Exhibit 99.2
__________________________________________________
__________________________________________________
FTI Consulting, Inc.
$30,000,000
INVESTMENT AND LOAN AGREEMENT
February, 4 2000
Financing provided by
ALLIED CAPITAL CORPORATION
NEWCOURT COMMERCIAL FINANCE CORPORATION
RELIASTAR FINANCIAL CORP.
and
SUNTRUST BANKS, INC.
TABLE OF CONTENTS
ARTICLE 1 - LOAN............................................................. 3
Section 1.1 Funding...................................................... 3
Section 1.2 Accession by ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLC........................... 3
Section 1.3 Senior Debt.................................................. 3
Section 1.4 No Preference Among Holders.................................. 3
ARTICLE 2 - EQUITY........................................................... 3
Section 2.1 Series A Stock Purchase Warrants............................. 3
Section 2.2 Conditional Warrants......................................... 4
Section 2.3 Valuation of Warrants........................................ 4
Section 2.4 Ceiling on Adjustments to Numbers of Warrant Shares.......... 4
ARTICLE 3 - INVESTOR EXIT.................................................... 4
Section 3.1 Demand Registration Rights................................... 4
Section 3.2 Piggy-Back Registration...................................... 6
Section 3.3 Certain Obligations of Holders in a Registered Offering...... 7
Section 3.4 Indemnification and Contribution............................. 7
Section 3.5 Underwritten Offerings....................................... 19
Section 3.6 Holders' Rights to Most Favorable Registration Rights........ 10
Section 3.7 "Put" Rights................................................. 10
ARTICLE 4 - UNDERTAKINGS BY THE PRINCIPALS................................... 13
Section 4.1 Commitment................................................... 13
Section 4.2 Non-Competition; Non-Disclosure.............................. 13
Section 4.3 Continued Equity Ownership................................... 13
Section 4.4 Access to Information........................................ 14
Section 4.5 Election of Director......................................... 14
Section 4.6 Termination of Certain Undertakings of the Principals........ 14
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES................................... 14
Section 5.1 Organization; Power and Authority............................ 14
Section 5.2 Authorization, Etc........................................... 15
Section 5.3 Disclosure................................................... 15
Section 5.4 Affiliates................................................... 15
Section 5.5 Financial Statements......................................... 15
Section 5.6 Compliance with Laws, Other Instruments, Etc................. 16
Section 5.7 Governmental Authorizations, Etc............................. 16
Section 5.8 Litigation; Observance of Agreements, Statutes and Orders.... 16
Section 5.9 Taxes........................................................ 16
Section 5.10 Title to Property; Leases.................................... 17
Section 5.11 Licenses, Permits, Etc....................................... 17
Section 5.12 Compliance with ERISA........................................ 18
Section 5.13 Private Offering by the Company.............................. 19
Section 5.14 Use of Proceeds; Margin Regulations.......................... 19
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Section 5.15 Existing Debt; Future Liens; Subordination of Seller Notes... 20
Section 5.16 Foreign Assets Control Regulations, Etc...................... 20
Section 5.17 Certain Statutory Matters.................................... 20
Section 5.18 Environmental Matters........................................ 21
Section 5.19 [Intentionally Omitted]...................................... 21
Section 5.20 Insurance.................................................... 21
Section 5.21 Patents, Trademarks and Copyrights........................... 21
Section 5.22 Solvency..................................................... 22
Section 5.23 Material Contracts........................................... 22
Section 5.24 Year 2000 Compliance......................................... 22
Section 5.25 Additional Representations and Warranties.................... 22
Section 5.26 Management History........................................... 22
Section 5.27 No Side Agreements........................................... 22
Section 5.28 Capital Structure............................................ 23
Section 5.29 Collective Bargaining........................................ 23
Section 5.30 Employee Matters............................................. 23
Section 5.31 No Competing Business Interests.............................. 23
Section 5.32 No Conflicting Non-Competition Agreements.................... 23
Section 5.33 Acquisition Agreement........................................ 24
Section 5.34 Senior Debt Documents........................................ 24
ARTICLE 6 - REPORTING COVENANTS.............................................. 24
Section 6.1 Financial and Business Information........................... 24
Section 6.2 Officer's Certificate........................................ 28
Section 6.3 Inspection................................................... 28
ARTICLE 7 - AFFIRMATIVE COVENANTS............................................ 28
Section 7.1 Compliance with Law.......................................... 28
Section 7.2 Insurance.................................................... 29
Section 7.3 Maintenance of Properties, Environmental Matters, Etc........ 30
Section 7.4 Payment of Taxes and Claims.................................. 31
Section 7.5 Corporate Existence, Etc..................................... 31
Section 7.6 Subsidiaries................................................. 31
Section 7.7 Taxes........................................................ 31
Section 7.8 [Intentionally Omitted]...................................... 33
Section 7.9 Pro Forma Balance Sheet...................................... 33
Section 7.10 Use of Proceeds.............................................. 33
Section 7.11 Year 2000 Problem............................................ 33
Section 7.12 Board Meetings and Representation............................ 34
Section 7.13 First Refusal for Future Financings.......................... 34
Section 7.14 Payments and Other Debts..................................... 34
Section 7.15 Information Requests......................................... 34
Section 7.16 Further Assurance............................................ 34
Section 7.17 Payments Under Special Indemnity of P&M...................... 35
ARTICLE 8 - NEGATIVE COVENANTS............................................... 35
Section 8.1 Coverage Ratios.............................................. 35
Section 8.2 Current Ratio................................................ 36
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Section 8.3 Minimum EBITDA............................................... 36
Section 8.4 Debt to Cash Flow Ratio...................................... 36
Section 8.5 Lease Rentals................................................ 37
Section 8.6 Maximum Executive Compensation............................... 37
Section 8.7 Limitation on Capital Expenditures........................... 37
Section 8.8 Limitations on Debt.......................................... 38
Section 8.9 Limitation on Liens.......................................... 38
Section 8.10 Distributions................................................ 40
Section 8.11 Restricted Investment........................................ 40
Section 8.12 ▇▇▇▇▇▇, Consolidation, Etc................................... 40
Section 8.13 Sale of Assets............................................... 40
Section 8.14 Issuance of Certain Stock.................................... 40
Section 8.15 Sale-and-Leasebacks.......................................... 40
Section 8.16 Prohibition of Change in Fiscal Year......................... 41
Section 8.17 Sale or Discount of Receivables.............................. 41
Section 8.18 [Intentionally Omitted]...................................... 41
Section 8.19 Partnerships, Joint Ventures and LLC's....................... 41
Section 8.20 Margin Securities............................................ 41
Section 8.21 Payments of Debt............................................. 41
Section 8.22 No Amendment of Articles of Incorporation or By-Laws......... 41
Section 8.23 Guaranties................................................... 41
Section 8.24 Amendments to Other Documents................................ 41
Section 8.25 Transactions with Affiliates................................. 42
Section 8.26 Line of Business............................................. 42
Section 8.27 Termination of Pension Plans................................. 42
Section 8.28 Intentionally Omitted........................................ 42
Section 8.29 Certain Compensation......................................... 42
ARTICLE 9 - DEFAULT.......................................................... 43
Section 9.1 Events of Default............................................ 43
Section 9.2 Remedies..................................................... 45
ARTICLE 10 - CONDITIONS TO CLOSING........................................... 45
Section 10.1 Issuance of Debentures and Warrants.......................... 45
Section 10.2 Transaction Documents........................................ 45
Section 10.3 Certified Documents.......................................... 45
Section 10.4 Representations and Warranties; No Default; No Adverse Change 46
Section 10.5 Solvency Opinions............................................ 46
Section 10.6 Solvency Certificate......................................... 46
Section 10.7 Opinions of Counsel.......................................... 46
Section 10.8 Transaction Permitted by Applicable Laws; No Injunction...... 46
Section 10.9 Compliance with Securities Laws.............................. 46
Section 10.10 Approvals and Consents....................................... 47
Section 10.11 Acquisition Documents........................................ 47
Section 10.12 Credit Agreement............................................. 47
Section 10.13 Subordination Agreement...................................... 47
Section 10.14 Acquisition.................................................. 47
Section 10.15 ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ Employment Agreements..................... 47
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Section 10.16 Seller Note Exchange or Repayment............................ 47
Section 10.17 Pro Forma Financial Information.............................. 47
Section 10.18 Use of Proceeds.............................................. 47
Section 10.19 Expenses..................................................... 48
Section 10.20 Fees......................................................... 48
Section 10.21 Insurance.................................................... 48
Section 10.22 Due Diligence................................................ 48
ARTICLE 11 - FEES AND COSTS.................................................. 48
ARTICLE 12 - INDEMNIFICATION. ENVIRONMENTAL LIABILITY....................... 49
ARTICLE 13 - REMEDIES........................................................ 50
Section 13.1 Cumulation. Receivership.................................... 50
Section 13.2 No Implied Waiver............................................ 50
ARTICLE 14 - PARTIES; TRANSFERS OF DEBENTURES AND WARRANTS; RIGHTS OF
MAJORITY HOLDERS................................................ 51
Section 14.1 Parties...................................................... 51
Section 14.2 Transfers of Debentures and Warrants......................... 51
Section 14.3 Rights of Majority Holders................................... 51
ARTICLE 15 - NOTICE.......................................................... 51
ARTICLE 16 - RELATIONSHIP OF THE PARTIES..................................... 53
ARTICLE 17 - REPRESENTATION OF EACH HOLDER................................... 54
ARTICLE 18 - EXPIRATION OR SUSPENSION OF COVENANTS........................... 54
ARTICLE 19 - CONTROLLING LAW; NON-EXCLUSIVE VENUE AND
JURISDICTION; SERVICE OF PROCESS................................ 54
ARTICLE 20 - WAIVER OF TRIAL BY JURY......................................... 55
ARTICLE 21 - CAPTIONS; SEVERANCE............................................. 55
ARTICLE 22 - COUNTERPARTS; ENTIRE AGREEMENT.................................. 55
ARTICLE 23 - DEFINITIONS AND RULES OF CONSTRUCTION........................... 56
Section 23.1 Definitions.................................................. 56
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ATTACHMENTS TO INVESTMENT AND LOAN AGREEMENT
Schedule 1.01 Allocation Schedule
Exhibit 1.03 Subordination Agreement
Exhibit 4.02 Employment Agreements of Principals
Schedule 4.03(b) Schedule of Stock Option Plans
Exhibit 5.01 Organization Documents
Exhibit 5.02 Enabling Resolutions
Exhibit 5.03A Confidential Information Memorandum of November 1999
Schedule 5.03B Schedule of Material Adverse Changes
Schedule 5.04 Schedule of Affiliates
Exhibit 5.05 Financial Statements
Schedule 5.06 Schedule of Material Agreements
Schedule 5.14 Use of Proceeds
Schedule 5.15 Outstanding Debt
Exhibit 5.17A SBA Size Status Declaration
Exhibit 5.17B SBA Assurance of Compliance for Non-Discrimination
Exhibit 5.17C SBA Portfolio Financing Report
Schedule 5.21 Schedule of Patents, Trademarks and Copyrights
Schedule 5.27 Schedule of Side Agreements
Schedule 5.28 Capital Structure
Schedule 5.29 Collective Bargaining Matters
Schedule 5.30 Schedule of Employment, Compensation and Related Agreements
Exhibit 5.33 Acquisition Agreement
Exhibit 5.34 Material Senior Debt Documents
Schedule 8.06 Schedule of Compensation Plans
Schedule 8.10 Schedule of Earn-Out Agreements
Exhibit 10.15 ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ Employment Agreements
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THIS INVESTMENT AND LOAN AGREEMENT is made by and among (i) FTI
Consulting, Inc., a Maryland corporation (collectively with successors and
assigns, the "Parent"), (ii) Teklicon, Inc., a California corporation
("Teklicon"), L.W.G., Inc., an Illinois corporation ("L.W.G."), ▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇, Inc., a Virginia corporation ("KK&A"), ▇▇▇▇ Consulting, Inc., a New York
corporation ("▇▇▇▇") S.E.A, Inc., an Ohio corporation ("SEA"), RestorTek, Inc.,
an Illinois corporation ("RestorTek") KCI Management Corp., a New York
corporation ("KCI") and ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLC, a New Jersey limited liability
company ("P&M")(P&M, Teklicon, L.W.G., KK&A, ▇▇▇▇, SEA, RestorTek and KCI,
collectively with successors and assigns the "Subsidiaries", and the
Subsidiaries, collectively with the Parent, the "Companies"; each, a "Company");
(iii) for the limited purposes set forth herein, ▇▇▇▇ ▇. ▇▇▇▇ ▇▇, and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇, each an executive officer of the Parent, ( sometimes hereinafter being
referred to collectively as the "Principals"), (iv) Allied Capital Corporation,
a Maryland corporation (collectively with successors and assigns, "Group 1"),
and (v) Newcourt Commercial Finance Corporation, a Delaware Corporation
("Newcourt"), SunTrust Banks, Inc., a Georgia corporation ("SunTrust") and
ReliaStar Financial Corp., a Delaware corporation ("ReliaStar," and with
SunTrust and Newcourt and their respective successors and assigns, collectively,
"Group 2"; Group 2, collectively with Group 1 and their respective successors
and assigns, the "Holders").
