratio during fiscal year
1998 of 1.15 to 1.0 and during fiscal year 1999 and thereafter of 1.20 to
1.0. For the purposes of this Agreement, debt service coverage ratio will
be calculated using the trailing four quarters of the Company's earnings
before interest, taxes, depreciation and amortization minus the Company's
cash capital expenditures (net of financed capital expenditures) divided
by the sum of Company's trailing four quarters debt service payments
(principal and interest) less funds raised to finance the Company's
repayment of indebtedness owed to CIGNA (whether in the form of debt or
equity) minus amortization of non-cash debt discount associated with
subordinated debt, as would be shown on the fiscal quarter end and fiscal
year end balance sheets of the Company prepared in accordance with GAAP.
For the
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purposes of this subsection, the calculation for fiscal year ended March
31, 1998 shall exclude the one time charge to earnings from September 26,
1997 to and including December 31, 1997, in an amount not to exceed
$750,000.00 for efficiencies realized as a result of "right sizing" of the
business of the Company, Holdings and German Newco which reduce the
Company's consolidated stockholders equity;
(v) the Company shall be limited to making annual capital
expenditures in the maximum amount of One Million Five Hundred Thousand
and no/100 Dollars ($1,500,000.00) during fiscal year 1998 and One Million
and no/100 Dollars during the balance of the term of this Agreement. If
required by the terms of the manufacturing agreement between the Company
and Rubbermaid Incorporated, for each year during the term of this
Agreement, the Company must provide evidence, satisfactory to the Agent,
that the Company has received the consent of Rubbermaid Incorporated to
make capital expenditures exceeding One Million and no/100 Dollars
($1,000,000.00) in said year;
(vi) the Company's expenditures for management fees shall not
exceed Eight Hundred Thousand and no/100 Dollars ($800,000.00) per annum;
(vii)the consolidated stockholders equity of the Company as of
March 31, 1998 shall not be less than the remainder of $14,415,000.00
minus the lesser of (a) $750,000.00 or (b) the one time charge to earnings
from September 26, 1997 to and including December 31, 1997 for
efficiencies realized as a result of "right sizing" of the business of the
Company, Holdings and German Newco which reduce the Company's consolidated
stockholders equity (such remainder the "1998 Company Net Worth"); the
consolidated stockholders equity of the Company at March 31, 1999 shall
not be less than the sum of the 1998 Company Net Worth plus $2,500,000.00;
the consolidated stockholders equity of the Company at March 31, 2000
shall not be less than the sum of the 1998 Company Net Worth plus
$6,500,000.00; and at each fiscal year end thereafter, the consolidated
stockholders equity of the Company shall not be less than the sum of the
consolidated stockholders equity of the Company required to be maintained
at the end of the immediately prior fiscal year plus $6,000,000.00; and
(viii) the consolidated stockholders equity of Holdings at
March 31, 1999 shall not be less than the sum of the consolidated
stockholders equity of Holdings at March 31, 1998 (the "1998 Net Worth")
plus $4,000,000.00; the consolidated stockholders equity of Holdings at
March 31, 2000 shall not be less than the sum of the 1998 Net Worth plus
$10,000,000.00; and at each fiscal year end thereafter, the consolidated
stockholders equity of Holdings shall not be less than the sum of the
consolidated stockholders equity of Holdings required to be maintained at
the end of the immediately prior fiscal year plus $8,000,000.00."
7.5. Insurance. The Company, Holdings and their Subsidiaries will
carry insurance as required in the Collateral Documents. They will carry
insurance with responsible
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insurance companies for which the Purchasers and the Agent will be named as an
insured against such other risks of whatever kind and in such amounts as the
Majority Noteholders may from time to time reasonably request in writing for
their protection. The Company and Holdings will deliver to the Agent the
insurance policies provided for above and they will reimburse the Agent and
Purchasers for any premiums paid for insurance by the Agent and Purchasers on
the failure of them to carry such insurance or deliver and assign such policies.
In addition to the foregoing, the Company, Holdings and their Subsidiaries will
carry such other types and amounts of insurance as are usually carried by
corporations engaged in the same or similar businesses similarly situated.
7.6. General Compliance. The Company, Holdings and their
Subsidiaries will maintain their properties in good repair and condition and
will make all needed renewals and replacements so that their businesses may be
properly and advantageously conducted at all times. They will comply with all
statutes, ordinances, rules, regulations and orders of any Federal, State,
municipal authority or official having jurisdiction over their property;
provided that they may contest in good faith any statutes, ordinances, rules,
regulations and orders of such bodies or officials in any reasonable manner
which will not, in the opinion of the Majority Noteholders, adversely affect its
rights under the Loan Documents. As to any real property owned or occupied by
the Company, Holdings and their Subsidiaries, the Company or Holdings will cure
any violation of any governmental requirements respecting the property, if
within Company's or Holdings' power to do so, including without limitation any
laws, rules or regulations governing hazardous waste removal and clean-up or
arising from an intentional or unintentional act or omission of the Company,
Holdings and their Subsidiaries or any previous owner and/or operator of the
real property, within twenty (20) days after receipt of written notice and
demand from the Agent. The expenses of any environmental testing and clean-up,
or fees for environmental auditors or engineers, shall be chargeable to the
Company and shall be secured by any and all Collateral Documents. The Company
and Holdings agree to indemnify and hold Agent and the Purchasers harmless
against any loss or liability, cost or expense (including, without limitation,
reasonable attorney's fees and disbursements) which Agent and the Purchasers may
sustain as a result of or on account of any Lien imposed upon any Collateral
Document by any federal, state or local authority charged with the enforcement
of Environmental Laws or by reason of Company's failure, or the failure of
Holdings or their Subsidiaries, or the failure of any of the Company's,
Holdings' or their Subsidiaries' predecessors in title, or the failure of any of
Company's, Holdings' or their Subsidiaries' (sub)tenants, to perform any of its,
or their, obligations pursuant to any Environmental Laws. The provisions of this
paragraph shall survive any transfer of any asset included in any Collateral
Document, including a transfer after a foreclosure of real property subject to a
mortgage, and delivery of the deed affecting such transfer.
7.7. Information. The Company, Holdings and their Subsidiaries will
at all times keep proper books of record and account in accordance with GAAP,
and the Company shall furnish to the Purchasers:
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(i) within ninety-five (95) days of the end of its fiscal
year, annual certified public accountant audited, consolidated statements
for the Company and Holdings (which must include a consolidating statement
schedule), all prepared in accordance with GAAP consistently applied, as
well as copies of Holdings' 10K reports;
(ii) within thirty (30) days of each calendar month end,
internally prepared financial statements for the Company for the preceding
month, in form acceptable to the Agent, all prepared in accordance with
GAAP;
(iii)within fifty (50) days of the end of each fiscal quarter,
10Q reports for Holdings;
(iv) within sixty (60) days after the end of each fiscal
quarter, a compliance letter acknowledged by the chief financial officers
of both the Company and Holdings concerning those financial covenants
referenced above in Section 7.4;
(v) with reasonable promptness upon the written request of
any Purchaser or Agent, such further information regarding the business
affairs at financial condition of the Company, Holdings or their
Subsidiaries as any Purchaser or Agent may reasonably request;
(vi) simultaneously at the time they are so furnished, a copy
of all statements and reports furnished to stockholders of the Company and
Holdings; and
(vii) within 45 days after the beginning of their respective
fiscal year, each of the Company and Holdings shall deliver to each Holder
the respective projected consolidated balance sheets, projected
consolidated cash flow statements and projected income statements for each
of the Company and Holdings for such fiscal year on a monthly basis.
7.8. Charter, By-Laws. The Company and Holdings will furnish to
each Purchaser and the Agent promptly after their effectiveness copies of all
amendments or other documents modifying the Certificates of Incorporation of the
Company and Holdings, certified by the Secretary for the States that they are
incorporated in and authorized to do business in, and copies of all amendments
to the By-Laws of the Company and Holdings, certified by their Secretaries.
7.9. Inspection. The Company and Holdings will permit each
Purchaser, by its officers and agents, to have access to and examine at all
reasonable times the properties, minute books and other corporate records, and
books of account and financial records of the Company, Holdings and their
Subsidiaries.
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7.10. Event of Default. The Company will promptly notify the Agent
upon the occurrence of any Event of Default, or Potential Default, as provided
in this Agreement, of which the Company has knowledge.
7.11. Collateral Documents. The Company has made, executed and
delivered to the Agent, and caused others to make, execute and deliver to the
Agent those Collateral Documents listed below, all as security for the
indebtedness evidenced by the Notes and the Loan Documents, plus any amendments,
modifications, extensions or renewals of any of the foregoing or any present or
future indebtedness arising therefrom, and for their performance of this
Agreement and the other Loan Documents:
(1) The Company has made, executed and delivered to the Agent, a
second security interest in all of its now owned or hereafter acquired
machinery, equipment, furniture, and fixtures, Accounts Receivable,
Inventory, Raw Materials, Work in Process, Finished Goods, Contract
Rights, Instruments, General Intangibles, Chattel Paper Choses in Action,
that certain ISDA Master Agreement dated March 27, 1997 executed by the
Company in favor of Fleet National Bank, that certain policy issued by
Export-Import Bank of the United States to the Company (policy no.
ESC-147470), and Patents, Copyrights and Trademarks (as those terms are
defined in the Senior Loan Documents), pursuant to a Subordinated
Assignment, Pledge and Security Agreement relating to said collateral,
dated the date hereof.
(2) The Company has caused Holdings to execute and deliver to the
Purchasers the Guaranty.
(3) The Company has made, executed and delivered to the Agent a
second mortgage on the Subject Property.
(4) The Company has delivered, assigned and pledged with the
Agent, all of the machinery and equipment leases that it has now or may
hereafter acquire, pursuant to a Subordinated Assignment, Pledge and
Security Agreement relating to said collateral, dated the date hereof.
(5) The Company has delivered, assigned and pledged to the Agent a
subordinated interest in all of the Company's right, title and interest in
and to that certain $6,000,000.00 Note from Holdings to the Company dated
as of July 20, 1994 and the $15,207,000 Note from Holdings to the Company
contemplated by clause (x) of the definition of Restricted Payments
contained herein
(6) Holdings has delivered, assigned and pledged to the Agent all
of its right, title and interest in and to the ComTel Notes and the
Management Agreement.
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In addition, after the Closing Holdings and the Company will use
their respective best efforts to obtain all necessary consents to pledge to the
Agent as security as aforesaid all of the issued and outstanding shares of
capital stock of the Company and upon obtaining such consent will execute and
deliver all necessary documents to grant such interest to the Agent subordinated
only to the rights of the Senior Lender.
7.12. Expenses. The Company agrees to reimburse the Agent and the
Purchasers for any and all out-of-pocket expenses incurred by the Agent and the
Purchasers in connection with the making of this Agreement, the Notes and the
other Loan Documents, or in connection with the enforcement thereof
(irrespective of whether litigation is actually commenced), including, if
applicable, reasonable counsel fees, searches for prior liens, recording and
filing fees, and if applicable, mortgage taxes, title insurance premiums, and
the cost of surveying the property covered by any Collateral Documents. Counsel
fees to Xxxxxx, Xxxxx & Xxxxxxx LLP in connection with their representation of
the Purchasers concerning this Agreement, the Notes and the other Loan Documents
prepared and delivered in connection therewith, shall be paid in full by the
Company prior to or simultaneously with the disbursement of any loan proceeds
hereunder.
7.13. Change in Control Event. Promptly after obtaining knowledge of
the occurrence of any Change of Control Event (or of any proposed or attempted
Change of Control Event), the Company will notify the Agent and Purchasers
thereof, specifying in reasonable detail the facts and circumstances surrounding
such event.
7.14. Public Documents; Senior Lender Communications. The Company
shall deliver to each Purchaser and the Agent:
(a) as soon as practicable, copies of any public statements or
press releases made by Holdings, the Company or any of their respective
Subsidiaries and copies of all reports, registration statements, proxy materials
and other documents filed by any such person with the Commission pursuant to the
Securities Act or the Securities Exchange Act; and
(b) concurrently with the delivery thereof to the Senior Lender,
copies of all notices, certificates and other documents which the Company
provides to the Senior Lender pursuant to the Senior Loan Documents, except to
the extent that such documents and communications relate solely to the revolving
credit facility provided by such Senior Lender or the calculation of eligible
receivables or eligible inventory thereunder.
7.15. Communication with Accountants. The Company and Holdings
hereby authorizes each of the Purchasers, following prior notice to the Company
and providing the chief financial officer of the Company a reasonable
opportunity to participate therein, to communicate directly with its and its
Subsidiaries' independent certified public accountants and tax advisors, and
authorizes those accountants and tax advisors to disclose to the Purchasers any
and all financial statements and other supporting financial documents and
schedules, including, without limitation, copies of any management letter with
respect to the business, financial condition and
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other affairs of the Company and Holdings and Conny or any of their respective
Subsidiaries. Promptly after the Closing Date, the Company and Holdings shall
have delivered a letter addressed to such accountants and tax advisors, in form
and substance acceptable to the Purchasers, instructing such accountants and tax
advisors to comply with the provisions of this Section 7.15. The Company and
Holdings shall cause such accountants to agree, not later than March 31, 1998,
that the holders of the Notes are authorized to rely on the certified financial
statements prepared by such accountants.
7.16. Inspection. The Company shall permit each Purchaser and the
Agent, and any authorized representative of any Purchaser and the Agent, to
visit and inspect any of the properties of the Company, Holdings and Conny or
any Subsidiary thereof, to examine the books of account of the Company, Holdings
or any such Subsidiary, and to discuss the business, affairs, finances and
accounts of the Company, Holdings and Conny or any such Subsidiary with its
officers, all at such reasonable times (during normal business hours and after
notice to the Company) and as often as may be reasonably requested and, if there
is no Potential Default or Event of Default continuing, at the expense of such
Purchaser and otherwise at the Company's expense.