RECITALS
A. Under terms of an LLC Membership Interest Purchase Agreement dated
as of January 31, 2000 (the "Acquisition Agreement") by and among the Parent,
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, the Parent is purchasing all of the
outstanding membership interests of P&M, for $47.5 million in cash and 565,000
shares of the Common Stock of the Parent, plus 250,000 restricted shares of the
Common Stock of the Parent. Such purchase is hereinafter referred to as the
"Acquisition."
B. Under terms of a Credit Agreement dated the date hereof (the
"Credit Agreement"), the Companies are obtaining from Newcourt Commercial
Finance Corporation, an affiliate of The CIT Group, Inc., a Delaware corporation
(collectively with successors and assigns, "NCFC"), as a lender and as Agent and
certain other lenders, a revolving line of credit and two term loans in the
principal amount of Sixty Eight Million Five Hundred Thousand Dollars ($
68,500,000).
C. Also under terms of the letter dated November 10th, 1999, the
Companies propose to issue to Holders certain subordinated debentures, and the
Parent proposes to issue certain warrants to purchase shares of its common
stock, in consideration for a loan (collectively with all modifications,
renewals, extensions and replacements thereof and therefor, the "Loan") to the
Companies in the aggregate principal amount of Thirty Million Dollars
($30,000,000), to provide funds for the Acquisition and to refinance certain
existing debts of the Companies.
D. The Companies and the Holders wish to set out certain agreements
and understandings with respect to the foregoing.
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PROVISIONS
In consideration of the premises and the covenants herein, the undersigned
parties agree as set forth below.
ARTICLE 1
LOAN
Section 1.1 Funding. At Closing (as such term is defined in the definition
section hereof in Article 23, below), each Holder will fund that portion of the
Loan to the Companies set out next to its name on Exhibit 1.01 hereof. The Loan
will be evidenced by, and repaid according to the terms of four(4) subordinated
debentures, one (1) of which will be issued by the Companies to Group 1
(collectively, with all modifications, extensions, renewals and replacements
thereof and therefor, the "Group 1 Debentures"), and three of which will be
issued by the Companies to Group 2 at Closing (with all modifications,
extensions, renewals and replacements thereof and therefor, the "Group 2
Debentures" and, together with the Group 1 Debentures and certain debentures
issuable pursuant to Section 3.7(d) below, the "Debentures"). This Agreement and
the Debentures, collectively with all modifications, extensions, renewals and
replacements thereof and therefor, are sometimes hereinafter referred to as the
"Loan Documents".
Section 1.2 [Intentionally Omitted].
Section 1.3 Senior Debt. The indebtedness under the Debentures and the
Holders' rights herein shall be subordinate to those certain term loans and that
certain revolving line of credit arranged by NCFC, as Agent, made pursuant to
that certain Credit Agreement dated the date hereof among the Companies, such
Agent, and certain other lenders (as amended, refinanced or refunded,
collectively, the "Senior Debt"), according to the terms of a certain
Subordination Agreement attached as Exhibit 1.03 hereto;
Section 1.4 No Preference Among Holders. The Companies shall make no payments
under the Debentures which give preference to one Holder over any other Holder.
In each instance of a payment being made to any Holder pursuant to its
Debenture, proportionate payments shall likewise be made under all other
Debentures as simultaneously as may be practical. If any Holder shall receive
any payment from any Company in respect of its Debenture, in an amount above its
ratable share or otherwise in violation of this Section, that Holder shall
forthwith pay over to the other Holders those sums necessary to restore the
balances of all the Debentures to amounts proportionate to their original face
amounts.
ARTICLE 2
EQUITY
Section 2.1 Series A Stock Purchase Warrants. At Closing, the Parent will
issue and sell, and each Holder will purchase, a Stock Purchase Warrant
denominated Series A (collectively with all modifications, extensions, renewals
and replacements thereof and therefor, the "Series A Warrants"), to purchase
shares of the Parent's common stock which will entitle the Holders to receive
that
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number of shares of the Parent's authorized but unissued common stock which
will provide the Holders, in the aggregate, with Eight and One Half Percent
(8.5%) of the Parent's capital stock calculated on the date of the Closing
subject to reduction pursuant to the Warrant. The aggregate purchase price for
the Series A Warrants shall be One Hundred Dollars ($100), which the Holders
shall pay to the Parent at Closing. The shares of the Parent's common stock are
hereinafter sometimes referred to as "Shares".
Section 2.2 Series B and C Conditional Warrants. At Closing, the Parent will
also issue and sell, and each Holder will purchase, a Stock Purchase Warrant
denominated Series B and a Stock Purchase Warrant denominated Series C
(collectively with all modifications, extensions, renewals and replacements
thereof and therefor, the "Series B Warrants" or the "Series C Warrants," as
applicable) to acquire Shares in certain circumstances set out therein. The
purchase price for the Series B and Series C Warrants shall be One Hundred
Dollars ($100) for each series, which sums the Holders shall pay to the Parent
at Closing.
Section 2.3 Valuation of Warrants. The Holders and the Companies hereby agree
to endeavor in good faith to agree within 45 days after the Closing, on the fair
market value of the Warrants, and to prepare and maintain their books of
account, financial statements and tax returns in a manner consistent therewith,
it being understood that the Companies are required to account for the Warrants
on their financial statements in accordance with GAAP.
Section 2.4 Ceiling on Adjustments to Numbers of Warrant Shares. The
provisions in the Series A Warrants for adjustments to the aggregate numbers of
Warrant Shares (as defined therein) from time to time shall in no case ever
increase the number of Warrant Shares above 19.9% of the number of shares of
Parent's Common Stock actually outstanding at Closing, subject in all cases to
adjustment as appropriate to reflect stock splits, reverse splits, stock
dividends and similar capital events.
ARTICLE 3
INVESTOR EXIT
Section 3.1 Demand Registration Rights. At any time, if Holders owning 20% or
more of the outstanding Warrants (determined according to the number of Shares
issuable thereunder) and Shares shall make a written request to the Parent, the
Parent shall cause to be filed with the Securities and Exchange Commission (the
"Commission") a registration statement meeting the requirements of the
Securities Act (a "Demand Registration").
(a) Each Holder shall be entitled to have included therein all or
such number of such ▇▇▇▇▇▇'s Shares as the Holder shall request in writing up to
the number of Shares for which such ▇▇▇▇▇▇'s Warrant is then exercisable;
provided, however:
(i) that the Parent shall be entitled to postpone for up to
ninety (90) days in any 365 day period the filing of any Demand Registration
statement otherwise required to be prepared and filed under this Section 3.1 if
the Board of Directors of the Parent shall determine in its good faith
reasonable judgment, that such Demand Registration would materially interfere
with, or
4
require premature disclosure of, any financing, acquisition, reorganization, or
other material event involving the Parent and the Board of Directors delivers
written notice of such determination to the Selling Holders;
(ii) the Parent shall be obligated to effect no more than four
(4) such Demand Registrations, two (2) of which may be demanded by Group 1, and
two (2) by Group 2; and
(iii) a Demand Registration hereunder shall not be deemed to
have been effective: (A) unless a registration statement pursuant to the
exercise of the demand rights under this Section 3.1 has become effective, (B)
if after such registration statement has become effective, such registration or
the related offer, sale or distribution of Shares thereunder is interfered with
by any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason not attributable to the
Selling Holders, or (C) if the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by reason of a failure on
the part of the Selling Holders.
(b) If any Demand Registration involves an underwritten offering,
or an agented offering, Selling Holders holding a majority of the Shares to be
included in the offering shall have the right to select the underwriter or
underwriters, manager or managers or agent or agents, as the case may be, to
administer such underwritten offering or the placement agent or agents for such
agented offering; provided, however that each Person so selected shall be
reasonably acceptable to the Parent.
(c) The Parent shall use its best efforts to keep the Demand
Registration statement continuously effective for up to 180 days or until such
earlier date as of which all the Shares under the Demand Registration statement
shall have been disposed of in the manner described in the registration
statement.
(d) If any registration under this Section 3.1 involves an
underwritten offering and the managing underwriter of such offering shall advise
the Selling Holders by letter that, in its view, the number of securities
requested to be included in such registration exceeds the largest number that
can be sold in an orderly manner in such offering and that such number would
materially and adversely affect such offering ("Maximum Amount "), then the
Parent shall include in such registration, to the extent the number and type of
securities which the Parent is so advised can be sold in (or during the time of)
such offering: (1) first, all Shares requested to be included in such
registration by the Selling Holders; and (2) second, to the extent that the
number of Shares to be included by all Selling Holders is less than the Maximum
Amount, securities that the Parent or any other holders of the equity securities
of the Parent, proposes to register.
(e) In connection with any registration statement or other filing
described herein, and in connection with making and keeping such filings
effective as provided herein, the Parent shall bear all the expenses and
professional fees of the Parent and Selling Holders (including the fees and
expenses of one legal counsel for all Selling Holders), except for the Selling
Holder's pro rata share of any underwriting discounts and commissions.
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(f) Holders shall not request a Demand Registration hereunder of
any offering or sale of Shares which can be effected, according to its proposed
terms, so as to comply with the requirements of Rule 144 under the Securities
Act without the necessity of any discount, any indemnity or similar undertaking
by the Selling Holders.
Section 3.2 Piggy-Back Registration. If the Parent shall at any time prepare
and file a registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the public offering of any Shares, the
Parent shall give written notice thereof to each Holder and shall, upon the
written request of any Holder within 10 Business Days after such notice, include
in the registration statement such number of the Holder's Shares as such Holder
may request. The Parent will keep such registration statement effective and
current under the Securities Act permitting the sale of the Holders' Shares
included therein for the same period that the registration is maintained
effective in respect of Shares of other persons (including the Parent). In any
underwritten offering the Holders' Shares to be included will be sold at the
same time and the same per-share price as the Parent 's Shares. In the event
the Parent fails to receive a written inclusion request from a Holder within ten
(10) Business Days after the mailing of its written notice, then the Parent
shall have no obligation to include any of such Holder's Shares in the offering.
(a) In connection with any registration statement or subsequent
amendment or similar document filed and is subject hereto, the Parent shall take
all reasonable steps to make the Holders' securities covered thereby eligible
for public offering and sale under the securities or blue sky laws of such
jurisdictions as may be specified by the relevant Holders by the effective date
of such registration statement; provided that in no event shall the Parent be
obligated to qualify to do business in any jurisdiction where it is not so
qualified at the time of filing such documents, or to take any action which
would subject it to unlimited service of process in any jurisdiction where it is
not so subject at such time. The Parent shall keep such blue-sky filings current
for the length of time it must keep any registration statement, post-effective
amendment, prospectus or offering circular effective pursuant hereto.
(b) In connection with any registration statement or other filing
described herein, and in connection with making and keeping such filings
effective as provided herein, the Parent shall bear all the expenses and
professional fees of the Parent and Holders (including the fees and expenses of
one legal counsel for all Holders), except for the Holder's pro rata share of
any discounts and commissions, and shall also provide the Selling Holders with a
reasonable number of printed copies of the prospectus, offering circulars and/or
supplemental or amended prospectuses in final and preliminary form. The Parent
consents to the use of each such prospectus or offering circular in connection
with the sale of Holders' Shares.
(c) Allocation. If any registration under this Section 3.2 involves
an underwritten offering and the managing underwriter of such offering shall
advise the Parent at any time two (2) or more days prior to the pricing of such
offering that, in its view, the number of securities requested to be included in
such registration exceeds the Maximum Amount, then the Parent shall notify the
Selling Holders of such fact and give such Holders at least 48 hours to
negotiate with the managing underwriter regarding the inclusion in such
registration of all of the Shares requested by the Holders to be included
therein. If such managing underwriter notifies the Parent of such a fact less
than two (2) days prior to such pricing, then the Parent shall likewise notify
the Selling Holders of such fact and allow them such lesser period to negotiate
with such underwriter as is reasonably practicable
6
under the circumstances. In either such case, one individual designated by Group
1 and one designated by Group 2 shall be allowed to participate in the pricing
and share volume negotiations with such underwriter along with the Parent or
other relevant sellers, and shall be provided reasonable advance notice thereof.
If the managing underwriter does not agree to include more than eighty (80)
percent (or such lesser percentage as the Selling Holders shall, in their sole
discretion, agree to) of the number of Shares initially requested by the Holders
to be included in such registration, then the Parent shall include in such
registration, to the extent of the number and type of which the Parent is so
advised can be sold in (or during the time of) such offering: (i) first, all
shares of its common stock which the Parent proposes to register for its own
account and not for the account of third parties (the "Company Securities");
(ii) second, to the extent that the number of Company Securities is less than
the Maximum Amount, the remaining Shares to be included in such registration
shall be allocated on a pro rata basis among the Selling Holders, in proportion
to the number of Shares requested to be included in such registration; and (iii)
third, to the extent the number of Company Securities and the Shares requested
for inclusion by the Holders is less than the Maximum Amount, to other owners of
Shares having piggyback registration rights.
Section 3.3 Certain Obligations of Holders in a Registered Offering.
(a) It shall be a condition precedent to the obligations of the
Parent to take any action under this Article 3 with respect to the Shares of any
Selling Holder that such Holder shall furnish to the Parent such information
regarding itself, the Shares held by it, and the intended method of disposition
of such securities as shall be reasonably required to effect the registration of
such Holder's Shares.
(b) Each Holder having Shares covered by a registration statement
agrees that, upon receipt of any notice from the Parent that the registration
materials must be supplemented or amended, such Holder will forthwith
discontinue disposition of Shares pursuant to such registration statement until
such ▇▇▇▇▇▇'s receipt of copies of a supplemented or amended prospectus covering
such Shares, and, if so directed by the Parent, such Holder will deliver to the
Parent (at the Parent's expense) all copies, other than permanent file copies
then in such ▇▇▇▇▇▇'s possession, of the prospectus covering such Shares current
at the time of its receipt of such notice.
Section 3.4 Indemnification and Contribution.
(a) In the event of any registration of any of the Shares under the
Securities Act pursuant to this Agreement, the Parent will indemnify and hold
harmless each Selling Holder, each underwriter of such Shares, and each other
person, if any, who controls such Selling Holder or underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities, joint or several, to which such Holder, underwriter, or
controlling person may become subject under the Securities Act, the Exchange
Act, state securities or Blue Sky laws, or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such Shares were
registered under the Securities Act, any preliminary prospectus, or final
prospectus contained in the registration statement, or any amendment or
supplement to such registration statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to
7
be stated therein or necessary to make the statements therein not misleading;
and the Parent will reimburse such Selling Holder, underwriter, and each such
controlling person in connection with investigation or defending any such loss,
claim, damage, liability, or action; provided, however, that the Parent will not
be liable in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon any untrue statement or omission made
in such registration statement, preliminary prospectus, or final prospectus, or
any such amendment or supplement, in reliance upon and in conformity with
information furnished to the Parent, in a written instrument, duly executed, by
or on behalf of such ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, underwriter, or controlling person
specifically stating that it is for use in the preparation thereof.
(b) In the event of any registration of any of the Shares under the
Securities Act pursuant to this Agreement, each Selling Holder, severally and
not jointly, will indemnify and hold harmless the Parent, each of its directors
and officers and each underwriters (if any) and each person, if any, who
controls the Parent or any such underwriter within the meaning of the Securities
Act or the Exchange Act, against any losses, claims, damages, or liabilities,
joint or several, to which the Parent, such directors and officers, underwriter,
or controlling person may become subject under the Securities Act, Exchange Act,
state securities or Blue Sky laws, or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such Shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained in the registration statement, or any amendment or supplement to the
registration statement, or arise out of or are based upon any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if the statement or
omission was made in reliance upon and in conformity with written information
furnished to the Parent through an instrument duly executed by a Selling Holder
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; provided, however, that the obligations of each Selling
Holder hereunder shall be limited to an amount equal to the proceeds to such
Selling Holder of Shares sold in connection with such registration.
(c) Each party entitled to indemnification under this Section 3.4
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), unless in such Indemnified Party's reasonable judgment a conflict of
interest between such Indemnified and Indemnifying Parties may exist in respect
of such claim; and, provided, further, that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 3.4. The Indemnified Party may participate in
such defense at such party's expense; provided, however, that the Indemnifying
Party shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation, shall except with the prior written
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant
8
or plaintiff to such Indemnified Party of a release from all liability in
respect of such claim or litigation, and no Indemnified Party shall consent to
entry of any judgment or settle such claim or litigation without the prior
written consent of the Indemnifying Party.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any Holder of
Shares exercising rights under this Agreement, or any controlling person of any
such Holder, makes a claim for indemnification pursuant to this Section 3.4 but
it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 3.4 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such Selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
3.4; then, in each such case, the Parent and such selling Holder will contribute
to the aggregate losses, claims, damages, or liabilities to which they may be
subject (after contribution from others) in such proportions so that such holder
is responsible for the portion represented by the percentage that the aggregate
public offering price of its Shares offered by the registration statement bears
to the aggregate public offering price of all securities offered by such
registration statement, and the Parent is responsible for the remaining portion;
provided, however, that, in any such case, (i) no such holder will be required
to contribute any amount in excess of the proceeds to it of all Shares sold by
it pursuant to such registration statement, and (ii) no person or entity guilty
of fraudulent misrepresentation, within the meaning of Section 11(f) of the
Securities Act, shall be entitled to contribution from any person or entity who
is not guilty of such fraudulent misrepresentation. In addition, no person shall
be obligated to contribute hereinunder any amounts in payment for any settlement
of any action or claim, effected without such person's prior written consent,
which consent shall not be unreasonably withheld.
Section 3.5 Underwritten Offerings.
(a) Underwritten Demand Offerings. If requested by the underwriters
for any underwritten offering by any Holders pursuant to a registration
requested under Section 3.1, the Parent will enter into an underwriting
agreement with such underwriters for such offering, such agreement to be
reasonably satisfactory in substance and form to the Parent, the Selling Holders
and the underwriters, and to contain such representations and warranties by the
Parent and the Selling Holders and such other terms as are generally prevailing
in agreements of that type, including, without limitation, indemnities to the
effect and to the extent provided in Section 3.4. The Selling Holders will
cooperate with the Parent in the negotiation of the underwriting agreement and
will give consideration to the reasonable suggestions of the Parent regarding
the form and substance thereof. Each Selling Holder shall be a party to such
underwriting agreement. The Selling Holders shall not be required to make any
representations or warranties to or agreements with the Parent or the
underwriters other than representations, warranties or agreements regarding such
Holders, their Shares, their intended method of distribution and any other
representations or warranties required by law or customarily given by selling
shareholders in an underwritten public offering.
9
(b) Underwritten Piggyback Offerings. If the Parent proposes to
register any Shares under the Securities Act as contemplated by Section 3.2 and
such securities are to be distributed by or through one or more underwriters,
subject to the provisions of Section 3.1(c)(i) the Parent will, if requested by
the Selling Holders, arrange for such underwriters to include all of the Shares
to be offered and sold by such Holders among the securities of the Company to be
distributed by such underwriters. Each Selling Holder shall each become a party
to the underwriting agreement negotiated between the Company and such
underwriters. The Holders shall not be required to make any representations or
warranties to or agreements with the Parent or the underwriters other than
representations, warranties or agreements regarding the Holders, their Shares
and their intended method of distribution or any other representations or
warranties required by law or customarily given by selling shareholders in an
underwritten public offering.
Section 3.6 Holders' Rights to Most Favorable Registration Rights'. If any
Company hereafter provides any Person with rights to cause a registration
statement to be filed with respect to the public offering of any Company's
equity securities owned by such person, on terms more favorable than those
provided herein for the registration of offerings of the Holders' Shares,
Sections 3.1 through 3.5 hereof shall, upon written notice by the Majority
Holders (for purposes of this Section 3.6, "Majority Holders" shall be
determined as if the Debentures had previously been paid in full) be deemed to
have been amended to provide for registrations with respect to the Holders'
Shares on such more favorable terms, and this Agreement shall be deemed to have
been amended, as nearly as may be practicable, to provide the Holders with all
benefits of such terms.
Section 3.7 "Put" Rights. At any time and from time-to-time beginning six (6)
years after the Closing, whenever the number of Shares traded on a national or
regional stock exchange or on the NASDAQ National Market System has been less
than 100,000 per day for a period of 20 consecutive trading days, any Holder or
group of Holders owning 16-2/3% or more of the Warrants and Shares then
outstanding, within 30 days after the relevant 20 trading day period, by written
notice may require the Parent to repurchase their Warrants or the Shares issued
thereunder. If within such 30 day period any Holder or Holders of the requisite
Warrants or Shares give notice of their exercise of their Put right according to
the terms herein, the other Holders shall have an additional 12 Business Days
after receipt of the notice from the Company provided in Section 3.7(f), within
which they may exercise their Put rights without regard to any requirement that
they own any particular number or amount of Warrants or Shares.
(a) Price.
(i) If the Shares are Publicly Traded at the time of the
exercise of the Put rights herein, then the repurchase price payable under this
Section 3.7 for each Share (the "Per-Share Value") shall be the higher of (x)
the product of the average of the closing bid and ask prices for the Shares in
the relevant securities market for the five (5) trading days prior to such
notice and (y) the quotient obtained by dividing six (6) times the Company's
EBITDA for the most recent twelve (12) month period ending prior to the date of
notice of the exercise of this Put right, less the amount of all funded debt and
plus the amount of all cash and cash equivalents reflected on the Companies'
consolidated balance sheet as of the last business Day of such twelve (12)
months period, as dividend, by the number of Shares outstanding on such date on
a Fully Diluted Basis,
10
as divisor; and in the case of an unexercised Warrant, such price shall be the
Per-Share Value, multiplied by number of Shares for which the Warrant is
exercisable.
(ii) If the Shares are not Publicly Traded, the total
repurchase price payable to each Holder for its Warrants and/or Shares shall be
the higher of (x) the product of the Appraised Value of the Company determined
pursuant to Section 3.7(b) below, multiplied by the Holder's Equity Percentage,
and (y) six (6) times the Company's EBITDA for the most recent twelve (12) month
period ending prior to the date of notice of the exercise of this Put right,
less the amount of all funded debt and plus the amount of all cash and cash
equivalents reflected on the Companies' consolidated balance sheet as of the
last business day of such twelve (12) months period, multiplied by the Holder's
Equity Percentage;
(iii) Whether or not the Shares are Publicly Traded, from the
repurchase price payable for unexercised Warrants, the Company shall be entitled
to deduct the exercise price of such Warrants from its payments of such prices.
(b) Appraised Value. The Appraised Value of the Company shall be
its fair market value on a going concern basis without considering any "take-
over" or similar premium, without giving effect to any discount in respect of
any minority interest, and with any contractual limitation in respect of the
Shares relating to voting rights and any so-called "Poison Pill" or similar
rights deemed to have been eliminated or canceled, determined from its earnings,
book value and other appropriate information according to the following
procedure.
(i) The Company, and the Holders as a group, shall each
select an appraiser, each of whom shall determine the value of the Company.
(ii) If the values determined by such two (2) appraisers are
the same or within Two Million Dollars ($2,000,000) of each other, then the
average of such two (2) values shall be the Appraised Value.
(iii) If the foregoing two (2) values differ by more than Two
Million Dollars ($2,000,000), then the appraisers shall together select a third
appraiser to determine the value of the Company.
(iv) If the value determined by the third appraiser is greater
than the larger of the values determined by the first two (2) appraisers, or
less than the smaller of the first two (2) values, then the average of the
values determined by the first two appraisers shall be the Appraised Value; or
(v) if the value determined by the third appraiser is between
the first two (2) values in amount, then the average of the value determined by
the third appraiser and the one of the first two (2) values which is closest to
the third value shall be the Appraised Value.
(vi) Each appraiser shall be an investment banking firm of
national reputation having experience in the valuation of businesses similar to
the Parent in type of entity
11
and principal activity. The Companies shall provide, with sufficient promptness
to allow completion of all appraisals within the periods specified herein, all
relevant information to which they have access, as may reasonably be requested
by the appraisers. The Parent shall pay all fees and other expenses of all
appraisers, and provide any reasonable and customary indemnification
undertakings they may request.
(vii) The initial appraisers shall in each case be engaged
within twenty-one (21) days of the notices of exercise of the Put right, and the
terms of their engagements shall be such as to cause the determinations by all
appraisers to be completed within forty-two (42) days after the engagements of
the initial appraisers. In any case this procedure shall be completed within
sixty-three (63) days after such notice.
(c) Time of Payment. The Companies shall pay the relevant
repurchase prices within ten (10) days of notice of exercise of this Put right
if the Shares are Publicly Traded, or ten days after the Appraised Value is
determined, if the Shares are not Publicly Traded, except as provided in section
(d), below.
(d) Financing of Put Price. If upon exercise by a Holder of the Put
right above, the Parent is unable after diligent effort to pay the above-
referenced re-purchase prices in cash for any reason, the Companies shall in
lieu of such cash payments, satisfy the obligation to make such payment by
issuing additional subordinated debentures to the relevant Holders in face
amounts corresponding to the Put Price and with provisions subordinating their
payment to the Group 1 and Group 2 Debentures, but otherwise having terms
identical to the Group 1 and Group 2 Debentures; in such case, such additional
subordinated debentures shall thereafter be included within the definition of
Debentures herein for all purposes, and the Parent shall be allowed an extra
fifty (50) days after the relevant ten (10) days' period specified in Section
(c) above to seek alternative financing for the repurchase price or to issue
such additional Debentures; provided however that the Companies may not issue
such additional Debentures if such issuance will, taking into account the
interest payable thereunder and other effects of such issuance, occasion an
Event of Default hereunder. If at any time prior to making the payment of the
Put Price herein, the Companies are able to pay such price in cash, they shall
do so.
(e) Holders' Rights to Most Favorable Put Rights. If hereafter any
Person obtains any right to cause any Company to purchase or redeem any of the
Parent's equity securities owned by such Person at a price or on terms more
favorable than those provided in Section 3.7(a), (b) and (c) hereof, this
Section shall, upon written notice from the Majority Holders, be deemed to have
been amended to provide the Holders, as nearly as may be practicable, all
benefits of such terms.
(f) Notice By Parent of Put Exercise. Whenever the Holder or
Holders of the requisite Warrants or Shares gives notice of exercise of the Put
hereunder during the 30 day period specified above, the Parent shall within 3
Business Days provide notice to all other Holders of such exercise, and identify
the relevant Holder or Holders.