7.17. Maintenance of Intellectual Property and Business. The Company
and Holdings shall, and shall cause each of their Subsidiaries and Conny to:
(a) at all times be engaged primarily in the Business; and
(b) at all times maintain, preserve and protect all of its
trademarks, trade names and other intellectual property and rights as licensee
or licensor thereof.
(c) in the case of Holdings, to act solely as a holding company
for controlling interests in business entities engaged primarily in the
Business.
7.18. Books and Records. The Company and Holdings shall, and shall
cause each of its Subsidiaries to, keep adequate records and books of account
with respect to its business activities, in which proper entries, reflecting all
of its financial transactions, are made in accordance with GAAP and on a basis
consistent with the audited financial statements of the Company and Holdings
included in the Financials.
7.19. Office for Payment, Exchange and Registration. So long as any
of the Notes or Warrants are outstanding, each of Holdings and the Company will
maintain an office or agency where Notes or Warrants, respectively, may be
presented for payment, exchange, exercise or registration of transfer as
provided in this Agreement or in the certificates representing the Warrants.
Such office or agency initially shall be the office of Holdings and the Company
located at Xxx Xxxx Xxxxxx, Xxxx Xxxxxx, Xxx Xxxx 00000, which place may from
time to time be changed by notice to the holders of all Notes and Warrants then
outstanding.
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7.20. Notices. The Company shall give notice to each holder of a
Note promptly after it learns of the existence of any of the following:
(a) any default in respect of any Senior Indebtedness, including
without limitation any default under the Senior Loan Documents, or any default
in respect of any other Indebtedness of the Company, Holdings, German Newco or
Conny or any of their respective Subsidiaries in an aggregate amount exceeding
$100,000, including without limitation any default under any indenture, mortgage
or other instrument or agreement relating to or evidencing any such other
Indebtedness, provided, however, that non-compliance with a covenant shall not
constitute such a default if such non-compliance would not permit a lender (with
the giving of notice or the passage of time) to declare any Indebtedness to be
due and payable prior to its stated maturity or to be entitled to equitable
relief or monetary damages in excess of $25,000;
(b) any action, suit, proceeding or investigation which has been
commenced or threatened against the Company, Holdings, German Newco or Conny or
any of their respective Subsidiaries which, individually or in the aggregate,
(i) could reasonably be expected to involve an amount in excess of $500,000, or
(ii) could reasonably be expected to have or result in a Material Adverse Effect
if adversely determined; and
(c) any ERISA Event has occurred or is reasonably expected to
occur. Each such notice (x) if delivered pursuant to paragraph (a) above, shall
specify the nature and period of existence of any such default and what the
Company proposes to do or cause to be done with respect thereto and (y) if
delivered pursuant to paragraph (c) above, shall specify the nature of each
actual or prospective ERISA Event referred to therein, what action the Company
proposes to take with respect thereto and what action any other relevant person
is taking or proposes to take with respect thereto.
7.21. No Impairment. The Company and Holdings shall not, and shall
not permit any of its Subsidiaries to, by any amendment of its certificate or
articles of incorporation or through any consolidation, merger, reorganization,
transfer of assets, 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 any Loan Document.
7.22. Agreements. The Company and Holdings shall, and shall cause
each of its Subsidiaries to, perform, within all required time periods (after
giving effect to any applicable grace periods), all of its obligations and
enforce all of its rights under each agreement to which it is a party
(including, without limitation, any leases and customer contracts to which it is
a party), where the failure to so perform and enforce, individually or together
with all such other failures of the Company and Holdings and its Subsidiaries,
could have or result in a Material Adverse Effect. The Company and Holdings
shall not, and shall not permit any of its Subsidiaries to, terminate or modify
any provision of any agreement to which it is a party which termination or
modification, individually or in the aggregate, could have or result in a
Material Adverse Effect.
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7.23. Board Seat. As long as any of the Purchasers holds a Note, a
Warrant, any shares of Series A Stock or 5% or more of the aggregate outstanding
Common Stock of Holdings, (x) Holdings shall, at the request of the Majority
Noteholders, use its best efforts to cause a person selected by the Majority
Noteholders and approved by Holdings (which approval will not be unreasonably
withheld) to be elected to the Board of Directors of Holdings, (y) Holdings will
notify the Agent of each meeting of the Board of Directors or shareholders of
Holdings at least 10 days prior to such meeting and permit any person selected
by the Majority Noteholders to attend any such Board meeting, and (z) Holdings
will provide to the Agent, not later than the date first provided to any
Holdings director, all information and documents provided to the Holdings Board
of Directors or any committee thereof.
7.24. Taxes. (a) Any and all payments by the Company hereunder or
under any of the Notes (whether of principal, interest, premium or other
amounts) shall be made, in accordance with this Section 7.24, free and clear of
and without deduction for any and all present or future Taxes. If the Company
shall be required by law to deduct any Taxes from or in respect of any sum
payable to a holder of Notes, (i) the Company shall make such deductions, (ii)
the Company shall pay the full amount deducted to the relevant taxing or other
authority in accordance with applicable law, and (iii) if such Taxes are
Indemnifiable Taxes, the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 7.24) such holder receives an amount
equal to the sum it would have received had no such deductions been made. For
purposes of this Agreement, "Indemnifiable Taxes" shall mean all Taxes other
than (i) any Taxes that are imposed on, based on or measured by net income or
net profits by the jurisdiction under the laws of which a holder of Notes is
organized, in which such holder is controlled and managed or in which the
principal office of such holder is located or any political subdivision or
taxing authority thereof or therein (other than Taxes described in the first
parenthesis in Section 7.24(b)) and (ii) any withholding taxes imposed by the
United States that would not have been imposed if such holder had submitted, on
a timely basis, to the Company any certificate or form pursuant to the first
sentence of Section 7.24(e) except for any such withholding taxes imposed as a
result of any change or amendment in or to any applicable law, treaty or
regulation or any judicial or administrative interpretation thereof after the
Closing Date.
(b) The Company shall indemnify and pay, within 10 days of demand
therefor, any holder of Notes for the full amount of Indemnifiable Taxes
(including, without limitation, any Taxes imposed by any jurisdiction on amounts
payable under this Section 7.24) paid by such holder and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Indemnifiable Taxes were correctly or legally
asserted.
(c) Within 30 days after the date of any payment of Taxes, the
Company shall furnish to the applicable holder of Notes, at its address referred
to in Exhibit A hereto, the original or a certified copy of a receipt (or any
other written evidence reasonably acceptable to the relevant holder of Notes)
evidencing payment thereof.
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(d) If any holder of Notes shall obtain a refund, credit or
deduction as a result of the payment or indemnification for any Indemnifiable
Taxes made by the Company to such holder hereunder, such holder shall pay to the
Company an amount with respect to such refund, credit or deduction equal to any
net tax benefit received by such holder as a result thereof which is
attributable to such payment so long as no Obligations owed to such Holder shall
then be due and payable, in which event such amount shall be applied to such
Obligations.
(e) Without limiting the obligations of the Company under this
Section 7.24, each holder of Notes that is not a United States person within the
meaning of Section 7701(a)(30) of the Code shall deliver to the Company on or
before the Closing Date, or, if later, the date on which such holder becomes a
holder, (i) a true and accurate certificate executed in duplicate by a duly
authorized officer of such holder, in a form reasonably satisfactory to the
Company, to the effect that such holder is capable, under the provisions of an
applicable tax treaty concluded by the United States (in which case the
certificate shall be accompanied by two executed copies of Form 1001 of the IRS)
or under Section 1442 of the Code (in which case the certificate shall be
accompanied by two copies of Form 4224 of the IRS), of receiving payments of
interest, fees and any other amounts under the Notes without deduction or
withholding of United States federal income tax, or (ii) if such holder is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver
Form 1001 or 4224 of the IRS pursuant to clause (i) above, a true and accurate
certificate executed in duplicate by a duly authorized officer of such holder,
in a form reasonably satisfactory to the Company, to the effect that such holder
is capable of receiving payments of interest hereunder without deduction or
withholding of United States federal income tax, accompanied by (x) a
certificate substantially in the form of Exhibit F attached hereto and (y) two
accurate and complete original signed copies of Form W-8 of the IRS (or
successor form). Each such holder further agrees to deliver to the Company from
time to time a true and accurate certificate or form executed in duplicate by a
duly authorized officer of such holder, substantially in a form satisfactory to
the Company, before or promptly upon the occurrence of any event requiring a
change in the most recent certificate or form previously delivered by it to the
Company pursuant to this paragraph (e). Further, each holder which delivers a
certificate accompanied by Form 1001 or W-8 of the IRS covenants and agrees to
deliver to the Company within 15 days prior to January 1, 1998, and every second
anniversary of such date thereafter on which any Note held by such holder is
outstanding, another such certificate and two accurate and complete original
signed copies of Form 1001 or W-8 (or any successor form or forms required under
the Code or the applicable regulations promulgated thereunder), and each holder
that delivers a certificate accompanied by Form 4224 of the IRS covenants and
agrees to deliver to the Company within 15 days prior to the beginning of each
subsequent taxable year of such holder during which any Note held by such holder
is outstanding, another such certificate and two accurate and complete original
signed copies of Form 4224 (or any successor form or forms required under the
Code or the applicable regulations promulgated thereunder). A holder of Notes
that is not a United States person within the meaning of Section 7701(a)(30) of
the Code and that cannot provide a certificate or form described in clause (i)
or (ii) of this Section 7.24(e) shall provide a certificate certifying as to one
of the following:
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(A) that such holder is not capable of receiving payments of
interest hereunder without deduction or withholding of United States
federal income tax as specified therein but is capable of recovering the
full amount of any such deduction or withholding from a source other than
the Company and will not seek any such recovery from the Company; or
(B) that, as a result of the adoption of or any change in any law,
treaty, rule, regulation, guideline or determination of a Governmental
Authority or any change in the interpretation or application thereof by a
Governmental Authority after the Closing Date, such holder is not capable
of receiving payments of interest hereunder without deduction or
withholding of United States federal income tax as specified therein and
that it is not capable of recovering the full amount of the same from a
source other than the Company.
Each holder of Notes shall promptly furnish to the Company such additional
documents as may be reasonably required by the Company to establish any
exemption from or reduction of any Taxes required to be deducted or withheld and
which may be obtained without undue expense to such holder.
(f) The Company shall not, and shall not permit any of its
Subsidiaries to, file or consent to the filing of any consolidated income tax
return with any person other than Holdings and its Subsidiaries.
7.25. Payment of Dividends by Subsidiaries. The Company shall cause
its Subsidiaries to pay dividends or make other distributions or advances to the
Company and Holdings, to the extent of funds legally available therefor, in
sufficient amounts (after taking into account the other sources of funds readily
available to the Company) and at sufficient times to enable the Company to have
sufficient funds to pay on a timely basis all amounts due with respect to the
Senior Debt and the Notes and any other amounts due in respect of the
Obligations.
7.26. Further Assurances. The Company and Holdings shall from time
to time, upon the request of the Majority Noteholders, promptly and duly execute
and deliver any and all such further instruments and documents as the Majority
Noteholders may reasonably deem necessary or desirable to obtain the full
benefits of (i) the obligations of the Company and Holdings under the Loan
Documents and (ii) the other rights and powers granted in the Loan Documents.
7.27. Delivery of Information for Rule 144A Transactions. If a
holder of Notes proposes to transfer any such Notes pursuant to Rule 144A under
the Securities Act (as in effect from time to time), the Company agrees to
provide (upon the request of such holder or the prospective transferee) to such
holder and such prospective transferee any financial or other information
concerning Holdings, the Company and their respective Subsidiaries which is
required to be delivered by such holder to any transferee of such Notes pursuant
to Rule 144A.
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7.28. Environmental Reports. The Company must provide to the Agent
and the Purchasers, within forty-five (45) days of the end of each fiscal
quarter update reports regarding the environmental regulatory status and
compliance of the Subject Property, including but not limited to, (i) the
Company's compliance with Environmental Laws with respect to tankage, releases,
storage requirements, air emissions, (ii) the status of pending environmental
litigation in which the Company is involved, and (iii) the status of the
Company's emission compliance plan, the estimated cost to comply with same and
the Company's plans for funding the cost of said compliance, and (iv) any
information regarding adopted changes in Environmental Law and environmental
requirements that could have a material adverse effect on Borrower's financial
condition, operations, business, properties, assets or liabilities, or require
significant capital expenditures. These reports shall be of a scope and level of
detail satisfactory to the Agent and Purchasers and be prepared by an
environmental engineer or other qualified person acceptable to the Agent and
Purchasers, at the Company's expense.
7.29. Conny Stock. Holdings shall own at least 73.2% of all the
Voting Stock of Conny by the Closing Date. Holdings shall own at least 75% of
all Voting Stock of Conny not later than 150 days after the Closing. By March
31, 1999, Holdings shall own either (i) at least 95% of the Voting Stock and 95%
of the Participating Stock, or (ii) or 75% of the Voting Stock and 99% of the
Participating Stock.