(g) Equal Treatment of Holders in Put Exercise; Recission of
Exercise. All Holders giving notice of exercise of their Put rights herein in
any particular 30 day (or, as the case may be, 45 day) period for such notice,
shall receive the same form of payments as between cash payment and
12
issuance of additional debentures; and if the Companies are, after diligent
effort in the strictest good faith, unable to make all of such payments either
in cash or by issuance of debentures, none of such Holders will receive any such
payment and each of their exercises of their Put rights herein will be deemed to
be rescinded.
ARTICLE 4
UNDERTAKINGS BY THE PRINCIPALS
Section 4.1 Commitment. Each of the Principals will devote his full time and
attention to the Companies' businesses unless (i) prevented from doing so by his
death or disability (ii) the Board of Directors terminates such Principal's
employment with the Companies or the Companies materially breach such
Principal's employment agreement; or (iii) his employment agreement expires
pursuant to its existing provisions contained in Section 3.01 thereof.
Section 4.2 Non-Competition; Non-Disclosure. The non-competition and non-
disclosure provisions in the Employment Agreements between the Companies and
each of the Principals, in the form of Exhibit 4.02, are in full force and
effect.
Section 4.3 Continued Equity Ownership. Except for Exempt Transfers (as
defined below), none of the Principals shall sell, assign or transfer any Shares
or other equity interest in the Parent which they own, or otherwise divest
themselves of any voting rights which they may hold in regard to stock in the
Parent. "Exempt Transfer" means any of the following sales, assignments or
transfers by either Principal of the capital stock or equity interests of the
Parent or any interest therein (each, a "transfer"):
(a) any transfer pursuant to the laws of descent and distribution
upon the death of such Principal;
(b) any sale of Shares wherein the proceeds are used solely to pay
the exercise price of options to purchase other Shares, issued pursuant to an
incentive stock option plan described in Exhibit 4.03(b), and/or income taxes
(including alternative minimum taxes) arising from exercise of such options;
(c) any sale of Shares where the proceeds are used solely to remedy
a bona fide crisis involving members of the Principal's immediate family;
(d) any transfer to a bona fide trust in which the trust
beneficiary is the Principal, his estate, or a member of his immediate family,
or any transfer into a similar estate planning vehicle;
(e) any transfer pursuant to the prior written consent of the
Majority Holders; and
(f) any sale of Shares by such Principal of up to 80,000 Shares in
one calendar year.
Upon any transfer by the Principals, the Parent shall deliver notice to
the holders
13
upon the earlier of (i) five (5) days after such transfer or (ii) the date on
which notice of such transfer has been delivered to any public security holders
of the Parent.
Section 4.4 Access to Information. Each of the Principals hereby authorizes the
Holders or their authorized representatives to obtain credit and other
background information on each such Principal in connection herewith.
Section 4.5 Election of Director. Each of the Principals will use his best
efforts (provided, that such efforts shall not require expenses to be incurred
by the Principals) in good faith to cause the persons whom Group 1 and Group 2
request to be elected as their designees to the Companies' Boards of Directors
to be so elected, in each case as and when such election shall be required under
Section 7.12 below.
Section 4.6 Termination of Certain Undertakings of the Principals. Sections
4.1 through 4.5 hereof shall remain in full force and effect, as to each
Principal, until the earliest of: (i) the Debentures are indefeasibly repaid in
full; (ii) all Holders have transferred or disposed of more than ninety (90)
percent of the voting or economic interests represented by the Warrants sold to
it pursuant to Section 2.1 (for purposes of this clause, the exercise of
Warrants in exchange for Shares shall not be deemed a disposition of the voting
or economic interests represented by the Warrants, but the disposition of Shares
issued as a result of the exercise of the Warrants shall be deemed a disposition
of a proportionate interest in the Warrants); or (iii) that Principal's
employment is terminated in a manner described in Section 4.1.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
To induce the Holders to enter the transactions contemplated herein and
purchase the Debentures and Warrants, the Companies jointly and severally make
the representations and warranties set out below. All representations and
warranties in this Article shall refer to facts as they exist at Closing unless
made as of a specific date, and shall survive the Closing.
Section 5.1 Organization; Power and Authority. Each Company is a corporation
or a limited liability company (as the case may be) duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and is duly qualified as a foreign entity and is in good standing
in each jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Each Company has the corporate power and
authority to own or hold under lease the properties it purports to own or hold
under lease, to transact the business it transacts and proposes to transact, to
execute and deliver the Loan Documents to which it is a party and to perform the
provisions hereof and thereof, and to consummate all portions of the Acquisition
to which it is a party. The Inactive Subsidiaries are shell entities which have
no Material assets, liabilities (contingent or otherwise) or operations. True
and complete copies of the Companies' charters, bylaws, and other organizational
documents are attached as Exhibit 5.01 hereto.
14
Section 5.2 Authorization, Etc. The Loan Documents have been duly authorized
by all necessary corporate action on the part of each Company and this Agreement
and the Loan Documents executed by each Company constitute, or in the case of
the Debentures will upon issuance constitute, the legal, valid and binding
obligations of the Companies enforceable against the Companies in accordance
with their respective terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). True copies of the relevant resolutions for
the above are attached as Exhibit 5.02 hereto.
Section 5.3 Disclosure. The Confidential Information Memorandum dated
November, 1999 attached as Exhibit 5.03A hereto, (the "Memorandum") fairly
describes, in all material respects, the general nature of the business of the
Companies. The representations in this Agreement, the Memorandum, the
documents, certificates or other writings delivered to the Holders by or on
behalf of an Company in connection with the transactions contemplated hereby and
the financial statements listed in Exhibit 5.05, taken as a whole, are complete
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading in light
of the circumstances under which they were made. The Approved Closing Budget
and other pro forma financial information contained in such materials are based
upon good faith estimates and assumptions believed by the Companies to be
reasonable at the time made and the Companies believe such estimates and
assumptions continue to be reasonable, it being recognized by the Holders that
such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. Except as disclosed in Schedule 5.03B, since
December 31, 1998, there has been no change in the financial condition,
operations, business, properties or prospects of an Company except changes that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. There is no fact known to an Company (other than
matters of a general economic nature) that could reasonably be expected to have
a Material Adverse Effect that has not been set forth herein or in the other
documents, certificates and other writings delivered to the Holders by or on
behalf of an Company specifically for use in connection with the transactions
contemplated hereby (including, without limitation, any Material reimbursement
or indemnification of liabilities to any party under the Acquisition Agreement).
All of the Companies' obligations under material leases, accounts payable and
Debts are current in all material respects.
Section 5.4 Affiliates. Schedule 5.04 contains complete and correct lists (i)
of the Companies' Affiliates, and (ii) of each Company's directors and senior
officers, in each case after giving effect to the consummation of the
Acquisition.
Section 5.5 Financial Statements.
(a) All of the financial statements included within Exhibit 5.05
(including in each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the Companies and the
financial position of P&M as of the respective dates specified in such financial
statements and the results of its operations and cash flows for the respective
periods so specified, and have been prepared in accordance with GAAP
consistently applied throughout the periods involved, except as set forth in the
notes thereto, and as set forth in such exhibit, subject (in
15
the case of any interim financial statements only) to the absence of footnotes
and to normal year-end adjustments which, separately and in the aggregate, are
not material;
(b) The pro forma balance sheet to be provided according to
Section 10.17 hereof will, as of the date of Closing and after giving effect to
the consummation of the Acquisition, fairly present in all material respects the
financial position of the consolidated Company and will have been prepared in
accordance with GAAP (as if GAAP were to be applicable to pro forma financial
statements) consistently applied.
Section 5.6 Compliance with Laws, Other Instruments, Etc. The execution,
delivery and performance by the Companies of the Loan Documents and the
consummation of the Acquisition will not (a) contravene, result in any breach
of, or constitute a default under, or result in the creation of any Lien (other
than under the Senior Debt Documents) in respect of any property of any Company
under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, corporate charter or by-laws, or any other agreement or
instrument to which any Company is a party or by which any Company or any of its
properties may be bound or affected, other than the breach of one or more
contracts which breaches individually or in the aggregate could not reasonably
be expected to have a Material Adverse Effect, (b) conflict with or result in a
breach of any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority applicable
to any Company or (c) violate any provision of any statute or other rule or
regulation of any Governmental Authority. The Companies represent and warrant
that Schedule 5.06 contains a true and correct description of all indentures,
mortgages, deeds of trust, loan, purchase or credit agreements, leases,
corporate charters or bylaws or any other agreement or instrument to which any
Company is a party or by which any Company or any of its properties may be bound
or affected which, in each case, is Material.
Section 5.7 Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Companies of the Loan Documents or the consummation of the Acquisition.
Section 5.8 Litigation; Observance of Agreements, Statutes and Orders
(a) There are no actions, suits or proceedings pending or, to the
knowledge of the Companies, threatened against or affecting any Company or any
property of any Company in any court or before any arbitrator of any kind or
before or by any Governmental Authority that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(b) No Company is in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority or
is in violation of any applicable law, ordinance, rule or regulation (including
without limitation Environmental Laws) of any Governmental Authority, which
default or violation, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
Section 5.9 Taxes.
16
(a) Filing of Returns; Payments. Each Company has filed all
federal tax returns and all other Material tax returns that are required to have
been filed in any jurisdiction, and have paid all taxes shown to be due and
payable on such returns and all other taxes and assessments levied upon it or
its properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (i) the amount of which is not individually
or in the aggregate Material or (ii) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the related Company has established adequate reserves in
accordance with GAAP. No Company knows of any basis for any other tax or
assessment that could reasonably be expected to have a Material Adverse Effect.
The charges, accruals and reserves on the books of the Companies in respect of
Federal, state or other taxes for all fiscal periods are adequate in all
material respects.
(b) Excess Parachute Payments. The Companies have not made, have
not become obligated to make, nor will, as a result of the transactions
contemplated by this Agreement, make or become obligated to make, any "excess
parachute payment" as defined in Internal Revenue Code Section 280G, except with
respect to severance payments under the employment agreements between the
Companies and the Principals.
(c) Deferred Intercompany Transactions. The Companies have not
engaged in any "deferred intercompany transactions" within the meaning of
Section 1.1502-13 of the regulations promulgated under the Internal Revenue
Code.
(d) True Copies of Returns. The Companies have delivered to Holders
true, correct and complete copies of all Federal, state and local tax returns
for the Parent's most recent three (3) full taxable years as of Closing, and all
information set forth on such returns is true, complete and accurate.
Section 5.10 Title to Property; Leases
(a) All leases under which any Company is lessee and that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects; no claim has been asserted
against any of the Companies adverse to its leasehold interests;
(b) The Companies will, at Closing after giving effect to the
consummation of the Acquisitions, have good and sufficient title to all
properties reflected in the balance sheet provided according to Section 10.17
hereof, free and clear of all Liens other than Permitted Liens.
Section 5.11 Licenses, Permits, Etc.
(a) Each Company owns or possesses all licenses, permits,
franchises, authorizations, patents, copyrights, service marks, trademarks and
trade names, or rights thereto, without conflict with the rights of others,
except such licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, as the failure to
own or possess could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
17
(b) No items sold or produced by any Company infringes in any
respect any license, permit, franchise, authorization, patent, copyright,
service mark, trademark, trade name or other right owned by any other Person,
except such infringements as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(c) There is no violation by any Person of any right of any
Company with respect to any patent, copyright, service mark, trademark, trade
name or other right owned or used by any of them, except such violations as
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
Section 5.12 Compliance with ERISA.
(a) Neither the Parent nor any ERISA Affiliate maintains or has
any obligation to contribute to any Plan or Multiemployer Plan. Each Company and
each ERISA Affiliate have operated and administered each Plan (other than any
Multiemployer Plan) in all material respects in accordance with its terms and in
compliance with all applicable laws and, with respect to any Plan intended to
satisfy the requirements of Section 401(a) and related Sections of the Internal
Revenue Code, the Internal Revenue Service ("IRS") has issued favorable
determination letters to the effect that the forms of Plans satisfy the
requirements of Section 401(a) and related Sections of such Code or an
application for such a determination has been filed with the IRS, and there are
no facts or circumstances that would jeopardize or adversely affect in any
material respect the qualification under Internal Revenue Code Section 401(a) of
any such Plan. Neither any Company nor any ERISA Affiliate has incurred any
liability pursuant to Title I (other than normal operating liabilities under a
Plan) or IV of ERISA or the penalty or excise tax provisions of the Internal
Revenue Code relating to employee benefit plans (as defined in Section 3 of
ERISA), and no event, transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such liability by any
Company or any ERISA Affiliate, or in the imposition of any Lien on any of the
rights, properties or assets of any Company or any ERISA Affiliate, in either
case pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Internal Revenue Code which
liability or Lien, either individually or together with any other liability or
Lien could reasonably be expected to have a Material Adverse Effect. No lawsuits
or complaints to or by any Person or Governmental Authority have been filed or,
to the knowledge of any Company, are contemplated or threatened, with respect to
any Plan (other than any Multiemployer Plan) which either individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect. To the
knowledge of the Companies, all of the foregoing applies to any Multiemployer
Plan to which an Company or any ERISA Affiliate has any obligation to
contribute.
(b) With respect to each Plan (other than a Multiemployer Plan)
that is an employee pension benefit plan as defined in Section 3 of ERISA: (i)
full payment has been made to each such Plan of all contributions that are
required by any Company or any ERISA Affiliate under the terms thereof and under
ERISA or the Internal Revenue Code to be made on or prior to the date hereof,
(ii) no "accumulated funding deficiency" (as defined in ERISA Section 302 or
Internal Revenue Code Section 412), whether or not waived, exists with respect
to any Plan (other than Multiemployer Plans), (iii) to the knowledge of the
Companies, no "accumulated funding deficiency" (as defined in ERISA Section 302
or Internal Revenue Code Section 412), whether or not waived, exists with
respect to any Multiemployer Plan, (iv) the present value of the aggregate
benefit liabilities under each of the Plans (other than Multiemployer Plans),
determined as of the end of such Plan's most
18
recently ended plan year on the basis of the actuarial assumptions specified for
funding purposes in such Plan's most recent actuarial valuation report, did not
exceed the aggregate current value of the assets of such Plan allocable to such
benefit liabilities and (v) such actuarial assumptions have not been materially
altered since the date of the most recent actuarial valuation report; except to
the extent that any non-compliance with any such event or events described in
clauses (i) through (iv) above, either individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect. The term "benefit
liabilities" has the meaning specified in section 4001 of ERISA and the terms
"current value" and "present value" have the meaning specified in Section 3 of
ERISA.
(c) Neither any Company nor any ERISA Affiliates have received
notice of or incurred withdrawal liabilities under section 4201 or 4204 of ERISA
in respect of Multiemployer Plans that individually or in the aggregate could
have a Material Adverse Effect.
(d) Except for continuation coverage mandated by Section 4980B of
the Internal Revenue Code, no Company has any post-retirement benefit
obligations which are subject to Financial Accounting Standards Board Statement
No. 106 and which individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect.
(e) Neither any Company nor any ERISA Affiliate has been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of ERISA,
and no such Multiemployer Plan is reasonably expected to be in reorganization or
to be terminated, within the meaning of Title IV of ERISA.
(f) The execution and delivery of the Loan Documents and the
making of the Loan and of the Senior Debt, and the consummation of the
Acquisitions will not involve any non-exempt transaction that is subject to the
prohibitions of Section 406(a) of ERISA or in connection with which a tax could
be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Internal Revenue Code.
The representation by the Companies in the first sentence of this Section
5.12(f) is made in reliance upon and subject to the accuracy of each Holder's
representation in Article 17 as to the sources of the funds used by the Holders
to make the Loan. For purposes of determining whether the representation in the
first sentence in this Section 5.12(f) is correct on any date after the Closing,
such representation in Article 17 shall be considered made by each Holder on the
date of Closing and shall be considered accurate on such date.
Section 5.13 Private Offering by the Company. Neither a Company nor anyone
acting on its behalf has offered the Debenture or Warrants, or any similar
securities, for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any person other
than the Holders and not more than 50 other Institutional Investors, each of
which has been offered the Debentures and Warrants at a private sale for
investment. Neither an Company nor anyone acting on its behalf has taken, or
will take, any action that would subject the issuance or sale of the Debentures
or Warrants to the registration requirements of Section 5 of the Securities Act.
Section 5.14 Use of Proceeds; Margin Regulations. The sources and uses of Loan
funds, proceeds of any Senior Debt, and funds being used to consummate the
Acquisition, are correctly described in Schedule 5.14. After giving effect to
the consummation of the Acquisition, margin stock will not on the date of
Closing constitute more than 1% of the value of the consolidated assets of the
Companies
19
and the Companies do not have any present intention that margin stock will
constitute more than 1% of the value of such assets. As used in this Section
5.14, the term "margin stock" shall have the meaning assigned to it in said
Regulation U.
Section 5.15 Existing Debt; Future Liens; Subordination of Seller Notes
(a) Schedule 5.15 sets forth a complete and correct list of all
outstanding Debt of the Companies as of January 31, 2000, since which date there
has been no Material change in the amounts, interest rates, sinking funds,
installment payments or maturities of the Debt of the Companies. As of the date
of Closing, no Company will be in default in the payment of any principal or
interest on any Debt of any Company and no event or condition exists with
respect to any Debt of any Company that would permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause such Debt to
become due and payable before its stated maturity or before its regularly
scheduled dates of payment.
(b) No Company has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its Property,
whether now owned or hereafter acquired, to be subject to a Lien not permitted
by Section 8.9.
(c) All balances outstanding on the date of Closing under
promissory notes and other indebtedness owed by the Companies to sellers of
previously-acquired businesses have been either (i) repaid from proceeds of the
Loan and the Senior Debt, or (ii) exchanged for common stock pursuant to certain
letter agreements with the Parent;
Section 5.16 Foreign Assets Control Regulations, Etc. Neither the making of
the Loan contemplated by this Agreement, the performance hereunder by any
Company, the use of the proceeds of the Loan, or the consummation of the
Acquisition, will violate the Trading with the Enemy Act, as amended, or any of
the foreign assets control regulations of the United States Treasury Department
(31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or
executive order relating thereto.
Section 5.17 Certain Statutory Matters.
(a) Investment Company Act. None of the Companies is an
"investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, or intends to become an investment
company; none of the Companies or any of their officers, directors, partners or
controlling persons is an Affiliated Person of any Holder;
(b) Small Business Act. The statements set forth in the Size
Status Declaration (SBA Form 480), Assurance of Compliance for Non-
Discrimination (SBA Form 652-D) and Portfolio Financing Report (SBA Form 1031),
as previously provided and set forth as Exhibits 5.17A, 5.17B and 5.17C,
respectively, are complete and accurate in all material respects; none of the
Companies or any of their officers, directors, partners or controlling persons
is an Associated Person (as defined in 13 CFR 120.10) of any Holder; and
20
(c) No Company is subject to regulation under the Public Utility
Holding Company Act of 1935, as amended, the ICC Termination Act of 1995, as
amended, or the Federal Power Act, as amended.
Section 5.18 Environmental Matters.
(a) No claim or proceeding instituted or, to the knowledge of the
Companies, threatened has been raising any claim against any Company or any of
its real properties now or formerly owned, leased or operated by it or other
assets, alleging any damage to the environment or violation of any Environmental
Laws, except, in each case, such as could not reasonably be expected to result
in a Material Adverse Effect.
(b) There are no facts which would give rise to any claim, public
or private, of violation of Environmental Laws or damage to the environment
emanating from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any Company or to other assets or their
use, except, in each case, such as could not reasonably be expected to result in
a Material Adverse Effect;
(c) No Company has stored any Hazardous Materials on real
properties now or formerly owned, leased or operated by it and has not disposed
of any Hazardous Materials in a manner contrary to any Environmental Laws in
each case in any manner that could reasonably be expected to result in a
Material Adverse Effect;
(d) All buildings on all real properties now owned, leased or
operated by any Company are in compliance with applicable Environmental Laws,
except where failure to comply could not reasonably be expected to result in a
Material Adverse Effect; and
(e) There are no Liens, nor has any Company received notice of
any potential Liens, arising under any Environmental Laws against any of the
real properties owned, leased or operated by it.
Section 5.19 [Intentionally Omitted].
Section 5.20 Insurance. The insurance required by the provisions of Section
7.2 is, or on the date of Closing will be, in force and all premiums due and
payable in respect thereof have or will have been paid. The Companies represent
and warrant that they are the owner and beneficiary of the life insurance policy
referred to in Section 7.2(e) with respect to Messieurs ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ and
that it has given written notice to the insurer that the beneficiary cannot be
changed without the prior written consent of the Majority Holders.
Section 5.21 Patents, Trademarks and Copyrights. Schedule 5.21 hereto lists,
as of the date of this Agreement, all patents, patent applications, trademark
and service mark registrations and applications therefor and copyright
registrations and applications therefor owned or licensed by each Company, and
all license agreements for the same entered into by the Companies. Each Company
as of Closing, after giving effect to the consummation of the Acquisition, will
own, possess or, with
21
respect to any license agreement, will have the valid right to use all such
patents, patent applications, trademark and service registrations and
applications therefor and copyright registrations and applications therefor
necessary for the present and, as now contemplated, future conduct of its
business, after giving effect to the consummation of the Acquisition, without
any Material conflict with the rights of others.
Section 5.22 Solvency. As of Closing, before and after giving effect to the
transactions contemplated by the Loan Documents and to the consummation of the
Acquisition, (i) the fair saleable value of the assets of the Companies on a
going concern basis will be in excess of the total amount of its liabilities
(including for purposes of this definition all liabilities, whether or not
reflected on a balance sheet prepared in accordance with GAAP, and whether
direct or indirect, fixed or contingent, secured or unsecured, disputed or
undisputed); (ii) the Companies will be able to pay their respective debts and
obligations as they mature in the ordinary course of its business as proposed to
be conducted and the Companies will be able to make all scheduled payments on
their respective Debt; (iii) the Companies will not have unreasonably small
capital to carry out their respective businesses as proposed to be conducted;
and (iv) the Companies have not taken any actions with respect to the
transactions contemplated by the Loan Documents and to the consummation of the
Acquisition with actual intent to hinder, delay or defraud either present or
future creditors.
Section 5.23 Material Contracts. Except as set forth in Schedule 5.06, there
are no contracts individually Material to the business of the Companies.
Section 5.24 Year 2000 Compliance. Each Company has conducted a comprehensive
review and assessment of the computer applications of such Company and has made
inquiry of its material suppliers, vendors (including data processors) and
customers, with respect to any defect in computer software, data bases,
hardware, controls and peripherals related to the occurrence of the year 2000 or
the use at any time of any date which is before, on, and after December 31,
1999, in connection therewith. Based on the foregoing review, assessment and
inquiry, the Companies represent and warrant that no such defect, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
Section 5.25 Additional Representations and Warranties. Each Company
represents and warrants that the representations and warranties contained in
Sections 3 and 4 of the Acquisition Agreement and in Article 5 of the Credit
Agreement are true and correct in all material respects as of the date given.
Section 5.26 Management History. During the past ten (10) years neither of the
Principals, nor any other officer or director of any of the Companies, has been
arrested for or convicted of any criminal offense, petitioned or been granted
any relief in bankruptcy, or (except in the capacity as a trustee in bankruptcy)
served as an officer or director of any company or other entity which has
petitioned or been granted such relief (except in a professional capacity).
Section 5.27 No Side Agreements. Except as set out in Schedule 5.27 hereof,
none of the Companies or any of their officers or directors or any shareholders
owning five percent (5%) or more of the equity securities in the Parent are
party to any agreement with either Holder except for the
22
Loan Documents and the other documents mentioned herein or listed as exhibits
hereto; except for the Loan Documents and agreements with respect to their
acquisition of other consulting businesses, the Companies are not party to any
agreement calling for any action by any of the Companies outside the ordinary
course of their businesses; there exists no agreement or understanding calling
for any payment or consideration from a customer or supplier of any of the
Companies to an officer or director of any of the Companies or shareholder
owning more than five percent (5%) of the equity securities of the Parent in
respect of any transaction between any such Company and such supplier or
customer; no affiliate of any of the Companies, directly or through any business
concern affiliated with such affiliate, transacts any business with any of the
Companies other than employment complying with the terms of Section 8.29 below.
Section 5.28 Capital Structure. The authorized capital stock of each of the
Companies is as set forth on Schedule 5.28, and all such stock has been duly
issued in accordance with applicable laws including federal and state securities
laws and is fully paid and nonassessable; except as set forth on Schedule 5.28,
there are no options, warrants or other securities which are convertible or
exchangeable for capital stock of any of the Companies, and there are no
preemptive rights in respect to capital stock of any of the Companies.
Section 5.29 Collective Bargaining. Except as disclosed on Schedule 5.29
hereto, none of the Companies is a party to or subject to any collective
bargaining agreements or union contracts. There are no labor disputes pending
or, to any of the Companies' knowledge, threatened against any of the Companies,
which could, materially and adversely, affect the business or the condition of
any of the Companies.
Section 5.30 Employee Matters. Each of the Companies has delivered to the
Holders copies of all employment and compensation contracts, including all
individual retirement benefit agreements and any labor contracts not disclosed
on Schedule 5.29, between any of the Companies and officers and directors of any
of the Companies, and all such contracts are listed on Schedule 5.30; except as
set forth on Schedule 5.30: (a) no officer or key employee of any of the
Companies is currently on short-term or long-term disability, (b) no officer or
key employee of any of the Companies has terminated his or her employment since
January 1, 1999, (c) no officer or key employee of any of the Companies has
advised any such Company (orally or in writing) that he or she intends to
terminate employment with such Company and (d) no written notice of termination
has been given to any officer or key employee.
Section 5.31 No Competing Business Interests. Neither the Principals nor, to
the knowledge of the Companies, any of the Companies' other officers, directors,
or principal employees has any direct or indirect interest, including, but not
limited to, the ownership of stock in any corporation, in any business, that
competes with any of the Companies, except with respect to the ownership of less
than 5% of the equity securities of any entity whose securities are Publicly
Traded.
Section 5.32 No Conflicting Non-Competition Agreements. Except pursuant to
employment or non-competition agreements with the Parent or another Company,
neither any of the Companies nor any of the Principals is subject to any
contract or agreement purporting to limit their rights to compete in any market
in which any of the Companies presently provides, or proposes to provide, goods
or services; or purporting to restrict their rights to disclose information in
respect to such competition.