7.30. Stockholders Meeting; Restated Certificate and Bylaws.
(a) Holdings shall take all actions necessary, in accordance with
the Delaware General Corporation Law and its Certification of Incorporation and
Bylaws, to duly call, give notice to, convene and hold a meeting of its
stockholders as promptly as practicable, to consider and vote upon the approval
and adoption of an amendment to the Certificate of Incorporation of the Company
to authorize a sufficient number of additional shares of Common Stock of
Holdings to permit the exercise in full of the Warrants and the conversion in
full of the Preferred Shares, Holdings shall use its best efforts to solicit
from stockholders proxies in favor of the foregoing proposals and to take all
other action necessary to secure the vote of stockholders in respect thereof
required by the Delaware General Corporation Law, the rules of the NASDAQ
SmallCap and the Company's Certificate of Incorporation and Bylaws. Holdings
shall prepare and file with the Commission as promptly as practicable a proxy
statement with respect to the matters to be voted on by stockholders pursuant to
this Section. Holdings will thereafter use its best efforts to respond to any
comments of the Commission with respect thereto and to cause a definitive proxy
statement and proxy to be mailed to stockholders of Holdings as promptly as
practicable. The proxy statement shall include the unanimous recommendation of
the Board of Directors of Holdings that the stockholders of Holdings vote in
favor of adoption and approval of the matters described in this Section.
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SECTION 8. NEGATIVE COVENANTS
The Company and Holdings jointly and severally covenant and agree
that unless the Majority Noteholders shall otherwise consent in writing, so long
as any Obligations remain outstanding:
8.1. Indebtedness. The Company, Holdings and their Subsidiaries
will not create, assume, incur or in any manner be or become liable to any
person or persons, directly or indirectly for any Indebtedness (other than
Indebtedness from a Subsidiary to the Company or Holdings) except that (i) the
Company, Holdings and their Subsidiaries may incur in each fiscal year in the
aggregate up to $250,000 for the purchase of Equipment and for Capital Lease of
Equipment; (ii) Holdings may incur up to $2,500,000 of debt solely for the
purpose of paying expenses and fees arising out of the transactions contemplated
hereby and by the Conny Stock Purchase Agreement; and (iii) the Company may
refinance or refund the Senior Indebtedness provided that (A) the principal
amount of the replacement Indebtedness shall not exceed the outstanding
principal and accrued interest on the Senior Indebtedness immediately prior to
the refinancing, (B) the terms, covenants, events of default and other
conditions of the refinancing are no more favorable to the Company than those of
the Senior Indebtedness (except for interest rates, commitment fees and similar
monetary obligations which shall not be, in the aggregate, less favorable to the
Company than those of the Senior Indebtedness), and (C) the position of the
holders of the Notes is not adversely affected as a result of such refinancing.
8.2. Management Fees. The Company will not pay management fees to
Holdings or any other person except that when no Potential Default under Section
14(a)(i) is continuing, the Company may pay to Holdings such fees in an amount
not in excess of Eight Hundred Thousand and no/100 Dollars ($800,000.00)
annually during the term of this Agreement.
8.3. Upstream Funding. Except for (i) those management fees
referred to in Section 8.2 hereof, (ii) the advances to Holdings contemplated by
clauses (x) and (z) of the definition of Restricted Payments herein, and (iii)
those income taxes payable by the Company to Holdings pursuant to the terms of
the Tax Sharing Agreement, during the term of this Agreement, the Company shall
be prohibited from advancing, loaning or upstreaming any funds to Holdings.
8.4. Guarantees. The Company, Holdings and their Subsidiaries will
not guarantee the obligations of any person, except endorsement of negotiable
instruments for deposit or collection in the ordinary course of business. The
Company, Holdings and their Subsidiaries will not lend to any persons or invest
in any other businesses or in the securities of any other persons except that
the Company may make advances to customers in the ordinary course of business
not to exceed $50,000 in the aggregate. The Company will not make advances to
Holdings, except for management fees permitted by Section 8.2 hereunder and
except as described in Section 8.3, or any other Subsidiary of Holdings or the
Company, or any officer or shareholder of the Company, Holdings, or any
Affiliate.
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8.5. Liens. The Company and Holdings will not, and each agrees to
cause its Subsidiaries to not, pledge or otherwise create or suffer the
imposition of any Liens upon any of its assets, whether now owned or hereafter
acquired, except Liens specifically provided for in this Agreement or the Senior
Loan Documents and except for Permitted Encumbrances; provided, however, that
(x) Liens in connection with Indebtedness not exceeding $250,000 in the
aggregate, (y) a Lien granted to other persons if the same Lien is provided to
the Agent for the benefit of the Noteholders on an equal and ratable basis, and
(z) Liens securing Indebtedness which refinances the Senior Indebtedness in
accordance with Section 8.1 hereof shall not constitute a violation of this
paragraph.
8.6. Merger; Sales. The Company, Holdings and their Subsidiaries
will not consolidate with or merge into any other corporation unless (x) the
surviving corporation assumes all obligations of its predecessor under the Loan
Documents in a manner satisfactory to the Majority Noteholders and (y) no Event
of Default or Potential Default is continuing before or just after such merger
or consolidation. The Company, Holdings and their Subsidiaries will not sell,
lease, or otherwise dispose of all or any part of their assets to any other
person except for (x) sales in the ordinary course of business and (y) other
sales if total assets so sold in any rolling twelve-month period do not account
for more than 10% of the consolidated operating income of Holdings for the
fiscal year most recently ended before the commencement of such rolling period
and (z) other sales the proceeds from which are used to prepay Senior
Indebtedness or Obligations or to purchase other operating assets used in the
Business if such other assets are so acquired within 12 months of such sales.
The Agent agrees to execute and deliver to the Company, Holdings and their
Subsidiaries all necessary releases to the end that the Company, Holdings and
their Subsidiaries may sell such assets free from the Agent's security interest
and lien.
8.7. Authorization or Issuance of Capital Stock. (a) The Company
will not issue any shares of its Common Stock.
(b) Holdings will not authorize any additional shares of Common
Stock unless it first reserves from such additional authorized shares a
sufficient number of shares to permit the conversion from time to time of the
Preferred Shares issued or issuable upon exercise of the Warrants. During any
time when there have not been authorized and reserved for issuance sufficient
Common Shares to permit the conversion in full of the Preferred Shares issued or
issuable under the terms of the Preferred Warrants and the exercise in full of
the Common Warrants and the Contingent Common Warrants, Holdings shall not
authorize, issue or agree to authorize or issue any shares of capital stock of
Holdings, any rights or options to receive any capital stock of Holdings, or any
security convertible into or exchangeable for capital stock of Holdings, except
for (i) the issuance of Common Shares upon the exercise of the Existing
Converts, (ii) the issuance of Series A Preferred in accordance with the
exercise of rights under the Preferred Warrants and the issuance of Common
Shares in accordance with the exercise of rights under the Common Warrants and
the Contingent Common Warrants and upon the conversion of the Preferred Shares,
(iii) up to 1,000,000 shares of Common Stock of Holdings,
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provided that (w) the net proceeds from the issuance thereof shall be used
solely for the purpose of paying expenses and fees arising out of the
transactions contemplated hereby and by the Conny Stock Purchase Agreement, (x)
such net proceeds shall reduce the amount of Indebtedness which can be issued
under clause (ii) of Section 8.1 hereof, (y) the amount of Indebtedness incurred
pursuant to clause (ii) of Section 8.1 hereof shall proportionately reduce the
number of shares of Common Stock which can be issued under this clause (iii),
and (z) sufficient shares of authorized Common Stock are available to permit
such issuance, and (iv) up to 500,000 shares of Common Stock of Holdings for the
purposes described in clause (iii)(w) of this Section 8.7(b), (v) the grant of
options to purchase Common Stock of Holdings to employees of Holdings, its
Subsidiaries, or Conny subject to the authorization of additional shares of
Holdings Common Stock.
8.8. Restricted Payments. The Company will not make any Restricted
Payments.
8.9. Affiliate Transactions. The Company and Holdings shall not,
and shall not permit any of its Subsidiaries to, enter into any transaction
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service to any of their Affiliates, except pursuant to the
reasonable requirements of the Company's, Holdings' or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company,
Holdings or such Subsidiary (as the case may be) than the Company, Holdings or
such Subsidiary (as the case may be) would obtain in a comparable arm's-length
transaction with an unaffiliated person.
8.10. ERISA. Neither the Company nor any ERISA Affiliate shall
acquire or otherwise affiliate with any new ERISA Affiliate that maintains or
has an obligation to contribute to a Pension Plan that has either an
"accumulated funding deficiency," as defined in Section 302 of ERISA, or any
"unfunded vested benefits," as defined in Section 4006(a)(3)(e)(iii) of ERISA in
the case of any Plan other than a Multiemployer Plan, and in Section 4211 of
ERISA in the case of a Multiemployer Plan. Additionally, neither the Company nor
any ERISA Affiliate shall: (i) terminate any Pension Plan that is subject to
Title IV of ERISA where such termination could reasonably be anticipated to
result in liability to the Company or any Subsidiary thereof, except where such
liability individually or in the aggregate with all other such liabilities is
less than $100,000; (ii) permit any accumulated funding deficiency, as defined
in Section 302(a)(2) of ERISA, to be incurred with respect to any Pension Plan;
(iii) fail to make any contributions or fail to pay any amounts due and owing as
required by the terms of any Plan before such contributions or amounts become
delinquent, except where such failure individually or in the aggregate with all
other such failures is less than $100,000; (iv) make a complete or partial
withdrawal (within the meaning of Section 4201 of ERISA) from any Multiemployer
Plan, except where such withdrawal, individually or in the aggregate with all
other such withdrawals, results in a liability less than $100,000; or (v) at any
time fail to provide the holders of the Notes with copies of any Plan documents
or governmental reports or filings, if reasonably requested by Majority
Noteholders.
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8.11. Amendments to Agreements. The Company and Holdings shall not
enter into or otherwise consent to any amendment or other modification to any of
the Acquisition Documents in any way that would be materially adverse to
Holdings, the Company or any holder of Notes.
8.12. Sale-Leasebacks. The Company and Holdings shall not, and shall
not permit any of its Subsidiaries to, engage in any sale-leaseback or similar
transaction involving any of its properties or assets.
8.13. Cancellation of Indebtedness. The Company and Holdings shall
not, and shall not permit any of its Subsidiaries to, cancel any claim or debt
owing to it, except for reasonable consideration and in the ordinary course of
its business, and except that the ComTel Notes may be discounted for less than
the amount of its outstanding principal amount and accrued interest.
8.14. Amendments to Indebtedness. Except as provided in the
Subordination Agreement, the Company shall not amend, supplement or otherwise
modify the terms of the Senior Indebtedness.
8.15. Fiscal Year. The Company and Holdings shall not, and shall not
permit any of its Subsidiaries to, change its Fiscal Year for accounting or tax
purposes from a period consisting of the 12-month period ending on March 31st of
each calendar year; provided, however, that the Company, Holdings and their
respective Subsidiaries may change their fiscal year to end on December 31st of
each year.
8.16. Private Placement Status. None of Holdings, the Company or any
agent or other person acting on Holdings' or the Company's behalf will do or
cause to be done (or will omit to do or to cause to be done) any act, which act
(or omission) would result in bringing the issuance or sale of the Notes, the
Warrants or the Shares within the provisions of Section 5 of the Securities Act
(other than in accordance with a registration of any such shares or Shares under
Section 17 hereof).
SECTION 9. SUBORDINATION
Each holder of a Note, whether upon original issue or upon transfer
or assignment thereof, by his acceptance thereof agrees that the Notes shall be
subject to the provisions contained in the Subordination Agreement.
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SECTION 10. CONDITIONS TO PURCHASERS' OBLIGATIONS
The Purchasers' obligations to purchase a Note or Notes and a
Warrant or Warrants hereunder are subject to satisfaction of the following
conditions at the Closing (any of which may be waived by the Purchasers):
10.1. Accuracy of Representations and Warranties. The
representations and warranties of each of Holdings and the Company in the Loan
Documents shall be correct and complete on and as of the Closing Date with the
same effect as though made on and as of the Closing Date (after giving effect to
the Acquisition Transactions).
10.2. Compliance with Agreements; No Defaults. Each of Holdings and
the Company shall have performed and complied in all material respects with all
agreements, covenants and conditions contained in the Loan Documents which are
required to be performed or complied with by it on or before the Closing Date.
On the Closing Date (after giving effect to the Acquisition Transactions), there
shall be no Event of Default or Potential Default.
10.3. Officers' Certificates. The Purchasers shall have received one
or more certificates dated the Closing Date and signed by the president or any
vice president and by the secretary, treasurer or chief financial officer of
each of Holdings and the Company, to the effect that the conditions set forth in
Sections 10.1, 10.2 and 10.8 have been satisfied.
10.4. Proceedings. All corporate and other proceedings in connection
with the transactions contemplated by the Loan Documents, and all documents
incident thereto, shall be in form and substance satisfactory to the Purchasers
and their counsel, and the Purchasers shall have received all such originals or
certified or other copies of such documents as the Purchasers or their counsel
may reasonably request.
10.5. Legality; Governmental and Other Authorization. The purchase
of and payment for the Notes and the Warrants shall not be prohibited by any law
or governmental order, rule, ruling, regulation, release, interpretation or
opinion applicable to any Purchaser and shall not subject any Purchaser to any
penalty, Charge, liability or other onerous condition. Any necessary consents,
approvals, licenses, permits, orders and authorizations of, and any necessary
filings, declarations, registrations or qualifications with, any Governmental
Authority or other person, with respect to the transactions contemplated by the
Transaction Documents shall have been obtained or made and shall be in full
force and effect. The Company shall have delivered to the Purchasers, upon their
reasonable request, factual certificates or other evidence, in form and
substance satisfactory to the Purchasers and their counsel, to enable the
Purchasers to establish compliance with the conditions set forth in this Section
10.5.
10.6. Time of Purchase. The Closing shall not occur later than
October 15, 1997.
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10.7. No Change in Law, etc. No legislation, order, rule, ruling or
regulation shall have been proposed, enacted or made by or on behalf of any
Governmental Authority, and no legislation shall have been introduced in either
House of Congress, and no investigation by any Governmental Authority shall have
been commenced or threatened, and no action, suit or proceeding shall have been
commenced before and no decision shall have been rendered by any Governmental
Authority or arbitrator, which, in any such case, in the Purchasers' reasonable
judgment, (a) could adversely affect, restrain, prevent or change the
transactions contemplated by the Loan Documents (including without limitation
the issuance of the Notes and the Warrants hereunder or the issuance of Shares
upon the exercise of Warrants) or (b) has had or resulted in, or would have or
result in, a Material Adverse Effect.
10.8. Completion of Acquisition Transactions. The Acquisition
Transactions shall have been consummated in accordance with the terms of the
Acquisition Agreements and Holdings shall own at least 73% of all of the
outstanding Voting Stock of Conny.
10.9. Environmental Report. The Purchasers shall have received an
environmental site assessment report concerning all Subject Properties prepared
by a firm satisfactory to Purchasers which report is in form and substance
satisfactory to Purchasers.
10.10. Fees. The Purchasers shall have received on the Closing
Date a non-refundable fee in the amount of $180,000.00 plus payment of their
expenses and their counsel's fees and disbursements.
10.11. No Material Adverse Change. There shall have been no material
adverse change in the business, projections, performance, properties,
operations, condition (financial or otherwise) or prospects of the Company or
Holdings since June 30, 1997.
10.12. Certain Loan Documents. The Purchasers shall have received
the Guaranty and the Collateral Documents duly executed and delivered by each
party thereto (other than the Purchasers) and dated no later than the Closing
Date.
10.13. Senior Loan Documents. Each of the Senior Loan Documents
(other than the Subordination Agreement) shall be satisfactory in form and
substance to the Purchasers and shall have been duly executed and delivered by
the parties thereto.
10.14. Intercreditor Agreement. The Purchasers shall have received
the Subordination Agreement duly executed and delivered by each party thereto
(other than the Purchasers) and dated no later than the Closing Date.
10.15. Searches. The Purchasers shall have received satisfactory tax
lien, Uniform Commercial Code and judgment searches with respect to the Company
and Holdings.
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10.16. Material Agreements. The Purchasers shall have received
copies of all material agreements to which the Company or Holdings is a party,
including without limitation, all documents in respect of the borrowing of
money, joint venture agreements, supply agreements or requirements contracts,
royalty agreements, license agreements, employee or management incentive
agreements and product warranties.
10.17. Pay-off Letters and Releases. The Company shall have provided
to the Purchasers documents in form and substance satisfactory to them setting
forth the amounts necessary to repay and satisfy in full, and evidencing the
repayment and satisfaction in full of, the Indebtedness described in Section 7.1
to be repaid in connection with the transactions described herein and evidencing
the release of any and all of the holders' of such Indebtedness Liens upon any
of the properties or assets of the Company or Holdings, including without
limitation, Uniform Commercial Code termination statements.
10.18. Acquisition Documents. Each of the Acquisition Documents
shall be satisfactory in form and substance to the Purchasers and shall have
been duly executed and delivered by the parties thereto. The Purchasers shall
have received a certificate dated the Closing Date of the chief executive
officer of the Company to the effect that no material provision of the
Acquisition Documents has been waived by Holdings or the Company without the
Purchasers' prior consent.
10.19. Insurance. The Purchasers shall have received evidence
satisfactory to them that the Company, Holdings and their Subsidiaries are
maintaining in full force and effect casualty, hazard, public liability, product
liability and such other insurance as may be reasonably required by the
Purchasers, in each case written by insurers and in amounts and forms
satisfactory to the Purchasers.
10.20. Solvency Certificate. The Purchasers shall have received a
solvency certificate with respect to the Company, satisfactory to them in form
and substance and dated the Closing date, from the principal financial officer
of the Company.
10.21. Opinions of Counsel. The Purchasers shall have received legal
opinions from special outside counsel to Holdings and the Company, each dated
the Closing Date, addressed to the Purchasers and the Agent, and otherwise in
form and substance satisfactory to the Purchasers and their counsel.
10.22. Other Documents and Opinions. The Purchasers shall have
received such other certificates, documents and opinions, including advice from
Holdings' auditors with respect to GAAP and the Conny financial statements, in
form and substance satisfactory to the Purchasers and their counsel, relating to
matters incident to the transactions contemplated hereby as the Purchasers may
reasonably request.
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SECTION 11. AMENDMENT AND WAIVER
(a) Each of this Agreement, the Notes and the Warrants may be
amended (or any provision hereof or thereof waived) (i) as to the rights or
obligations of the holders of the Notes, only with the written consent of the
Majority Noteholders and (ii) as to the rights or obligations of the holders of
Warrants and Shares, only with the written consent of the holder or holders of
Warrants or Shares representing at least a majority of the sum of the Shares
then outstanding and the Shares then obtainable upon the exercise of all
Warrants then outstanding, if any; provided, however, that (w) no such amendment
or waiver as to the rights or obligations of the holders of the Notes shall
change the fixed maturity of any Note, the rate or the time of payment of
interest thereon, the principal amount thereof, the premium thereon, the
redemption price thereof, the currency in which the Notes are payable or the
prepayment provisions of Section 6, without the consent of the holder of each
Note affected thereby, (x) no such amendment or waiver as to the rights or
obligations of the holders of Warrants and Shares shall change the current
exercise price of a Warrant or the registration rights under Section 17, hereof,
without the consent of the holder of each Warrant or Share affected thereby, (y)
no such amendment or waiver shall reduce the aforesaid percentage of Notes,
Warrants or Shares, as the case may be, the holders of which are required to
consent to any such amendment or waiver as to the rights or obligations of such
holders, without the consent of the holders of all the Notes then outstanding or
the holders of all Warrants and Shares then outstanding, as the case may be, and
(z) no such amendment or waiver as to the rights or obligations of the holders
of the Notes shall increase the percentage of the amount of the Notes, the
holders of which may declare the Notes to be due and payable under Section 14,
without the consent of the holders of all the Notes then outstanding.
(b) Holdings and the Company agree that all holders of Notes,
Warrants and Shares shall be notified by Holdings or the Company in advance of
any proposed amendment or waiver of any Loan Document as to the rights or
obligations of such holders, but failure to give such notice shall not in any
way affect the validity of any such amendment or waiver. In addition, promptly
after obtaining the written consent of the holders required pursuant to
paragraph (a) above, the Company shall transmit a copy of any amendment or
waiver which has been adopted to all holders of Notes, Warrants and Shares then
outstanding, but failure to transmit such copies shall not in any way affect the
validity of any such amendment or waiver.
(c) Holdings, the Company and the holders of all Notes, Warrants
and Shares then or thereafter outstanding (to the extent that the applicable
amendment or waiver has been effected as to such holders) shall be bound by any
amendment or waiver effected in accordance with the provisions of this Section
11, whether or not such Notes, Warrants and Shares shall have been marked to
indicate such modification, but any Note or Warrant certificate issued
thereafter shall bear a notation identifying any such modification as to the
holders of the Notes or the Warrants and Shares, as the case may be (but the
failure to bear any such notation shall not affect the validity of any such
subsequently issued Note or Warrant, which shall be enforceable in accordance
with its terms subject to any such modification).
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SECTION 12. EXCHANGE OF NOTES AND WARRANTS; CANCELLATION OF SURRENDERED NOTES
(a) Subject to Section 16, at any time at the request of any
holder of one or more of the Notes to the Company at its office provided under
Section 7.19, the Company at its expense (except for any transfer tax or any
other tax arising out of the exchange) will issue and deliver to or upon the
order of the holder in exchange therefor new Notes, in such denomination or
denominations as such holder may request (which must be in denominations of no
less than $100,000 plus one Note in a lesser denomination, if required), in
aggregate principal amount equal to the unpaid principal amount of the Note or
Notes surrendered and substantially in the form thereof, dated as of the date to
which interest has been paid on the Note or Notes surrendered (or, if no
interest has yet been paid thereon, then dated the date of the Note or Notes so
surrendered) and payable to such person or persons or order as may be designated
by such holder. Any such new Note shall bear any notation required by Section
11.
(b) Subject to Section 16, at any time at the request of any
holder of one or more of the Warrants to Holdings at its office provided under
Section 7.19, Holdings at its expense (except for any transfer tax or any other
tax arising out of the exchange) will issue and deliver to or upon the order of
the holder in exchange therefor a new Warrant certificate or certificates of
like tenor, in such amount or amounts as such holder may request and calling in
the aggregate on the face or faces thereof for the number of Shares which are
called for on the face or faces of the Warrant certificate or certificates so
surrendered, and in the name of such holder or as such holder may direct. Any
such new Warrant certificate shall bear any notation required by Section 11.
(c) In the event that any Note or portion thereof is surrendered
to the Company upon the exercise of all or a portion of any Warrant, or upon a
prepayment under Section 6, the Company shall pay all accrued and unpaid
interest on such Note or such portion thereof and interest shall cease to accrue
upon that portion of the principal amount of such Note used for such exercise or
which was prepaid, all upon the date of such exercise or prepayment and upon
presentation and surrender of such Note to the Company.
(d) Upon the exercise in whole or in part of any Warrant or upon
any prepayment under Section 6, if only a portion of the principal amount of a
Note is used or paid in such exercise or prepayment, then such Note shall be
surrendered to the Company and the Company shall simultaneously execute and
deliver to or on the order of the holder thereof, at the expense of the Company,
a new Note or Notes in principal amount equal to the unused or unpaid portion of
such Note.
(e) Subject to paragraph (d) above, all Notes or portions thereof
which have been used to exercise all or a portion of a Warrant, or which have
been prepaid under Section 6, shall be canceled by the Company and no Notes
shall be issued in respect of the principal amount so used or prepaid.
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SECTION 13. REGISTRATION; REPLACEMENT OF NOTES AND WARRANTS
(a) The Company shall keep a register in which provisions shall be
made for the registration of the Notes and the registration of transfers of the
Notes. The register shall be kept at the chief executive office of the Company.
Upon surrender for registration of transfer of any Note at the chief executive
office of the Company, the Company shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Notes for a like aggregate
principal amount of Notes. At the option of the holder of any Notes, its Notes
may be exchanged for other Notes of any authorized denominations and of a like
aggregate principal amount of Notes, upon surrender of the Notes to be exchanged
at the chief executive office of the Company. Each new Note issued upon transfer
or exchange shall be in a principal amount of at least $100,000 and in integral
multiples of $100,000 and dated the date or dates to which interest on the Notes
surrendered shall have been paid. All Notes issued upon any registration of
transfer or exchange of Notes shall be the valid obligations of the Company
evidencing the same respective obligations, and entitled to the same benefits
under this Agreement and the other Loan Documents, as the Notes surrendered upon
such registration of transfer or exchange. The Company shall make a notation on
each new Note of the amount of all payments of principal previously made on the
old Notes with respect to which such new Note is issued and the date to which
interest accrued on such old Note has been paid.
(b) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Note and, in the
case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory to the Company, or in the case of any such
mutilation, upon surrender of such Note (which surrendered Note shall be
canceled by the Company), the Company will, without charge, issue new Note of
like tenor in lieu of such lost, stolen, destroyed or mutilated Note as if the
lost, stolen, destroyed or mutilated Note were then surrendered for exchange.
(c) Holdings shall keep a register in which provisions shall be
made for the registration of the Warrants and the registration of transfers of
the Warrants. The register shall be kept at the chief executive office of
Holdings. Upon surrender for registration of transfer of any Warrant certificate
at the chief executive office of Holdings, Holdings shall execute and deliver,
in the name of the designated transferee or transferees, one or more new Warrant
certificates for a like aggregate number of Shares. At the option of the holder
of any Warrants, its Warrant certificates may be exchanged for other Warrant
certificates of any authorized denominations and for a like aggregate number of
Shares, upon surrender of the Warrant certificates to be exchanged at the chief
executive office of Holdings. Each new Warrant certificate issued upon transfer
or exchange shall be for at least 2% of the total number of Shares and dated the
date of the original Warrant certificate. All Warrant certificates issued upon
any registration of transfer or exchange of Warrant certificates shall be the
valid obligations of Holdings evidencing the same respective obligations, and
entitled to the same benefits under this Agreement and the other Loan Documents,
as the Warrant certificates surrendered upon such registration of transfer or
exchange.
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(d) Upon receipt of evidence reasonably satisfactory to Holdings
of the loss, theft, destruction or mutilation of any Warrant certificates and,
in the case of any such loss, theft or destruction, upon delivery of an
indemnity agreement reasonably satisfactory to Holdings, or in the case of any
such mutilation, upon surrender of such Warrant certificates (which surrendered
Warrant certificates shall be canceled by Holdings), Holdings will, without
charge, issue new Warrant certificates of like tenor in lieu of such lost,
stolen, destroyed or mutilated Warrant certificates as if the lost, stolen,
destroyed or mutilated Warrant certificates were then surrendered for exchange.