23
Section 5.33 Acquisition Agreement. Attached as Exhibit 5.33 hereto is a true
copy of the Acquisition Agreement, which is unmodified, in full force and
effect, and neither the Parent nor, to the Parent's knowledge, any other party
thereto, is in material breach thereunder.
Section 5.34 Senior Debt Documents. Attached as Exhibit 5.34 hereto are true
copies of all material Senior Debt Documents; such documents are unmodified, in
full force and effect, and neither the Companies nor, to their knowledge any
other party is in material breach thereunder.
ARTICLE 6
REPORTING COVENANTS
Subject to the expiration provisions in Article 18 hereof, each of the
Companies shall comply with the following covenants.
Section 6.1 Financial and Business Information. The Companies shall deliver to
each Holder:
(a) Quarterly Statements -- promptly, and in any event, within 45
days after the end of each quarterly fiscal period in each fiscal year of the
Parent (excluding the last quarterly fiscal period of each such fiscal year), a
copy of:
(i) an unaudited consolidated balance sheet of the Parent as
at the end of such quarter, and
(ii) unaudited consolidated statements of income, changes in
shareholders' equity and cash flows of the Parent for such quarter and (in the
case of the second and third quarters) for the portion of the fiscal year ending
with such quarter, setting forth in each case in comparative form the figures
for the corresponding periods in the previous fiscal year all in reasonable
detail, prepared in accordance with GAAP, and certified by the Chief Financial
Officer of the Parent as fairly presenting, in all material respects, the
financial position of the Companies and their results of operations and cash
flows, subject to changes resulting from year-end adjustments together with a
written management discussion and analysis of the operations and financial
condition of the Companies (it being agreed that delivery within the time period
specified above of copies of the Parent's Quarterly Report on Form 10-Q prepared
in compliance with the requirements therefor and filed with the Securities and
Exchange Commission shall be deemed to satisfy the foregoing requirements of
this Section 7.1(a) to the extent the information contained in said Form 10-Q is
duplicative of the requirements hereinabove);
(b) Annual Statements -- promptly, and in any event, within 90
days after the end of each fiscal year of the Parent, a copy of, (i)consolidated
and consolidating balance sheet of the Parent, as at the end of such year, and
(ii) consolidated and consolidating statements of income, changes in
shareholders' equity and cash flows of the Parent, for such year, setting forth
in each case in comparative form the figures for the previous fiscal year, all
in reasonable detail, prepared in accordance with GAAP, and accompanied by
24
(A) an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state
that the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the
Companies and their results of operations and cash flows and have been
prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made
in accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating that they have
reviewed the financial covenants contained in Sections 8.1 through
8.5, inclusive, and stating further whether, in making their audit,
they have become aware of any condition or event that then constitutes
a Default or an Event of Default under such Sections, and, if they are
aware that any such condition or event then exists, specifying the
nature and period of the existence thereof (it being understood that
such accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default); and
(C) a written management discussion and analysis of the
operations and financial condition of the Companies;
It is agreed that the delivery within the time period specified above of the
Parent's Annual Report on Form 10-K for such fiscal year, together with the
Parent's annual report to shareholders, if any, prepared pursuant to Rule 14a-3
under the Exchange Act, which annual report to shareholders prepared pursuant to
said Rule 14a-3 (is) delivered to the Holders within 120 days (and not 90 days)
after the end of the related fiscal year and which is prepared in accordance
with the requirements therefor and filed with the Securities and Exchange
Commission, together with the accountant certificate described in clause (B)
above, shall be deemed to satisfy the requirements of this Section 6.1(b) to the
extent the information contained therein is duplicative of the requirements
hereinabove;
(c) SEC and Other Reports -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or proxy
statement sent by the Parent to its stockholders generally, and (ii) each
report, each registration statement, and each prospectus and all amendments
thereto filed by the Parent with the Securities and Exchange Commission and of
all press releases and other written statements made available generally by an
Company to the public concerning developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in any
event within one Business Day after a Responsible Officer becomes aware of the
existence of any Default or Event of Default or that any Person has given any
notice or taken any action with respect to a claimed default hereunder or that
any Person has given any notice or taken any action with respect to a claimed
default of the type referred to in Section 9(f), a written notice specifying the
nature and period of existence thereof and within 5 Business Days after such
Responsible Officer becomes so aware, a written description of what action the
relevant Company is taking or proposes to take with respect thereto;
25
(e) ERISA Matters -- promptly, and in any event within two
Business Days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the action, if
any, that each Company or an ERISA Affiliate proposes to take with respect
thereto:
(i) with respect to any Plan (other than any Multiemployer
Plan), any reportable event, as defined in section 4043(c) of ERISA and the
regulations thereunder, for which notice thereof has not been waived pursuant to
such regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan (other than any Multiemployer Plan), or the receipt by any Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action has been
taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by any Company or any ERISA Affiliate pursuant
to Title I (other than normal operating liabilities under a Plan) or IV of ERISA
or the penalty or excise tax provisions of the Internal Revenue Code relating to
employee benefit plans, or in the imposition of any Lien on any of the rights,
properties or assets of any Company or any ERISA Affiliate pursuant to Title I
or IV of ERISA or such penalty or excise tax provisions.
(f) Notices from Governmental Authority -- promptly, and in any
event within 5 days of receipt thereof, copies of any notice to any Company from
any Governmental Authority relating to any order, ruling, statute or other law
or regulation that could reasonably be expected to have a Material Adverse
Effect;
(g) Audit Reports -- promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the books of an
Company and any management letter received from such accountants;
(h) Material Litigation -- promptly (and in any event within five
(5) Business Days) after any Company becomes aware of (i) the institution of, or
written (or otherwise overt) threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting a Company or any
of its property, or (ii) any Material development in any such action, suit,
proceeding, governmental investigation or arbitration, which, in either case, if
adversely determined, could have a Material Adverse Effect, a certificate of a
Responsible Officer of the relevant Company describing the nature and status of
such matter in reasonable detail (unless such disclosure would, in the
reasonable opinion of counsel to the Parent, cause a waiver of attorney-client
privilege);
(i) Waivers and Consents -- as soon as possible and in any event
within two Business Days of entering into any waiver or consent to the any
Senior Debt Document, the Companies shall provide written notice (together with
copies of all executed instruments relevant thereto) to the Holders of any such
waiver or consent along with such other information as may be necessary to
explain the reason for such waiver or consent, provided that, nothing in this
clause (i) shall in any way affect the agreement of the Companies contained in
Section 8.24, in addition, the
26
Companies shall send copies of any proposed or requested waivers or consents or
modifications to any Senior Debt Document as promptly as practicable and in no
event less than five Business Days prior to the effectiveness thereof;
(j) Notices -- as soon as possible, copies of any notices given by
or delivered to an Company under or pursuant to the Senior Debt Documents, the
Acquisition Agreement or the Companies' agreements with Messieurs ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇, including without limitation, any notices of default thereunder or any
claims for indemnities.
(k) Budgets; Long Term Plans -- (i) as soon as available, but in
any event not later than 15 days prior to the first day of each fiscal year
commencing with the fiscal year 2001 of the Parent, a copy of the initial budget
of the Companies for such fiscal year, prepared on a monthly basis and including
appropriate balance sheet, income statement, cash flow and working capital
projections for such period, (ii) promptly after the same are produced, copies
of any material adjustments to the budget of the Companies referred to in clause
(i) above, and (iii) promptly after the same is presented to the Board of
Directors of the Companies, a copy of any long-range business plans of the
Companies that may be prepared from time to time for or at the direction of the
Board of Directors of the Companies, and all material amendments thereto which
may be in effect from time to time;
(l) Variation from Budget -- as soon as available, but in any
event within 30 days following the end of each quarterly period beginning March
31, 2000, a written statement of a Responsible Officer of the Company setting
forth an explanation for any Material variance from the budget for such
quarterly reporting period;
(m) Borrowing Base Certificate -- a Borrowing Base Certificate as
and when provided under the Credit Agreement;
(n) Other Reports -- as soon as available, and in any event within
twenty (20) days after the close of each monthly accounting period of the
Company, an accounts receivable and summary accounts payable aging, and an
accounts receivable reconciliation report, each as of the close of such period
and in reasonable detail prepared by the Company and certified to by a Senior
Financial Officer; and
(o) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations, affairs,
financial condition, assets or properties of any Company or relating to the
ability of any Company to perform its obligations hereunder and under the
Debentures and the other Loan Documents (including, without limitation, any data
or information furnished to any other holder of Debt of any Company) as from
time to time may be reasonably requested by any Holder.
(p) Notices under Subordination Agreement with Senior Lender --
within five (5) days of receipt, a copy of any notices or other communications
provided to any Company by any holders of any Senior Debt pursuant to the terms
of Schedule 1.03 hereto.
27
Section 6.2 Officer's Certificate'. Each set of financial statements delivered
to a Holder pursuant to Section 6.1(a) or 6.1(b) hereof shall be accompanied by
a certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Companies were in
compliance with the requirements of Section 7.2 and Section 8.1 through Section
8.5, inclusive, during the quarterly or annual period covered by the statements
then being furnished (including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such Sections,
and the calculation of the amount, ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of each Company from
the beginning of the quarterly or annual period covered by the statements then
being furnished to the date of the certificate and that such review shall not
have disclosed the existence during such period of any condition or event that
constitutes a Default or an Event of Default or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof and
what action any Company shall have taken or proposes to take with respect
thereto.
Section 6.3 Inspection. Each Company shall permit the representatives of each
Holder, upon reasonable prior notice to the Company, to visit and inspect any of
the offices or properties of such Company, to examine all its books of account,
records, reports and other papers, to make copies and extracts therefrom and to
discuss the affairs, finances and accounts of such Company with such Company's
officers and accountants (and by this provision each Company authorizes said
accountants to discuss the affairs, finances and accounts of such Company), all
at such reasonable times during normal business hours and as often as may be
reasonably requested. Any such visit or inspection shall, during the
continuance of a Default or an Event of Default, be at the relevant Company's
expense.
ARTICLE 7
AFFIRMATIVE COVENANTS
Subject to the expiration provisions in Article 18 hereof, each of the
Companies shall comply with the following covenants, unless such compliance is
waived in writing by the Majority Holders.
Section 7.1 Compliance with Law. The Companies will comply with all laws,
ordinances or governmental rules or regulations to which it is subject,
including, without limitation, ERISA and Environmental Laws, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of its properties or to
the conduct of its business, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
28
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 7.2 Insurance. The Companies shall maintain at their own expense, with
insurers acceptable to the Majority Holders and comply with all terms and
conditions of the following insurance coverages:
(a) the Companies shall maintain all risk property insurance
against direct physical loss or damage on an all risks basis, including flood
and earthquake coverage, subject to a maximum deductible of $50,000. The
property shall be insured for the full replacement cost and such policy shall
contain an agreed amount endorsement waiving any coinsurance penalty;
(b) as an extension of the coverage required under Section 7.2(a),
the Companies shall maintain business income insurance on a profits form
including extra expense in an agreed amount not less than $2,000,000 with a
minimum period of indemnity of six (6) months, subject to a maximum five-day
waiting period or $50,000 deductible and shall contain an agreed amount
endorsement waiving any coinsurance penalty;
(c) the Companies shall maintain commercial general liability
insurance written on an occurrence basis with a limit of not less than
$1,000,000 each occurrence and $2,000,000 in the aggregate. Such coverage shall
include, but not be limited to, premises/operations, blanket contractual
liability, independent contractors, broad form products and completed
operations, personal injury, fire legal liability and employee benefits
liability. Such insurance shall not exclude coverage for punitive or exemplary
damages where insurable by law;
(d) the Companies shall maintain workers' compensation insurance
in accordance with statutory provisions covering accidental injury, illness or
death of an employee of the Companies while at work or in the scope of his or
her employment with the Companies and employer's liability insurance in an
amount not less than $500,000. Such coverage shall not contain any occupational
disease exclusions;
(e) the Companies shall maintain automobile liability insurance
covering owned, non-owned, leased, hired or borrowed vehicles against bodily
injury or property damage. Such coverage shall have a limit of not less than
$1,000,000;
(f) the Companies shall maintain excess or umbrella liability
insurance in an aggregate amount not less than $10,000,000, written on an
occurrence basis providing limits in excess of the insurance limits required
under Section 7.2(c), (d) (employers liability only), (e), (i), (j), and (k).
Such insurance shall follow form the primary insurances and drop down in case of
exhaustion of underlying limits and /or aggregates. Such insurance shall not
exclude coverage for punitive or exemplary damages where insurable by law;
(g) the Companies shall maintain employee dishonesty insurance in
an amount not less than $1,000,000 including loss Inside/Outside coverage,
Depositors Forgery, and
29
computer theft and funds transfer fraud, in an amount not less than $1,000,000
each insuring agreement;
(h) the Companies shall maintain employment practices liability
insurance written on a claims-made basis with a limit of not less than
$1,000,000 each loss and in the aggregate with a deductible not to exceed
$25,000;
(i) the Companies shall maintain professional liability insurance
written on a claims-made basis (with coverage for prior acts including, without
limitation, prior acts of P&M provided, that such coverage with respect to P&M
shall not be required to be in force prior to 30 days after the date of
Closing)) with a limit of not less than $5,000,000 each claim and in the
aggregate with a deductible not to exceed $50,000;
(j) the Companies shall maintain directors and officers liability
insurance in an amount not less than $5,000,000 with coverage to be provided for
the new board of directors with an effective date as of Closing; and
(k) if the Senior Debt is retired prior to the repayment of the
Loan, the Parent shall within ten (10) Business days of such retirement provide
to the Holders as collateral security for the Loan a collateral assignment of
the key man life insurance policies in the amount of $10,000,000 each on the
lives of Messieurs. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ which are required by Section 9.2 (b)
(xi) of the Credit Agreement With respect to each such life insurance policy,
the Parent shall be irrevocably designated as the owner and beneficiary
thereunder, and shall not change the beneficiary or owner thereof without the
prior written consent of the Majority Holders; and shall keep both such policies
in full force and effect while the Loan is outstanding.