SECTION 14. DEFAULTS
(a) Any of the following shall constitute an "Event of Default"
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any Governmental Authority or arbitrator or any law, rule or
regulation of any Governmental Authority):
(i) the Company defaults in the payment (whether or not such
payment is prohibited under Section 9 hereof or under the Subordination
Agreement) of (A) any part of the principal of any Note, when the same
shall become due and payable, whether at maturity or at a date fixed for
prepayment or by acceleration or otherwise, or (B) any part of the
interest on any Note, when the same shall become due and payable, and such
default in the payment of interest shall have continued for ten days, or
(C) any other amount due under a Loan Document, and such default shall
have continued for five Business Days after notice thereof from any holder
of Notes;
(ii) the Company fails to observe any of the covenants or
agreements contained in Section 7.1, 7.10, or 8 hereof; or
(iii) the Company defaults in the performance of any other
agreement or covenant contained in the Loan Documents, and such default
shall have continued for a period of ten days after written notice of such
default is given by any holder of Notes; or
(iv) any representation or warranty made by the Company or
Holdings in the Loan Documents or any statement or representation in any
certificate, financial statement, report or other document delivered by
the Company, any Subsidiary thereof or Holdings pursuant to any Loan
Document proves to have been incorrect in any material respect when made;
or
(v) Holdings, the Company or any of their respective
Subsidiaries defaults in the performance of any agreement or covenant
contained in any Senior Loan Document, and such default causes or results
in the acceleration of the Senior Indebtedness or any portion thereof; or
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(vi) a default occurs under any other agreement, document or
instrument relating to Indebtedness (other than Senior Indebtedness) to
which the Company, Holdings or any of their Subsidiaries is a party or by
which the Company, Holdings or any such Subsidiary or the Company's,
Holdings' or any such Subsidiary's property is bound and such default (x)
involves the failure to make any payment (whether of principal, interest
or otherwise) due (whether at scheduled maturity or at a date fixed for
prepayment or by acceleration or otherwise) in respect of any Indebtedness
in an aggregate amount exceeding $100,000 or (y) causes (or permits any
holder of such Indebtedness or a trustee to cause) such Indebtedness, or a
portion thereof in an aggregate amount exceeding $100,000, to become due
prior to its stated maturity or prior to its regularly scheduled dates of
payment; or
(vii) any of the assets of the Company, Holdings or any
Subsidiary thereof is attached, seized, levied upon or subjected to a writ
or distress warrant, or comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors of the
Company, Holdings or such Subsidiary; or any person other than the
Company, Holdings or such Subsidiary shall apply for the appointment of a
receiver, trustee or custodian for any assets of the Company, Holdings or
any Subsidiary thereof, and such application shall remain unstayed or
undismissed for 60 consecutive days; or the Company, Holdings or any of
their Subsidiaries shall have concealed or removed or permitted to be
concealed or removed, any part of its property, with intent to hinder,
delay or defraud its creditors or any of them or made or suffered a
transfer of any of its property or the incurring of an obligation which
may by fraudulent under any bankruptcy, fraudulent conveyance or other
similar law; or
(viii) a case or proceeding is commenced against the Company,
Holdings or any of their Subsidiaries in a court having competent
jurisdiction seeking a decree or order (x) under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other
applicable federal, state or foreign bankruptcy or other similar law, (y)
appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of the Company, Holdings or any such
Subsidiary or of any substantial part of the Company's, Holdings' or any
such Subsidiary's properties, or (z) ordering the winding up or
liquidation of the affairs of the Company, Holdings or any such
Subsidiary, and such case or proceeding shall remain undismissed or
unstayed for 60 consecutive days or such court shall enter a decree or
order granting the relief sought in such case or proceeding; or
(ix) the Company, Holdings or any of their Subsidiaries (w)
files a petition seeking relief under Title 11 of the United States Code,
as now constituted or hereafter amended, or any other applicable federal,
state or foreign bankruptcy or other similar law, (x) consents to the
institution of proceedings thereunder or to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of the Company, Holdings or any such Subsidiary or of any
substantial part of the Company's, Holdings' or any such Subsidiary's
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properties, (y) fails generally to pay its debts as such debts become due,
or (z) takes any corporate action in furtherance of any such action; or
(x) final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $500,000
in the aggregate are rendered against the Company, Holdings or any of
their Subsidiaries unless the same are (x) fully covered by insurance or
(y) vacated, stayed, bonded, paid or discharged within a period of 30 days
from the date of such judgment and the date of termination of any such
stay; or
(xi) (A) any Termination Event occurs which the Majority
Noteholders believe could subject the Company or any of its ERISA
Affiliates to a material liability to pay money; or (B) the plan
administrator of any Title IV Plan applies under Section 412(d) of the
Code for a waiver of the minimum funding standards of Section 412(a) of
the Code and the Majority Noteholders believe that the substantial
business hardship upon which the application for the waiver is based could
subject the Company or any of its ERISA Affiliates to a material liability
to pay money; or
(xii) in the event that the Rubbermaid Incorporated
Manufacturing Agreement dated April 17, 1995 is severed or terminated,
unless a similar agreement is entered into with another business entity
within a period of 90 days of said severance or termination, in form and
substance satisfactory to the Majority Noteholders; or
(xiii) failure to notify the Purchasers of a Change in Control
Event as required by Section 7.13; or
(xiv) substantial damage, or destruction to all or
substantially all of the Fixed Asset Collateral (as defined in the Senior
Loan Documents) or unauthorized sale of all or any part of the Fixed Asset
Collateral; or
(xv) in the event that the Certificate of Incorporation of
Holdings is not amended on or prior to June 30, 1998 to authorize, and the
Board of Directors of Holdings had not reserved, a sufficient number of
shares of Common Stock to permit the exercise in full of the Warrants and
the conversion in full of the Preferred Shares.
(b) If an Event of Default occurs pursuant to any of Sections
14(a)(i) through (vi), or Sections 14(a)(x) through (xv), then and in each such
event any holder or holders of more than 25% in aggregate principal amount of
the Notes then outstanding may at any time (unless all such Events of Default
shall theretofore have been waived or remedied), at its or their option, by
written notice or notices to the Company, declare all the Notes to be due and
payable in full. Upon any such declaration or upon the occurrence of an Event of
Default pursuant to clause (vii), (viii) or (ix) of Section 14(a) (in which case
no declaration is required), all Notes shall forthwith immediately mature and
become due and payable, together with all interest accrued thereon, without
presentment, demand, protest or notice, all of which are hereby waived. However,
if at
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any time after the principal of the Notes shall so become due and payable and
prior to the date of maturity stated in the Notes, all arrears (without giving
effect to any such acceleration) of principal and interest on the Notes (with
interest at the rate specified in the Notes on any overdue principal and, to the
extent legally enforceable, on any overdue interest) shall be paid by or for the
account of the Company, then the holders of Notes evidencing at least 50% of the
principal amount outstanding under all Notes, by written notice or notices to
the Company, may rescind or annul such declaration, but not waive the underlying
Event of Default, and thereafter the Notes may be accelerated as a result of
such Event of Default only upon notice from the Majority Noteholders. If any
holder of a Note shall give any notice or take any other action with respect to
a claimed default, the Company, forthwith upon receipt of such notice or
obtaining knowledge of such other action, shall give written notice thereof to
all other holders of the Notes then outstanding, describing such notice or other
action and the nature of the claimed default.
SECTION 15. ADDITIONAL REMEDIES
(a) In case any one or more Events of Default shall occur and be
continuing, (x) the holder of any Note then outstanding may proceed to protect
and enforce the rights of such holder by an action at law, suit in equity or
other appropriate proceeding, whether for the specific performance of any
agreement contained herein or in any other Loan Document, or for an injunction
against a violation of any of the terms hereof or thereof, or in aid of the
exercise of any power granted hereby or thereby or by law, or for any other
remedy (including, without limitation, damages) and/or (y) the Agent may
exercise any or all remedies under the Collateral Documents.
(b) In case of a default in the payment of any principal of or
interest on any Note, or a default in the payment of any other amount owing
under any Loan Document, or a default in the observance of any other agreement
or covenant of the Company or Holdings in any Loan Document, Holdings and the
Company jointly and severally agree to pay to the holders of the Notes and the
holders of the Warrants, as applicable, in addition to any interest or premium
otherwise required, such further amount as shall be sufficient to cover any and
all costs and expenses of enforcement and collection, including, without
limitation, reasonable attorneys' fees and expenses.
(c) No course of dealing and no delay on the part of any holder of
any Note or Warrant in exercising any rights or remedies shall operate as a
waiver thereof or otherwise prejudice such holder's rights. No right or remedy
conferred hereby or by any other Loan Document shall be exclusive of any other
right or remedy referred to herein or therein or available at law, in equity, by
statute or otherwise.
(d) Each of the Purchasers and the holders of the Notes, the
Warrants and the Shares shall, in addition to other remedies provided by law,
have the right and remedy to have the provisions of any Loan Document
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any breach or threatened breach of the provisions
of any Loan Document will cause irreparable injury to the Purchasers and such
holders and that money
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damages will not provide an adequate remedy. Nothing contained herein or in any
other Loan Document shall be construed as prohibiting any of the Purchasers or
such holders from pursuing any other remedies available to it for such breach or
threatened breach, including, without limitation, the recovery of damages from
the Company and Holdings.
SECTION 16. RESTRICTIONS ON TRANSFER
Each holder of a Note, Warrant or Share, by its acceptance thereof,
agrees that it will not sell or otherwise dispose of such Note, Warrant or Share
unless such Note, Warrant or Share has been registered under, or has been sold
pursuant to an exemption from registration under, the Securities Act. As a
condition to the Company's obligation to issue a new Note or Warrant to a
transferee thereof the transferor must represent to the Company in writing that
the transfer is so exempt.
SECTION 17. REGISTRATION RIGHTS
17.1. Requested Registration. (a) At any time, the holder or
holders of any of the Registrable Securities (as defined below) then outstanding
and entitled to registration rights under this Section 17 (the "Initiating
Holders") may, upon written request to Holdings, require that Holdings effect a
registration, qualification or compliance with respect to all or a part of such
Registrable Securities. Holdings will, within ten days of the receipt of such
request, give written notice of such request to all other holders of Registrable
Securities and shall file a registration statement with the Commission on a form
deemed appropriate by Holdings' counsel as expeditiously as possible, but in no
event later than 90 days after receipt of such written request; provided,
however, that Holdings shall not be obligated to file such a registration
statement with the Commission prior to the first anniversary of the Closing.
Such registration statement shall cover all the Registrable Securities requested
to be included therein by the Initiating Holders and by such other holders as
specified by such other holders in writing given within 20 days of receipt of
the notice given by Holdings pursuant to this subsection (a). After the filing
of such registration statement, Holdings shall use its best efforts to cause
such registration statement to become effective as expeditiously as possible.
Holdings shall pay the expenses (as defined in Section 17.7) of such
registration.
Holdings shall also use its best efforts to effect promptly all such
other registration, qualification and compliance (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate
qualification under the applicable blue sky, or other state securities laws, and
appropriate compliance with exemptive regulations issued under the Securities
Act) as may be so requested by a holder of Registerable Securities covered by a
registration statement filed pursuant to this Section 17.1 and as would permit
or facilitate the sale and distribution of all or any portion of such
Registrable Securities.
Holdings shall not be obligated to effect such registration,
qualification or compliance (1) after Holdings already has effected two such
registrations pursuant to this
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subsection (a), (2) if the Initiating Holders hold less than 20% of the
Registerable Securities then outstanding, or (3) within six months after the
effective date of the registration statement most recently filed by Holdings
under the Securities Act with respect to any class of Registerable Securities if
the holders of the Registerable Securities shall have had the opportunity
pursuant to Section 17.2 to participate in the offering effected pursuant to
such registration statement without any reduction of the number of Registerable
Securities included in such offering pursuant to Section 17.3.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by such request by means of an underwriting, they shall so
advise Holdings as a part of such request made pursuant to Section 17.1(a).
Holdings shall enter into an agreement in customary form for a secondary
distribution with the underwriter or underwriters selected by Holdings for such
underwriting, provided such underwriters are reasonably acceptable to the
Initiating Holders.
(c) As used herein, the term "Registrable Securities" means,
collectively, the Preferred Shares and all Common Shares (including all such
Shares issued or issuable upon exercise of any Warrant or upon the conversion of
the Preferred Shares). Registrable Securities will cease to be such when (i) a
registration statement covering such Registrable Securities has become or been
declared or ordered effective and they have been disposed of pursuant to such
effective Registration Statement or (ii) they are sold, transferred or
distributed pursuant to and in compliance with Rule 144 (or any similar
provision then in force, but not including Rule 144A) under the Securities Act.
(d) Notwithstanding the foregoing, if Holdings shall furnish to
Holders requesting a registration statement pursuant to this Section 17.1, a
certificate signed by the President of Holdings stating that, in the good faith
judgment of the Board of Directors of Holdings, it would be seriously
detrimental to Holdings and its shareholders for such registration statement to
be filed and it is therefore essential to defer the filing of such registration
statement, Holdings shall have the right to defer such filing for a period of
not more than 30 days after receipt of the request of the Initiating Holders;
provided, however, that Holdings may not utilize this right more than once in
any twelve month period.
17.2. Incidental Registration. (a) If at any time or times after the
date hereof, Holdings intends to file a registration statement for the
registration of securities under the Securities Act of the same class as any
Registerable Securities in connection with a public offering (other than any
offering pursuant to any stock option plan or stock purchase, savings or similar
plan, any offering in connection with any merger or acquisition of or by
Holdings, any exchange of outstanding Common Stock or any registration of any
security convertible into Common Stock), Holdings shall notify in writing each
of the holders of record of Registrable Securities at least 40 days prior to
each such filing of Holdings' intention to file such a registration statement.
Such notice shall state the date on which Holdings proposes to file such
registration statement and the number and class of securities proposed to be
registered thereby and shall advise the holders
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of such Registrable Securities of their rights to have such securities included
in such registration. If any holder of Registrable Securities notifies Holdings
within 25 days after receipt of such notice from Holdings of its desire to have
included in such registration statement any of its Registrable Securities, then
Holdings shall include such shares in such registration statement for sale in
the same manner and upon the same terms and conditions as for the securities
originally to be subject to such registration statement; provided that if, at
any time after giving written notice of its intention to register any securities
and prior to the effective date of the registration statement filed in
connection with such registration, Holdings shall determine for any reason
either not to register, to discontinue registration or to delay registration of
such securities, Holdings may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register or to discontinue registration,
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
registration expenses in connection therewith) and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities for the same period as the delay in registering such
other securities. Holdings shall pay the expenses (as defined in Section 17.7)
of such registration.
(b) If the registration of which Holdings gives notice is for a
registered public offering involving an underwriting, Holdings shall so advise
the holders of Registrable Securities as a part of the written notice given
pursuant to subsection (a) above. In such event the right of such holders to
registration pursuant to this Section 17.2 shall be conditioned upon such
holders' participation in such underwriting and the inclusion of such holders'
Registrable Securities in the underwriting to the extent provided herein. The
holders of Registrable Securities shall (together with Holdings and any other
shareholders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters
selected for underwriting by Holdings and shall use their best efforts to
arrange for all documents and opinions required to be delivered thereunder in
respect of their participation as selling shareholders to be delivered. If any
of the holders of Registrable Securities or any officer, director or other
shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to Holdings and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
(c) The holders of Registrable Securities shall be entitled to
have their shares included in an unlimited number of registrations pursuant to
this Section 17.2.
17.3. Underwriter Cutbacks. Notwithstanding any other provision
of this Section 17, if any registration provided for in Section 17.1 or 17.2
involves an underwriting and if the managing underwriter determines that
marketing factors require a limitation on the number of shares to be
underwritten, then Holdings shall include in the underwriting only that number
of such securities, including Registrable Securities, which the managing
underwriter believes will not jeopardize the success of the offering. The
securities to be so included will be apportioned, in the case of Section 17.2,
pro rata among the securityholders (including the selling holders of
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Registrable Securities) seeking to include their respective securities in the
offering according to the total amount of securities entitled to be included
therein owned by each such selling securityholder or in such other apportions as
shall be mutually agreed to by such selling securityholders. The securities to
be so included will be apportioned, in the case of a Section 17.1 registration
first, to the selling holders of Registrable Securities to the extent of their
Warrants and Shares, and pro rata as aforesaid among them, and, second, pro rata
as aforesaid among all other selling securityholders and the Company. The rights
granted to the holders of Registrable Securities in this Section 17.3 shall be
subject only to the rights of the holders of Common Stock of Holdings issued in
accordance with the Exchange Agreement dated March 31, 1996 among the Company,
CIGNA Mezzanine Partners Inc., and CIGNA Property and Casualty and Insurance
Company of North America.
17.4. Right to Review the Registration Statement. (a) In connection
with the preparation and prior to the filing of each registration statement
under the Securities Act pursuant to Sections 17.1 and 17.2, Holdings will give
the holders of Registrable Securities registered under such registration
statement, the underwriters, and their respective counsel and accountants, the
opportunity to review and comment upon such registration statement, each
prospectus included therein or filed with the Commission and each amendment
thereof or supplement thereto, and will give each of them such access to its
books and records and such opportunities to discuss the business of Holdings
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holders' and
such underwriters' respective counsel to conduct a reasonable investigation
within the meaning of the Securities Act.
(b) Each such holder of Registrable Securities shall have the
right to review and comment upon such registration statement and to request the
insertion therein of material furnished to Holdings in writing which in the
judgment of such holder (a "Requesting Holder") of Registrable Securities should
be included; provided, however, such information shall not be required to be
included if in the reasonable opinion of counsel of Holdings, the inclusion of
such material furnished by such holder would be misleading or otherwise in
violation of the rules and regulations of the Securities Act. Furthermore, a
Requesting Holder has the right to require the deletion of any reference to such
Requesting Holder by name or otherwise if such reference is not required by the
Securities Act or the rules promulgated thereunder.
Holdings will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the registration statement) to which the holders of at least a majority of the
securities (including Registrable Securities) covered by such registration
statement or the underwriter or underwriters, if any, shall reasonably object,
provided that Holdings may file such document in a form required by law or upon
the advice of its counsel.
17.5. Registration Procedures. In the case of each registration,
qualification or compliance effected by Holdings pursuant to this Xxxxxxx 00,
Xxxxxxxx xxxxx:
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(x) notify each holder of Registrable Securities as to the filing
of the Registration Statement and of all amendments or supplements thereto filed
prior to the effective date of said Registration Statement;
(b) notify each holder of Registrable Securities, promptly after
it shall receive notice thereof, of the time when said Registration Statement
becomes effective or when any amendment or supplement to any prospectus forming
a part of said Registration Statement has been filed;
(c) notify each holder of Registrable Securities promptly of any
request by the Commission for the amending or supplementing of such Registration
Statement or prospectus or for additional information;
(d) prepare and promptly file with the Commission and promptly
notify each holder of Registrable Securities of the filing of any amendments or
supplements to such Registration Statement or prospectus as may be necessary to
correct any statements or omissions if, at any time when a prospectus relating
to the Registrable Securities is required to be delivered under the Securities
Act, any event with respect to Holdings shall have occurred as a result of which
any such prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made, in the light of the circumstances under
which they were made, not misleading; and, in addition, prepare and file with
the Commission, promptly upon the written request of any holder of Registrable
Securities, any amendments or supplements to such Registration Statement or
prospectus which may be reasonably necessary or advisable in connection with the
distribution of the Registrable Securities;
(e) advise each holder of Registrable Securities promptly after
Holdings shall receive notice or obtain knowledge of the issuance of any stop
order by the Commission suspending the effectiveness of any such Registration
Statement or amendment thereto or of the initiation or threatening of any
proceeding for that purpose, and promptly use its best efforts to prevent the
issuance of any stop order or obtain its withdrawal promptly if such stop order
should be issued;
(f) use its best efforts to qualify as soon as reasonably
practicable the Registrable Securities included in the Registration Statement
for sale under the securities or blue sky laws of such states and jurisdictions
within the United States as shall be reasonably requested by any holder of
Registrable Securities; provided that Holdings shall not be required in
connection therewith or as a condition thereto to become subject to taxation in
any of the aforesaid states or jurisdictions; and
(g) furnish each holder of Registrable Securities, as soon as
available, copies of any Registration Statement and each preliminary or final
prospectus, or supplement or amendment
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required to be prepared pursuant hereto, all in such quantities as any holder of
Registrable Securities may from time to time reasonably request.
At its expense, Holdings shall keep such registration statement
effective until 90 days after such registration statement becomes effective.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from Holdings of the
occurrence of any event of the kind described in subsection (d) above, such
holder will forthwith discontinue such holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by subsection (d) above and, if so directed by
Holdings, will deliver to Holdings (at Holdings' expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice. In the event Holdings shall give any such notice, the period mentioned
in the immediately preceding paragraph of this Section 17.5 shall be extended by
the length of the period from and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received such notice to the date on which each such seller has received the
copies of the supplemented or amended prospectus contemplated by subsection (d)
above.
17.6. Indemnity. (a) In connection with a Registration Statement
filed with the Commission pursuant to this Section 17 or any other registration
statement filed by Holdings, Holdings will indemnify and hold harmless any
seller of Registrable Securities and each person, if any, who controls any
holder of Registrable Securities within the meaning of the Securities Act, any
underwriter who participates in the distribution of Registrable Securities and
any Requesting Holder and each person, if any, who controls any Requesting
Holder against any loss, claim, damage or liability, joint or several, to which
such holder or such controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any Registration
Statement (including any preliminary prospectus and the prospectus as a part
thereof (the "Prospectus") or any amendment or supplement thereof, or (B) in any
blue sky application or other document executed by Holdings specifically for
that purpose or based upon written information furnished by Holdings filed in
any state or other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such application,
document or information being hereinafter called a "Blue Sky Application"), or
(ii) the omission or alleged omission to state in any Registration Statement
(including any preliminary prospectus and the Prospectus as a part thereof) or
any amendment or supplement thereof or in any Blue Sky Application a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and
will reimburse each holder of Registrable Securities, each Requesting Holder and
each such controlling person for any legal or other expenses reasonably incurred
by such holder of Registrable Securities, such Requesting Holder or such
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controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action; provided that Holdings will not be liable to any
holder of Registrable Securities in any such case to the extent, but only to the
extent, that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to Holdings by such holder of Registrable Securities specifically
stating that it is for use in the preparation of any Registration Statement or
any such amendment or supplement thereof or any such Blue Sky Application or any
such preliminary prospectus or the Prospectus or any such amendment thereof or
supplement thereto. This indemnity agreement is in addition to any liability
which Holdings may otherwise have.
(b) Each holder of Registrable Securities included in the
securities covered by the Registration Statement severally, but not jointly,
will indemnify and hold harmless Holdings, each of Holdings' directors, each of
Holdings' officers, and each person, if any, who controls Holdings within the
meaning of the Securities Act, as well as any underwriter who participates in
the distribution of securities covered by such Registration Statement against
any loss, claim, damage or liability to which Holdings, or any such director or
officer or controlling person or any underwriter may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage or liability
(or action in respect thereof) arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in any
Registration Statement (including any preliminary prospectus and the Prospectus
as a part thereof) or any amendment or supplement thereof, or (B) in any Blue
Sky Application, or (ii) the omission or alleged omission to state in the
Registration Statement (including any preliminary prospectus and the Prospectus
as a part thereof) or any amendment or supplement thereto or in any Blue Sky
Application a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to Holdings by or on
behalf of such holder of Registrable Securities specifically stating that it is
for use in the preparation of the Registration Statement or any such amendment
or supplement thereof or any such Blue Sky Application or any such preliminary
prospectus or the Prospectus or any such amendment thereof or supplement
thereto; and will reimburse any legal or other expenses reasonably incurred by
Holdings or any such director or officer or controlling person in connection
with investigating or defending against any such loss, claim, damage, liability
or action. No holder of Registrable Securities shall be required by this
subsection (b) to pay an amount in excess of the amount of proceeds (net of
underwriting discounts or commissions) received by such holder upon the sale of
Registrable Securities included in such Registration Statement. This indemnity
agreement is in addition to any liability which such holder of Registrable
Securities may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 17.6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect
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thereof is to be made against any indemnifying party under this Section 17.6,
notify in writing the indemnifying party of the commencement thereof within a
reasonable time thereafter, provided that the failure so to notify the
indemnifying party shall not relieve the indemnifying party from any liability
which it may have under this Section 17.6, except to the extent it has been
prejudiced by such failure, or from any liability which it may have to an
indemnified party otherwise than under this Section 17.6. In case any such
action, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel who shall be reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 17.6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, provided that if it is necessary to prevent a conflict
of interest for the holders of Registrable Securities, Requesting Holders or
their respective controlling persons to be represented by separate counsel, the
holders of Registrable Securities shall have the right to employ a single
counsel to represent the holders of Registrable Securities and such controlling
persons, in which event the reasonable fees and expenses of such separate
counsel shall be borne by Holdings.
17.7. Expenses. Holdings shall bear all registration expenses in
connection with a registration of Registrable Securities pursuant to this
Section 17. As used in this Section 17, "registration expenses" of a
registration shall mean, without limitation, all registration, filing and
National Association of Securities Dealers' fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and disbursements
of counsel for Holdings and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance and the fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (including
fees paid to a qualified independent underwriter) and the reasonable fees and
expenses of one firm (which firm shall be reasonably satisfactory to the selling
holders of Registrable Securities) to act as special counsel for all holders of
Registrable Securities and such other local counsel as to matters of local laws
as such special counsel and such holders of Registrable Securities may
reasonably request. All underwriting discounts and commissions relating to
securities registered on behalf of the holders of Registrable Securities and
transfer taxes shall be borne by such holders pro rata on the basis of the
number of Registrable Securities so registered.
17.8. Lock-Ups. To the extent requested by the managing underwriter
in respect of an offering of securities of Holdings described in this Section
17, each holder of Registrable Securities and Holdings shall agree to refrain
from selling or offering to sell, making any short sale of, loaning, granting
any option for the purchase of, effecting any public sale or distribution of or
otherwise disposing of (other than pursuant to such Registration Statement) any
securities of Holdings during the seven days prior to and the 180 days after the
effective date of any
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Registration Statement described herein, whether or not such holder participates
in such registration. Nothing in this Section 17.8 shall preclude Holdings from
issuing shares of Registrable Securities upon exercise of outstanding options or
conversion of outstanding convertible securities. Each holder of Registrable
Securities agrees that Holdings may instruct its transfer agent to place stop
transfer notations in its records to enforce this Section 17.8.
17.9. Other Obligations of Holdings. In connection with Holdings'
obligations to the holders of Registrable Securities with respect to the sale of
Registrable Securities pursuant to a public offering thereof as provided in this
Section 17, Holdings shall use its best efforts to register Registrable
Securities as required, or permitted if any holder of Registrable Securities so
requests, by Section 12 of the Securities Exchange Act of 1934, as amended, and,
if the Registrable Securities to be sold meet the criteria for listing on any
exchange on which the Common Stock is then listed, apply for listing of such
Registrable Securities on such exchange.
17.10.Transferability. The registration rights granted in this
Section 17 shall not be assignable in any manner to any transferee of any of the
Warrants or Registrable Securities except in connection with the sale by the
holder of the Warrants or the Registrable Securities issued upon exercise
thereof in a transaction not involving a public offering for the purposes of the
Securities Act.
SECTION 18. EXPENSES; INDEMNIFICATION
(a) Expenses; Taxes. Holdings and the Company jointly and
severally agree to pay the fees and disbursements of counsel to the holders of
Notes, Warrants and Shares in connection with any amendments or modifications to
or waivers of any provisions of the Loan Documents or in connection with any
other agreements between such holders, on the one hand, and the Company or
Holdings, on the other hand, and the fees and expenses of any investment banker,
broker or finder involved with the Loan Documents or any of the transactions
contemplated hereby or thereby. The obligations of Holdings and the Company
under this Section 18 shall survive the Closing, the payment or cancellation of
the Notes and the exercise of the Warrants and any termination of the Loan
Documents.