Upon the request of the Majority Holders, the Companies will provide Holders
with copies of their insurance policies.
Section 7.3 Maintenance of Properties, Environmental Matters, Etc.. The
Companies will maintain and keep, or cause to be maintained and kept, its
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section 7.3 shall not
prevent an Company from discontinuing the operation and the maintenance of any
of its properties if such discontinuance is desirable in the conduct of its
business and such Company has concluded that such discontinuance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Without limiting the generality of this Section 7.3, each
Company: (i) shall maintain its properties in compliance in all Material
respects with any applicable Environmental Laws; (ii) shall obtain and maintain
in full force and effect all governmental approvals required for its operations
at or on its properties by any applicable Environmental Laws; (iii) shall cure
as soon as practicable any material violation of applicable Environmental Laws
with respect to any of its properties; (iv) shall not, and shall not permit any
other Person to, own or operate on any of its properties any landfill or dump or
hazardous waste treatment, storage or disposal facility as defined pursuant to
the Resource Conservation and Recovery Act of 1980, as amended, or any
comparable state law; (v) shall not use, generate, treat, store, release or
dispose of Hazardous Materials at or on any of its properties (including without
limitation, any underground storage tanks) except in the ordinary course of its
business and in Material compliance with all Environmental Laws; and (vi)
30
shall notify each Holder in writing, and within a reasonable period of time, and
provide any reasonably requested documents, upon learning of any Material
environmental claim or Material violation of any Environmental Laws, or any
release of a reportable quantity (as determined under any Environmental Law) of
a Hazardous Material, or any claim arising out of or in connection with a
release of a Hazardous Material, which arises in connection with any of its
properties, and any other environmental or health and safety condition which
would reasonably be expected to result in any material interference with the use
or operation of any of its properties or could reasonably be expected to have a
Material Adverse Effect. With respect to any release of Hazardous Materials, the
Companies shall conduct any necessary or required investigation, study, sampling
and testing, and undertake any cleanup, removal, remedial or other response
action necessary to remove, clean up or ▇▇▇▇▇ any material quantity of Hazardous
Materials released or disposed at or on any of its properties as required by any
applicable Environmental Law.
Section 7.4 Payment of Taxes and Claims. The Companies will file all tax
returns required to be filed in any jurisdiction and to pay and discharge all
taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on it or any of its
Properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of any Company, provided that no Company
need pay any such tax or assessment or claims if (i) the amount, applicability
or validity thereof is contested by such Company on a timely basis in good faith
and in appropriate proceedings, and such Company has established reserves
reasonably deemed by it to be adequate on its books with respect thereto and
(ii) the nonpayment of all such taxes and assessments in the aggregate could not
reasonably be expected to have a Material Adverse Effect and any Lien resulting
from such nonpayment of any such tax or assessment or claim is and remains a
Permitted Lien.
Section 7.5 Corporate Existence, Etc. Each Company will at all times preserve
and keep in full force and effect its legal existence, provided, however, that
(a) any Subsidiary may merge of consolidate with or into any other Subsidiary
if, at the time thereof and after giving effect thereto, (i) no Default or Event
of Default exists hereunder and (ii) in the case of any such transaction
involving an Inactive Subsidiary, such transaction shall satisfy the
requirements of Section 8.13 and (b) the foregoing shall not prohibit the
transactions required under Section 8.13. Each Company will at all times
preserve and keep in full force and effect all rights and franchises of such
Company unless, in the good faith judgment of such Company, the termination of
or failure to preserve and keep in full force and effect such right or franchise
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
Section 7.6 Subsidiaries.__The Parent will at all times own 100% of the
capital stock or membership interest (as applicable) of each Subsidiary,
provided, however, that any Subsidiary may merge into any other Subsidiary so
long as no Default exists hereunder. If any Company acquires any Subsidiary
after the Closing, such Company shall, concurrently with such acquisition, cause
such Subsidiary to join this Agreement as a co-borrower hereunder pursuant to an
instrument of joinder satisfactory in form and substance to the Majority Holder.
Section 7.7 Taxes.
(a) Payments Free and Clear of Taxes. Any and all payments by any
Company
31
hereunder, under the Debentures or under any other Loan Document shall be made
free and clear of and without deduction for any and all present or future taxes
(including any excise taxes), levies, imposts, deductions, charges, penalties,
assessments, or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Holder, taxes imposed on its income, capital,
profits or gains and franchise taxes imposed on it, in each case by (i) the
United States (including, without limitation, withholding taxes imposed by the
United States) including any authority, agency or instrumentality thereof, (ii)
the jurisdiction in which such Holder's office is located or (iii) the
jurisdiction in which such Person is organized, managed, controlled or doing
business, in each case including all political subdivisions thereof (all such
taxes, levies, imposts, deductions, charges, withholdings and liabilities not
excluded by the foregoing clauses (i), (ii) or (iii) being hereinafter referred
to as "Taxes"). If any Company shall be required by law to withhold or deduct
any Taxes from or in respect of any sum payable hereunder, under the Debentures
or under any other Loan Document to such Holder or the Majority Holders, (x)
such sum payable shall be increased as may be necessary so that after making all
required withholdings or deductions (including withholdings or deductions
applicable to additional sums payable under this Section 7.7) such Holder or the
Majority Holders (as the case may be) receives an amount equal to the sum it
would have received had no such withholdings or deductions been made, (y) such
Company shall make such withholdings or deductions, and (z) such Company shall
pay the full amount withheld or deducted to the relevant taxation authority or
other authority in accordance with applicable law. In no event shall any Holder
receive actual payments hereunder which are duplicative of other actual payments
made to such Holder hereunder.
(b) Other Taxes. In addition, the Companies agree to pay any
present or future stamp, value-added or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from and which relate
directly to (i) any payment made under any Loan Document or (ii) the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Debentures or any other Loan Document (hereinafter referred to as "Other
Taxes").
(c) Indemnification. The Companies will indemnify all Holders
against, and reimburse each on demand for, the full amount of all Taxes and
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by
any Governmental Authority on amounts payable under this Section 7.7 and any
additional income or franchise taxes resulting therefrom) incurred or paid by
such Holder or the Majority Holders (as the case may be) or any affiliate of
such Holder and any liability (including penalties, interest, and out-of-pocket
expenses paid to third parties) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or lawfully payable;
provided that the Companies shall not be obligated to indemnify any Holder,
Agent or any affiliate of such Holder or Agent for liability resulting from such
person's gross negligence or willful misconduct or its failure to give notice
thereof to the Company within a reasonable period after it becomes aware of such
Taxes or Other Taxes. A certificate as to any amount payable to any person under
this Section 7.7 submitted by such person to the Company shall, absent manifest
error, be final, conclusive and binding upon all parties hereto. This
indemnification shall be made within thirty (30) days from the date such person
makes written demand therefor and within thirty (30) days after the receipt of
any refund of the Taxes or Other Taxes following final determination that the
Taxes or Other Taxes which gave rise to the indemnification were not required to
be paid, such person shall repay the amount of such paid indemnity to the
Company. Such person agrees to take reasonable efforts to pursue any right such
person has to any rebate, refund or credit of such paid indemnity.
32
(d) Receipts. Within thirty (30) days after the date of any
payment of Taxes or Other Taxes by an Company, such Company will furnish to the
Holder or Holders affected thereby, the original or a certified copy of a
receipt or other documentation reasonably satisfactory to such Holder evidencing
payment thereof. The Parent will furnish to any Holder upon such ▇▇▇▇▇▇'s
request from time to time an Officer's Certificate stating that all Taxes and
Other Taxes of which it is aware that are due have been paid and that no
additional Taxes or Other Taxes of which it is aware are due.
(e) Withholding Forms. Each Holder which is not created or
organized under the laws of the United States or a political subdivision thereof
shall deliver to the Parent on or before the date of the Closing or upon
becoming, and from time to time thereafter upon the Parent's request, a true and
accurate certificate executed in duplicate by a duly authorized officer of such
Holder to the effect that such Holder is eligible to receive payments hereunder
and under the Debentures without deduction or withholding of United States
federal income tax (I) under the provisions of an applicable tax treaty
concluded by the United States (in which case the certificate shall be
accompanied by two duly completed copies of IRS Form 1001 (or any successor or
substitute form or forms)) or (II) under Sections 1441(c) (1) and 1442(a) of the
Internal Revenue Code (in which case the certificate shall be accompanied by two
duly completed copies of IRS Form 4224 (or any successor or substitute form or
forms)) or (III) in the case of any Holder claiming exemption from United States
withholding tax with respect to "portfolio interest," a properly completed and
executed Internal Revenue Service Form W-8 (or any successor or substitute form
or forms) and a certificate representing that such holder is not a "bank" for
purposes of Section 881(c) of the Internal Revenue Code, is not a "10%
shareholder" of the Parent within the meaning of Section 871(h)(3)(B) of the
Internal Revenue Code, and is not a "controlled foreign corporation" with
respect to the Parent within the meaning of Section 864(d)(4) of the Internal
Revenue Code.
Section 7.8 [Intentionally Omitted].
Section 7.9 Post Closing Balance Sheets. (a) Within 30 days after Closing, the
Parent will deliver to each Holder a consolidated balance sheet of the Parent,
prepared by the Parent reflecting the assets, liabilities and stockholders'
equity of the Parent as of the date of Closing, adjusted to reflect the effect
of the Loan and the use of the proceeds thereof and the consummation of the
Acquisition, including the payment of related costs and expenses; (b) within 60
days after Closing the Parent will deliver to each Holder a copy of all
information described in Section 6.1(k) hereof, but with respect to fiscal year
2000 instead of 2001.
Section 7.10 Use of Proceeds. All proceeds of the Loan shall be used as
provided in Schedule 5.14; each Company shall allow Holders to conduct a review
of such Company's books and records to confirm such use; and within ten (10)
days of such use the Parent shall provide a written certification of such use
to the Holders.
Section 7.11 Year 2000 Problem. The Companies shall take all actions necessary
and commit adequate resources to assure that its computer-based and other
systems are able to effectively process data, including dates before, on and
after January 1, 2000, without experiencing any Year 2000 Problem that could
cause a Material Adverse Effect. At the request of any Holder or Agent, the
Parent will provide such Holder and Agent with assurances and substantiations
(including, but not limited to, the results of internal and external audit
reports prepared in the ordinary course of business) reasonably acceptable to
such Holder or Agent as to the capability of the Companies to
33
conduct their businesses and operations before, on and after January 1, 2000
without experiencing a Year 2000 Problem causing a Material Adverse Effect.
Section 7.12 Board Meetings and Representation. Each Company shall hold
meetings of its Board of Directors at least quarterly; allow two designees of
the Holders, (one designated by Group 1 and one by Newcourt), to attend such
meetings and all meetings of committees of such Board at the Parent's expense
(such expenses not to include hourly rates of the person attending such
meetings); provide the Holders the same prior notice of such meetings and
written materials as given to the directors (notice to the Holders by facsimile
or voice mail shall be sufficient); notwithstanding the foregoing, if any of the
Companies' Boards desires to act by unanimous written consent in lieu of a
meeting, it may do so provided that the Holders receive, prior to their
adoption, a copy of the resolutions to be adopted in the same manner and at the
same time as provided to the directors; each of the Companies shall use its best
efforts to cause the designee of Group 1, upon written request of Group 1, to be
elected to its Board of Directors, and to cause a designee of Group 2, upon the
written request of the holders of Debentures (or Warrants, in the event that no
Debentures are outstanding) representing a majority of the outstanding
Debentures held by Group 2 whenever an uncured Event of Default shall be
outstanding, to be elected to such board, but only in cases where one or more of
the entities within the definition of "Group 1" or "Group 2" (as the case may
be), or their affiliates, owns a Debenture, a Warrant, or Shares obtained
directly or indirectly pursuant to a Warrant;
Section 7.13 First Refusal for Future Financings. Each Company shall offer to
issue to the Holders all subordinated debt, equity, or convertible securities
proposed to be issued by any of the Companies, on the most favorable terms to be
offered to any other party; such offer may be accepted in whole but not in part
by the Holders who must respond to such offer within ten (10) days of receipt
thereof; failure to respond within such time shall be construed as a decline of
the offer by the relevant Holder; this Section shall not be construed to limit
or qualify any covenant against such issuance; each Holder shall be entitled to
purchase that portion of any such issuance corresponding to their respective
percentage of the Loan at the time of the issuance, and to their ratable share
of any portion thereof declined by any other Holder;
Section 7.14 Payments and Other Debts. Each Company shall make all payments of
principal, interest and expenses as and when due under the Debentures, without
setoff and regardless of any claim any of the Companies may have against the
Holders; and comply in all respects with all terms, conditions and covenants
relating to other Debt obligations of the Companies;
Section 7.15 Information Requests. Each Company shall furnish from time to time
to any Holder at the Parent's expense all information a Holder may reasonably
request to enable such Holder to prepare and file any report or form required of
such Holder by the Securities and Exchange Commission or any other regulatory
authority;
Section 7.16 Further Assurance. Each Company shall from time to time promptly
execute and deliver to the Holders such additional documents, and take such
other reasonable steps, as the Holders may reasonably require to carry out the
purposes hereof and of the other Loan Documents, or to protect the Holders'
rights hereunder or thereunder.