Holdings and the Company agree to pay, or cause to be paid, all
documentary, stamp and other similar taxes levied under the laws of the United
States or any state or local taxing authority thereof or therein in connection
with the issuance and sale of the Notes, the Warrants and the Shares and the
execution and delivery of this Agreement and any other Loan Document or other
agreements, documents or instruments contemplated hereby or thereby and any
modification of any of the Loan Documents or any such other documents or
instruments, and shall hold the Purchasers harmless without limitation as to
time against any and all liabilities with respect to all such taxes; provided,
however, that neither Holdings nor the Company shall be required to pay any tax
or other governmental charge which may be payable in respect of any transfer
involved in the issue or delivery of any Warrant or Share certificate in a name
other than that of the holder of record of the applicable Warrants.
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(b) Indemnification. Whether or not the transactions contemplated
by this Agreement are consummated, Holdings and the Company jointly and
severally agree to indemnify and hold harmless each Purchaser and each holder of
a Note, Warrant or Share (including, without limitation, any of such Purchaser's
or holder's affiliated companies) and any of such Purchaser's or holder's
directors, officers, employees or agents and any person controlling (within the
meaning of Section 20(a) of the Securities Exchange Act) such Purchaser or
holder or any of its affiliated companies (collectively, the "Indemnified
persons") from and against any and all losses, claims, damages, liabilities,
securities law penalties and expenses whatsoever (including, but not limited to,
any and all reasonable fees and expenses whatsoever incurred by an Indemnified
person and its attorneys in investigating, preparing for, defending against,
acting as a witness, providing evidence, producing documents or taking any other
action in respect of any litigation or proceeding, commenced or threatened, or
any claim whatsoever) (collectively, the "Losses") arising out of or in
connection with the Loan Documents, other than to the extent Losses result from
the gross negligence or wilful misconduct of the Indemnified person or the
breach of any covenant in the Loan Documents by the Indemnified person. The
foregoing indemnity shall be in addition to any other rights which the
Indemnified persons may have against Holdings and the Company otherwise than
under this paragraph (b). If a court shall hold for any reason that the
preceding indemnification is unavailable to any Indemnified person as to any
Loss for which it would be available if enforceable in accordance with its
terms, Holdings and the Company, on the one hand, and the Indemnified person, on
the other hand, agree to contribute to such Loss in such proportion as is
appropriate to reflect the relative benefits and the relative fault of Holdings
and the Company, on the one hand, and of the Indemnified person, on the other
hand, in connection with the statements, actions or omissions which result in
such Loss, as well as any other relevant equitable considerations.
If any Indemnified person is entitled to indemnification hereunder,
such Indemnified person shall give prompt notice to the Company of any claim or
of the commencement of any proceeding with respect to which such Indemnified
person seeks indemnification pursuant hereto and of which such Indemnified
person knew or reasonably should have known; provided, however, that the failure
so to notify the Company shall not relieve Holdings or the Company from any
obligation or liability except to the extent that the amount owed by Holdings
and the Company has been increased by such failure. Holdings and the Company
shall have the right, exercisable by giving written notice to an Indemnified
person within 20 Business Days after receipt of written notice from such
Indemnified person of such claim or proceeding, to assume, at their expense, the
defense of any such claim or proceeding with counsel reasonably satisfactory to
the Indemnified Person (taking into account, among other factors, any potential
exposure of the Indemnified person to criminal liability); provided, however,
that an Indemnified person shall have the right to employ separate counsel in
any such claim or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
person unless: (1) Holdings or the Company agrees to pay such fees and expenses;
(2) Holdings and the Company fail promptly to assume, or to diligently pursue,
the defense of such claim or proceeding; (3) the named parties to any such claim
or proceeding (including any impleaded parties) include both such Indemnified
person and one or more of Holdings, the Company or an Affiliate of Holdings or
the Company, and such Indemnified person shall have been advised by counsel that
there may be one or more material
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defenses available to such Indemnified person which are different from or
additional to those available to Holdings, the Company or such Affiliate; or (4)
an Event of Default is continuing (in which case if such Indemnified person
notifies Holdings and the Company in writing that it elects to employ separate
counsel at the expense of Holdings and the Company, Holdings and the Company
shall not have the right to assume the defense thereof, it being understood,
however, that Holdings and the Company shall not, in connection with any one
such claim or proceeding or separate but substantially similar or related claims
or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for all such Indemnified persons). Whether or not such defense is assumed
by Holdings and the Company, no Indemnified person will be subject to any
liability for any settlement made without its consent (but such consent will not
be unreasonably withheld or delayed).
SECTION 19. HOME OFFICE PAYMENTS
As long as a Purchaser or any payee named in the Notes delivered to
a Purchaser on the Closing Date, or any institutional holder which is a direct
or indirect transferee from such Purchaser or such payee, shall be the holder of
any Note, the Company will make payments (whether at scheduled maturity or at a
date fixed for prepayment or upon acceleration or otherwise) of principal,
interest and premium, if any, (i) by check payable to the order of such
Purchaser or such other holder, as the case may be, duly mailed or delivered to
such Purchaser at its address specified in Exhibit A, or at such other address
as such Purchaser or such other holder may designate in writing, or (ii) if
requested by such Purchaser or such other holder, as the case may be, by wire
transfer to such Purchaser's or such other holder's (or its nominee's) account
at any bank or trust company in the United States, notwithstanding any contrary
provision herein or in any Note with respect to the place of payment. IF A
PURCHASER HAS PROVIDED AN ADDRESS ON EXHIBIT A HERETO FOR PAYMENTS BY WIRE
TRANSFER, THEN SUCH PURCHASER SHALL BE DEEMED TO HAVE REQUESTED WIRE TRANSFER
PAYMENTS UNDER THE PRECEDING CLAUSE (ii). All such payments shall be made in
federal or other immediately available funds and shall arrive by 11:00 a.m.
local time at the place of payment on the day when due.
SECTION 20. NOTICES
Unless otherwise expressly specified or permitted by the terms
hereof or thereof, all notices, requests, demands, consents and other
communications hereunder or under the other Loan Documents shall be in writing
and shall be delivered by hand or shall be sent by telex or telecopy (confirmed
by registered, certified or overnight mail or courier, postage and delivery
charges prepaid), to the following addresses:
(a) if to any Purchaser or the Agent, at such Purchaser's address
as set forth in Exhibit A, or at such other address as may have been furnished
to the Company by such Purchaser in writing; or
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(b) if to any other holder of a Note, Warrant or Share, at such
address as the payee or registered holder thereof shall have designated to the
Company in writing; or
(c) if to the Company or Holdings, at Xxx Xxxx Xxxxxx, Xxxx
Xxxxxx, Xxx Xxxx 00000 (telecopier: (000) 000-0000), Attention: Xxxxxxx X.
Xxxxxxx, or at such other address as may have been furnished in writing by the
Company or Holdings to the Purchasers, the Agent and to the other holders of
Notes, Warrants and Shares.
Whenever any notice is required to be given hereunder, such notice shall be
deemed given and such requirement satisfied only when such notice is delivered
or, if sent by telex or telecopier, when received, unless otherwise expressly
specified or permitted by the terms hereof.
SECTION 21. MISCELLANEOUS
21.1. Entire Agreement. The Loan Documents, together with any
further agreements entered into by the Purchasers, on the one hand, and Holdings
or the Company, on the other hand, at the Closing, contain the entire agreement
between the Purchasers, the Agent, the Company and Holdings, and supersede any
prior oral or written agreements, commitments, terms or understandings regarding
the subject matter hereof and thereof.
21.2. Survival. All agreements, representations and warranties
contained in the Loan Documents or any document or certificate delivered
pursuant hereto or thereto shall survive, and shall continue in effect
following, the execution and delivery of such Loan Documents, the closings
hereunder and thereunder, any investigation at any time made by the Purchasers,
the Agent or on their behalf or by any other person, the issuance, sale and
delivery of the Notes and the Warrants, any disposition thereof and any payment
or cancellation of the Notes, and any exercise of the Warrants; provided, that
Sections 4 (other than Section 4.1, 4.2, 4.18 and 4.27 thereof), 5, 6, 7 (other
than Sections 7.1, 7.7, 7.8, 7.9, 7.12, 7.13, 7.14, 7.15, 7.16, 7.19, 7.23, 7.27
and 7.30), 8 (other than Section 8.7), 9, 10, 14 and 15 shall terminate upon the
payment of all outstanding Notes. All statements contained in any certificate or
other document delivered by or on behalf of Holdings or the Company pursuant
hereto shall constitute representations and warranties by Holdings and the
Company hereunder.
21.3. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument, and all signatures need not appear on any one
counterpart.
21.4. Headings. The headings and captions in this Agreement and the
table of contents are for convenience of reference only and shall not define,
limit or otherwise affect any of the terms or provisions hereof.
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21.5. Binding Effect and Assignment. (a) The terms of this Agreement
shall be binding upon, and inure to the benefit of, the parties and their
respective successors and permitted assigns whether so expressed or not.
(b) Neither Holdings nor the Company may assign any of its
obligations, duties or rights under any of the Loan Documents.
(c) In addition to any assignment by operation of law, each
Purchaser may assign, in whole or in part, any or all of its rights and
obligations under any of the Loan Documents to any transferee of any or all of
its Notes, Warrants or Shares, subject to the terms of Section 16 hereof and the
Warrant certificates, and (unless this Agreement or such assignment expressly
provides otherwise) any such assignment shall not diminish the rights such
Purchaser would otherwise have under this Agreement or with respect to any
remaining Notes, Warrants or Shares held by the Purchaser.
21.6. Severability. Any provision of any Loan Document which 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 thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforce
able such provision in any other jurisdiction. To the extent permitted by
applicable law, the parties hereby waive any provision of law which may render
any provision hereof prohibited or unenforceable in any respect.
21.7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York (other than any
conflict of laws rule which might result in the application of the laws of any
other jurisdiction).
21.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH OF
HOLDINGS AND THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO THE ELECTION OF THE PURCHASERS OR ANY OTHER
HOLDER OF NOTES, ALL ACTIONS OR PROCEEDINGS RELATING TO THE LOAN DOCUMENTS MAY
BE LITIGATED IN SUCH COURTS. EACH OF HOLDINGS AND THE COMPANY ACCEPTS GENERALLY
AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LOAN DOCUMENTS. EACH OF
HOLDINGS AND THE COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL AT ITS
ADDRESS PROVIDED IN SECTION 20 HEREOF SHALL CONSTITUTE SUFFICIENT NOTICE AND
SERVICE OF PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY PURCHASER OR
ANY OTHER HOLDER
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OF NOTES, WARRANTS OR SHARES TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS
AGAINST HOLDINGS OR THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
21.9. WAIVER OF JURY TRIAL. EACH OF HOLDINGS, THE COMPANY AND THE
PURCHASERS HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY LOAN DOCUMENT, OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. EACH OF HOLDINGS, THE
COMPANY AND THE PURCHASERS ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE PURCHASERS. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL- ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF HOLDINGS,
THE COMPANY AND THE PURCHASERS FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
SUPPLEMENTS OR OTHER MODIFICATIONS TO (OR ASSIGNMENTS OF) ANY LOAN DOCUMENT. IN
THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL (WITHOUT A JURY) BY THE COURT.
21.10. Changes in GAAP. If any changes in GAAP are hereafter
required or permitted and are adopted by Holdings or the Company with the
agreement of its independent certified public accountants and such changes
result in a change in the method of calculation of any of the financial
covenants, restrictions or standards herein or in the related definitions or
terms used therein ("Accounting Changes"), the parties hereto agree to enter
into negotiations, in good faith, in order to amend such provisions in a credit
neutral manner so as to reflect equitably such changes with the desired result
that the criteria for evaluating the Company's financial condition shall be the
same after such changes as if such changes had not been made; provided, however,
that until such provisions are amended in a manner reasonably satisfactory to
the Majority Noteholders, no Accounting Change shall be given effect in such
calculations and all financial statements and reports required to be delivered
hereunder shall be prepared in accordance with GAAP without taking into account
such Accounting Change. In the event such amendment is entered into, all
references in this Agreement to GAAP shall mean generally accepted accounting
principles as of the date of such amendment.
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21.11. Confidentiality. Each of the Purchasers, severally and not
jointly, agrees that it shall not disclose to any other person, without the
prior written consent of the Company, any information with respect to Holdings,
the Company or their respective Subsidiaries which is furnished pursuant to this
Agreement ("Confidential Information"), except that each Purchaser may disclose
any such Confidential Information (a) as has become generally available to the
public (other than by a breach of this Section 21.11), (b) as may be required by
any appropriate report, statement or testimony submitted to any municipal, state
or federal Governmental Authority having or claiming to have jurisdiction over
such Purchaser, Holdings, the Company or any such Subsidiary, (c) as may be
required or appropriate in response to any summons or subpoena or any law,
order, regulation or ruling applicable to such Purchaser, (d) to any Affiliate
of such Purchaser as may be desirable in connection with or such Purchaser's
internal monitoring and reporting of matters related to the Loan Documents and
(e) to any prospective transferee in connection with any contemplated transfer
permitted under the Loan Documents provided that prior to delivery of any
Confidential Information to a prospective transferee, such Purchaser shall
execute an agreement with such person containing provisions substantially
identical to those contained in this Section 21.11. Each Purchaser will use its
best efforts to give the Company prior notice before complying with any subpoena
or summons requesting the disclosure of Confidential Information.
21.12. Waiver of Bond. The Company and Holdings waive the posting of
any bond otherwise required of Agent or any Purchaser in connection with any
judicial process or proceeding to enforce any judgment or other court order
entered in favor of the Agent or Purchaser, or to enforce by specific
performance, temporary restraining order, or preliminary or permanent
injunction, in connection with any Loan Document.
21.13. Advice of Counsel. Each of the Company and Holdings
represents and warrants that it has consulted with its legal counsel regarding
all waivers under any Loan Document, including without limitation those under
Sections 21.8, 21.9 and 21.12 hereof, that it believes that it fully understands
all rights that it is waiving and the effect of such waivers, that it assumes
the risk of any misunderstanding that it may have regarding any of the
foregoing, and that it intends that such waivers shall be a material inducement
to the Purchasers to purchase the Notes.
SECTION 22. THE AGENT
22.1. Appointment. Each Purchaser hereby irrevocably designates and
appoints the Agent as the agent of such Purchaser under this Agreement and the
Loan Documents, and each such Purchaser irrevocably authorizes the Agent, as the
agent for such Purchaser, to take such action on its behalf under the provisions
of this Agreement and the Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the Loan Documents, together with such other powers as are
reasonably incidental thereto.
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22.2. Application of Proceeds of the Collateral. All collateral
under the Collateral Documents shall be held or administered by the Agent for
the ratable benefit of the Purchasers. Any proceeds received by the Agent from
the foreclosure, sale, lease or other disposition of any of the collateral and
any other proceeds received pursuant to the terms of the Loan Documents shall be
applied, first, to the cost of any such foreclosure, sale, lease or other
disposition and, second, to the payment in full of the remaining Company's
Obligations pro rata in proportion to the amount of the Company's Obligations
owed to each Person.
22.3. Delegation of Duties. The Agent may execute any of its duties
under this Agreement by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
22.4. Reliance by Agent. The Agent may deem and treat the registered
owner of any Note as the owner thereof for all purposes. The Agent shall be
fully justified in failing or refusing to take any action under this Agreement
unless it shall first receive such advice or concurrence of the Majority
Noteholders as it deems appropriate. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement, the
Notes or any Loan Document in accordance with a request of the Majority
Noteholders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Purchasers and all future holders of the
Notes.
22.5. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Potential Default or Event of
Default hereunder unless the Agent has received notice from the Company or
Holdings referring to this Agreement, describing such Potential Default or Event
of Default and stating that such notice is a "notice of default". The Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Potential Default or Event of Default as it shall
deem advisable and in the best interests of the Purchasers.
22.6. Agent in Its Individual Capacity. The Agent and its Affiliates
may make loans to and generally engage in any kind of business with the Company
or Holdings as though the Agent were not the Agent hereunder. With respect to
any Note issued to it, the Agent shall have the same rights and powers under
this Agreement as any Purchaser and may exercise the same as though it were not
the Agent, and the terms "Purchaser" and "Purchasers" shall include the Agent in
its individual capacity.
22.7. Successor Agent. The Agent may resign as Agent upon 20 days'
notice to the Purchasers. If the Agent shall resign as Agent under this
Agreement and the other Loan Documents, then the Purchasers on whose behalf such
Agent is acting shall appoint a successor agent for the Purchasers, whereupon
such successor agent shall succeed to the rights, powers and duties of the
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to
-75-
77
this Agreement or any Loan Document or any holders of the Notes. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Section
22 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement and the other Loan Documents. The
Agent shall use its best efforts to notify the Company of any such resignation;
provided, however, neither the Agent nor the Purchasers shall be held liable in
any respect for the failure to provide such notice; and further provided,
however, that until the Company receives notice of the Agent's resignation and
of the appointment of a successor agent, the Company shall be entitled to rely
upon the Agent as the Agent hereunder.
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78
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
DECORA, INCORPORATED
By: _____________________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President, Administration
DECORA INDUSTRIES, INC.
By: _____________________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President,
Administration and Finance
State Street Bank and Trust Company, as
Trustee for THE TEXTRON MASTER TRUST
By: _____________________________________
Name:
Title:
XXXXXXXX STREET CAPITAL ADVISORS, L.L.C.,
as Agent
By: _____________________________________
Name: Xxxx X. Xxxxxx
Title: Managing Principal
-77-
79
EXHIBIT A
Number of
Common
Shares, Number of
Subject to Preferred
Adjustment, Shares, Subject % of
Principal Initially to Adjustment, Contingent
Amount of Covered By Initially Covered Common
Name and Address of Purchaser Notes to be Common by Preferred Warrants
----------------------------- Purchased Warrants Warrants Issued
----------- ----------- ----------------- ----------
1. State Street Bank and Trust Company as
Trustee for the Textron Master Trust $18,000,000 2,136,534 69,557 100%
(a) address for communications:
State Street Bank and Trust
Company as Trustee for the
Textron Master Trust
One Enterprise Drive
Master Trust-W6C
North Quincy, MA 02171
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Xxxxxxxx Street Capital
Advisors, L.L.C.
Attn: Xxxx X. Xxxxxx
Xxx Xxxxxxxx Xxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) address for payments, by wire
transfer:
State Street Bank and Trust
Company
ABA No. 000000000
Account Name: Textron/TX8A
Account Number: 00000000
Attention: Xxxxxx X. Xxxxxx
(providing sufficient information
with such wire transfer to identify
the source and application of such
funds)
(c) Tax Identification Number:
00-0000000
80
TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF NOTES AND WARRANTS.......................................1
SECTION 2. THE CLOSING...................................................................3
SECTION 3. DEFINITIONS...................................................................4
SECTION 4. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE
COMPANY......................................................................19
4.1. Corporate Existence; Compliance with Law.....................................19
4.2. Corporate Power; Authorization; Enforceable Obligations......................19
4.3. Stock Ownership..............................................................20
4.4. Subsidiaries; Joint Ventures; Indebtedness...................................20
4.5. Business.....................................................................20
4.6. Financial Statements and Projections.........................................20
4.7. Material Adverse Change......................................................21
4.8. Ownership of Property; Liens.................................................22
4.9. Restrictions; No Default.....................................................22
4.10. Status Under Certain Statutes................................................23
4.11. Labor Matters................................................................23
4.12. Taxes........................................................................24
4.13. ERISA........................................................................25
4.14. No Litigation................................................................26
4.15. Brokers......................................................................26
4.16. Employment Matters...........................................................26
4.17. Patents, Trademarks, Copyrights and Licenses.................................26
4.18. Full Disclosure..............................................................27
4.19. Offering of Securities.......................................................27
4.20. Holdings Orders..............................................................27
4.21. Insurance Policies...........................................................27
4.22. No Foreign Assets Control Regulation Violation...............................27
4.23. Outstanding Securities.......................................................27
4.24. No Burdensome Agreements.....................................................28
4.25. Solvency.....................................................................28
4.26. Americans with Disabilities Act of 1990......................................28
4.27. Additional Representations with Respect to Holdings..........................29
SECTION 5. REPRESENTATIONS OF THE PURCHASERS............................................30
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SECTION 6. PREPAYMENTS AND REPAYMENTS...................................................32
6.1. Prepayment at Holder's Option................................................32
6.2. Optional Prepayments.........................................................32
6.3. Obligations Unconditional....................................................33
SECTION 7. AFFIRMATIVE COVENANTS........................................................33
7.1. Use of Proceeds; Mandatory Payment...........................................33
7.2. Taxes........................................................................34
7.3. Existence....................................................................34
7.4. Financial Covenants..........................................................34
7.5. Insurance....................................................................36
7.6. General Compliance...........................................................36
7.7. Information..................................................................37
7.8. Charter, By-Laws.............................................................37
7.9. Inspection...................................................................38
7.10. Event of Default.............................................................38
7.11. Collateral Documents.........................................................38
7.12. Expenses.....................................................................39
7.13. Change in Control Event......................................................39
7.14. Public Documents; Senior Lender Communications...............................39
7.15. Communication with Accountants...............................................40
7.16. Inspection...................................................................40
7.17. Maintenance of Intellectual Property and Business............................40
7.18. Books and Records............................................................40
7.19. Office for Payment, Exchange and Registration................................41
7.20. Notices......................................................................41
7.21. No Impairment................................................................41
7.22. Agreements...................................................................42
7.23. Board Seat...................................................................42
7.24. Taxes........................................................................42
7.25. Payment of Dividends by Subsidiaries.........................................44
7.26. Further Assurances...........................................................45
7.27. Delivery of Information for Rule 144A Transactions...........................45
7.28. Environmental Reports........................................................45
7.29. Conny Stock..................................................................45
7.30. Stockholders Meeting; Restated Certificate and Bylaws........................45
SECTION 8. NEGATIVE COVENANTS...........................................................46
8.1. Indebtedness.................................................................46
8.2. Management Fees..............................................................46
8.3. Upstream Funding.............................................................46
8.4. Guarantees...................................................................47
8.5. Liens........................................................................47
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82
8.6. Merger; Sales................................................................47
8.7. Authorization or Issuance of Capital Stock...................................47
8.8. Restricted Payments..........................................................48
8.9. Affiliate Transactions.......................................................48
8.10. ERISA........................................................................48
8.11. Amendments to Agreements.....................................................49
8.12. Sale-Leasebacks..............................................................49
8.13. Cancellation of Indebtedness.................................................49
8.14. Amendments to Indebtedness...................................................49
8.15. Fiscal Year..................................................................49
8.16. Private Placement Status.....................................................49
SECTION 9. SUBORDINATION................................................................50
SECTION 10. CONDITIONS TO PURCHASERS' OBLIGATIONS........................................50
10.1. Accuracy of Representations and Warranties...................................50
10.2. Compliance with Agreements; No Defaults......................................50
10.3. Officers' Certificates.......................................................50
10.4. Proceedings..................................................................50
10.5. Legality; Governmental and Other Authorization...............................50
10.6. Time of Purchase.............................................................51
10.7. No Change in Law, etc........................................................51
10.8. Completion of Acquisition Transactions.......................................51
10.9. Environmental Report.........................................................51
10.10. Fees.........................................................................51
10.11. No Material Adverse Change...................................................51
10.12. Certain Loan Documents.......................................................51
10.13. Senior Loan Documents........................................................51
10.14. Intercreditor Agreement......................................................51
10.15. Searches.....................................................................52
10.16. Material Agreements..........................................................52
10.17. Pay-off Letters and Releases.................................................52
10.18. Acquisition Documents........................................................52
10.19. Insurance....................................................................52
10.20. Solvency Certificate.........................................................52
10.21. Opinions of Counsel..........................................................52
10.22. Other Documents and Opinions.................................................52
SECTION 11. AMENDMENT AND WAIVER.........................................................53
SECTION 12. EXCHANGE OF NOTES AND WARRANTS; CANCELLATION OF
SURRENDERED NOTES.....................................................54
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SECTION 13. REGISTRATION; REPLACEMENT OF NOTES AND WARRANTS..............................55
SECTION 14. DEFAULTS.....................................................................56
SECTION 15. ADDITIONAL REMEDIES..........................................................59
SECTION 16. RESTRICTIONS ON TRANSFER.....................................................60
SECTION 17. REGISTRATION RIGHTS..........................................................60
17.1. Requested Registration.......................................................60
17.2. Incidental Registration......................................................61
17.3. Underwriter Cutbacks.........................................................63
17.4. Right to Review the Registration Statement...................................63
17.5. Registration Procedures......................................................64
17.6. Indemnity....................................................................65
17.7. Expenses.....................................................................67
17.8. Lock-Ups.....................................................................68
17.9. Other Obligations of Holdings................................................68
17.10. Transferability..............................................................68
SECTION 18. EXPENSES; INDEMNIFICATION....................................................68
(a) Expenses; Taxes........................................................68
(b) Indemnification........................................................69
SECTION 19. HOME OFFICE PAYMENTS.........................................................70
SECTION 20. NOTICES......................................................................71
SECTION 21. MISCELLANEOUS................................................................71
21.1. Entire Agreement.............................................................71
21.2. Survival.....................................................................71
21.3. Counterparts.................................................................72
21.4. Headings.....................................................................72
21.5. Binding Effect and Assignment................................................72
21.6. Severability.................................................................72
21.7. Governing Law................................................................72
21.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS...............................72
21.9. WAIVER OF JURY TRIAL.........................................................73
21.10. Changes in GAAP..............................................................73
21.11. Confidentiality..............................................................74
21.12. Waiver of Bond...............................................................74
21.13. Advice of Counsel............................................................74
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SECTION 22. THE AGENT....................................................................75
22.1. Appointment..................................................................75
22.2. Application of Proceeds of the Collateral....................................75
22.3. Delegation of Duties.........................................................75
22.4. Reliance by Agent............................................................75
22.5. Notice of Default............................................................75
22.6. Agent in Its Individual Capacity.............................................75
22.7. Successor Agent..............................................................76
EXHIBITS
Exhibit A - Purchasers' Note, Common Stock and Warrant Amounts Purchasers'
Addresses for Notices and Payment Instructions
Exhibit B - Form of Note
Exhibit C - Form of Common Warrant Certificate
Exhibit D - Form of Preferred Warrant Certificate
Exhibit E - Form of Contingent Common Warrant Certificate
Exhibit F - Terms of Series A Preferred
Exhibit G - Form of Guaranty
Exhibit H - Form of Subordination Agreement
Exhibit I - Form of Certificate Regarding United States Withholding Tax
SCHEDULES
Schedule 4.1 - Certain Licenses, Permits, etc.
Schedule 4.2 - Dilution
Schedule 4.4 - Outstanding Indebtedness and Subsidiaries
Schedule 4.6(a) - Financial Statements
Schedule 4.6(b) - Projections
Schedule 4.7 - Certain Dividends, Distributions, etc.
Schedule 4.8 - Ownership of Property; Liens
Schedule 4.9 - Third Party Defaults
Schedule 4.11 - Certain Labor Matters
Schedule 4.12 - Tax Matters
Schedule 4.13 - ERISA Matters
Schedule 4.14 - Litigation (Company)
Schedule 4.15 - Brokers
Schedule 4.16 - Employment Agreements, etc.
Schedule 4.17 - Intellectual Property
Schedule 4.18 - Certain Material Facts
Schedule 4.21 - Insurance Policies
Schedule 4.23 - Registration Statements; Registration Rights
Schedule 4.27(d) - Holdings Common Stock
Schedule 5(b) - Employee Benefit Plans
v