34
Section 7.17 Payments Under Special Indemnity of P&M. Each Company shall pay
to the Holders, within 5 days of receipt, as a prepayment against the principal
balance under the Loan, all sums received pursuant to Section 8.1A of the
Acquisition Agreement, except (a) to the extent such sums are paid to the
holders of the Senior Debt, and (b) sums expended to recruit replacements for
Messieurs ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ (as the case may be), up to $2,000,000 for each of
them.
ARTICLE 8
NEGATIVE COVENANTS
Subject to the expiration provisions in Article 18 hereof, each of the
Companies shall comply with the following covenants, unless such compliance is
waived in writing by the Majority Holders.
Section 8.1 Coverage Ratios.
(a) The Companies will not permit the Total Interest Charges
Coverage Ratio at the end of each calendar quarter to be less than the ratio
specified below set forth opposite such quarter end:
Calendar Quarter Ending Ratio
March 31, 2000 2.00 to 1.00
June 30, 2000 2.00 to 1.00
September 30, 2000 2.10 to 1.00
December 31, 2000 2.10 to 1.00
March 31, 2001 2.25 to 1.00
June 30, 2001 2.25 to 1.00
September 30, 2001 2.75 to 1.00
December 31, 2001 2.75 to 1.00
March 31, 2002 3.00 to 1.00
June 30, 2002 3.00 to 1.00
September 30, 2002 3.00 to 1.00
December 31, 2002 3.00 to 1.00
March 31, 2003 3.50 to 1.00
June 30, 2003 3.50 to 1.00
September 30, 2003 3.50 to 1.00
December 31, 2003 3.50 to 1.00
March 31, 2004 3.50 to 1.00
June 30, 2004 3.50 to 1.00
September 30, 2004 3.50 to 1.00
December 31, 2004 3.50 to 1.00
March 31, 2002 and each calendar
quarter end thereafter 3.50 to 1.00
(b) The Companies will not permit the Total Debt Service Coverage
Ratio at the end of each calendar quarter to be less than the ratio specified
below set forth opposite such quarter end:
35
Calendar Quarter Ending Ratio
March 31, 2000 1.05 to 1.00
June 30, 2000 1.05 to 1.00
September 30, 2000 1.05 to 1.00
December 31, 2000 1.05 to 1.00
March 31, 2001 1.15 to 1.00
June 30, 2001 1.15 to 1.00
September 30, 2001 1.15 to 1.00
December 31, 2001 1.15 to 1.00
March 31, 2002 and each calendar 1.25 to 1.00
quarter end thereafter
Section 8.2 Current Ratio.
The Companies will not permit the Current Ratio at the end of each
calendar quarter to be less than 1.25 to 1.00:
Section 8.3 Minimum EBITDA. The Companies will not permit EBITDA for any 12
month period to be less than the amount specified below opposite the last day of
such period.
12-month period ending Minimum EBITDA
March 31, 2000 $22,000,000
June 30, 2000 $22,500,000
September 30, 2000 $22,500,000
December 31, 2000 $23,500,000
March 31, 2001 $24,500,000
June 30, 2001 $25,000,000
September 30, 2001 $26,000,000
December 31, 2001 $28,000,000
March 31, 2002 and each calendar $31,000,000
quarter end thereafter
Section 8.4 Debt to Cash Flow Ratio.
The Companies will not permit the Debt to Cash Flow Ratio at the end of each
calendar quarter to be greater than the ratio specified below set forth opposite
such quarter end:
Calendar Quarter Ending Ratio
March 31, 2000 4.25 to 1.00
June 30, 2000 4.25 to 1.00
September 30, 2000 4.25 to 1.00
December 31, 2000 4.25 to 1.00
March 31, 2001 3.75 to 1.00
June 30, 2001 3.75 to 1.00
September 30, 2001 3.50 to 1.00
December 31, 2001 3.50 to 1.00
March 31, 2002 3.00 to 1.00
June 30, 2002 3.00 to 1.00
September 30, 2002 3.00 to 1.00
36
Calendar Quarter Ending Ratio
December 31, 2002 3.00 to 1.00
March 31, 2003 and each calendar 2.50 to 1.00
quarter end thereafter
Section 8.5 Lease Rentals. The Companies will not, at any time, permit
aggregate Lease Rentals at the end of each calendar year for the immediately
preceding period of 12 consecutive calendar months ending at the end of such
year to exceed the amount specified below opposite such year end and set forth
below:
Calendar Year Ending Amount
December 31, 2000 $ 6,000,000
December 31, 2001 $ 8,000,000
December 31, 2002 $10,000,000
December 31, 2003 $12,000,000
December 31, 2004 $14,000,000
December 31, 2005 and thereafter $16,000,000
Section 8.6 Maximum Executive Compensation. The Companies will not pay salaries
or other compensation, or make advances or loans including, without limitation
loans or advances which are anticipated to be forgiven or not timely repaid in
cash, to any employee in excess of seven hundred fifty thousand dollars
($750,000) per annum except pursuant to Performance Bonus plans listed in
Schedule 8.6. For purposes hereof, the term "Compensation" shall not include
severence payments or loans for stock purchase. No employee shall have an
employment contract or be subject to a compensation plan with a term of more
than four (4) years.
Section 8.7 Limitation on Capital Expenditures. The Companies will not permit
the aggregate amount of Capital Expenditures for any year to exceed the amount
specified below for such year.
37
Year Maximum Capital Expenditure
-------------------------------------------------------------------------------
2000 $3,090,000
-------------------------------------------------------------------------------
2001 $3,180,000
-------------------------------------------------------------------------------
2002 $3,280,000
-------------------------------------------------------------------------------
2003 $3,380,000
-------------------------------------------------------------------------------
2004 $3,480,000
-------------------------------------------------------------------------------
2005 $3,580,000
-------------------------------------------------------------------------------
2006 $3,690,000
-------------------------------------------------------------------------------
Section 8.8 Limitations on Debt. No Company will create, assume, guarantee or
otherwise incur or in any manner be or become liable in respect of any Debt,
except:
(a) The Loan and the Debentures;
(b) Senior Debt (i) in the amount outstanding at the Closing, as
such Debt may be amended, refinanced or refunded and (ii) any additional amount
of Senior Debt to the extent the incurrence of such portion of Senior Debt does
not violate any other covenant or provision of this Agreement or exceed
principal amount specified in the definition of Senior Debt in the Subordination
Agreement between the Holders and the Agent (as such definition may from time to
time be amended);
(c) Any Swap entered into by any Company which is required
according to the terms of any Senior Debt Document;
(d) Other Debt set out in Schedule 5.15;
(e) Unsecured debt or secured Debt permitted pursuant to Section
8.9(g), for the purpose of making Capital Expenditures, in an aggregate
principal amount not to exceed $1,500,000 per year; and
(f) Other secured debt permitted pursuant to Section 8.9(g) in an
aggregate principal amount not to exceed $500,000.
Section 8.9 Limitation on Liens. No Company will create or incur, or suffer to
be incurred or to exist, any Lien on its property or assets, whether now owned
or hereafter acquired, or upon any income or profits therefrom, or transfer any
property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its general creditors, or acquire or agree to acquire
any property or assets upon conditional sales agreements or other title
retention devices, except for Liens as follows (collectively, "Permitted
Liens"):
(a) Liens for property taxes and assessments or governmental
charges or levies and ▇▇▇▇▇ securing claims or demands of mechanics and
materialmen, provided payment thereof is not at the time required by Section
7.4; provided further in each case, the obligation secured is not overdue
38
or, if overdue, is bonded or the execution of which is stayed by appropriate
judicial action; and provided finally that any such Lien is subject and
subordinate to the Lien of the Senior Debt Documents unless otherwise provided
by operation of law;
(b) Liens of or resulting from any judgment or award, the time for
the appeal or petition for rehearing of which shall not have expired, or in
respect of which such Company shall at any time in good faith be prosecuting an
appeal or proceeding for a review and in respect of which the obligation secured
by such ▇▇▇▇ is bonded or a stay of execution pending such appeal or proceeding
for review shall have been secured; provided that any such Lien is subject and
subordinate to the Lien of the Senior Debt Documents;
(c) Liens incidental to the conduct of business or the ownership
of properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, warehousemen's and
attorneys' liens and statutory landlords' liens) and Liens to secure the
performance of bids, tenders or trade contracts, or to secure statutory
obligations, surety or appeal bonds or other Liens of like general nature
incurred in the ordinary course of business and not in connection with the
borrowing of money; provided in each case, the obligation secured is not overdue
or, if overdue, is being contested in good faith by appropriate actions or
proceedings and is bonded or the execution of which is stayed by appropriate
judicial action; and provided further that any such Lien is subject and
subordinate to the Lien of the Senior Debt Documents unless otherwise provided
by operation of law;
(d) Minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other similar
purposes, or zoning or other restrictions as to the use of real properties,
which do not in any event materially impair the value of such real property or
the use thereof in the operation of the business of such Company;
(e) Liens existing as of the date of Closing and reflected in
Schedule 5.15;
(f) Liens of the Senior Debt Documents, Liens expressly permitted
pursuant thereto and Liens securing Swaps described in Section 8.8(c) hereof;
and
(g) Liens incurred after the date of Closing given to secure the
payment of the purchase price incurred in connection with the acquisition of
fixed assets useful and intended to be used in carrying on the business of an
Company, including Liens existing on such fixed assets at the time of
acquisition thereof, whether or not such existing Liens were given to secure the
payment of the purchase price of the fixed assets to which they attach so long
as they were not incurred, extended or renewed in contemplation of such
acquisition, provided that (i) the Lien shall attach solely to the fixed assets
acquired or purchased, (ii) at the time of acquisition of such fixed assets, the
aggregate amount remaining unpaid on all Debt secured by Liens on such fixed
assets whether or not assumed by such Company shall not exceed 100% of the
lesser of the total purchase price or Fair Market Value at the time of
acquisition of such fixed assets (as determined in good faith by the Board of
Directors of the Company), and (iii) all such Debt shall have been incurred
within the limitations provided in Section 8.8(e);
39
Section 8.10 Distributions. No Company will at any time declare or make, or
incur any liability to declare or make, any Distribution, provided, however,
that the foregoing provisions of this Section 8.10 shall not prohibit the
payment by the Companies of (i) earn-out payments contained in agreements
described on Schedule 8.10 and (ii) repurchases by a Company in the event of any
"Involuntary Transfer" as defined in and as contemplated by Section 3(b) of the
Restricted Stock Agreement, provided, further, however, that in the case of any
such payment pursuant to clause (i) or (ii) above (excluding earn-out
arrangementsdescribed on Schedule 8.10), at the time of such payment and after
giving effect thereto no Default or Event of Default exists hereunder.
Section 8.11 Restricted Investment. No Company will make or authorize any
Restricted Investments.
Section 8.12 Merger, Consolidation, Etc. No Company shall consolidate with or
merge with any other corporation or convey, transfer or lease substantially all
of its assets in a single transaction or series of transactions to any Person,
provided, however, that (a) the foregoing shall not prohibit any Subsidiary from
consolidating or merging with or into any other Subsidiary or conveying,
transferring or leasing all or substantially all of its assets to another
Subsidiary if, at the time thereof and after giving effect thereto, (i) no
Default or Event of Default exists hereunder and (ii) in the case of any
transaction involving an Inactive Subsidiary, such transaction shall satisfy the
requirements of Section 8.13, and (b) the foregoing shall not prohibit the
transaction required under said Section 8.13.
Section 8.13 Sale of Assets. No Company shall make any Asset Disposition.
Notwithstanding the foregoing, as promptly as practicable and in any even within
90 days after the date of Closing, the Companies shall furnish to the Holders a
detailed plan whereunder (a) substantially all of the operating assets of the
Parent are transferred to either an existing Subsidiary or a wholly-owned
Subsidiary to be formed in connection with such transfer, and (b) the Inactive
Subsidiaries are dissolved or merged into a Subsidiary which is a Company with
such Company as the surviving or continuing corporation. The aforementioned
plan shall be satisfactory to the Majority Holders in form, scope and substance.
In addition, as promptly as practicable and within 180 days after the date of
Closing, the transactions contemplated by and described in the aforementioned
plan shall be fully consummated upon terms and provisions satisfactory in form,
scope and substance to the Majority Holders.
Section 8.14 Issuance of Certain Stock. (a) No Company shall issue after the
Closing any shares of capital stock of any class or other equity interests, or
any options, warrants, convertible securities or rights with respect thereto,
other than (i) pursuant to the exercise of the Warrants or other stock purchase
warrants of the Parent outstanding as of Closing, (ii) capital stock of the
Company of an existing class issued as a stock split or stock dividend, or (iii)
capital stock issued by the Parent pursuant to its 1992 Stock Option Plan or its
1997 Stock Option Plan; (iv) capital stock issued by the Parent for cash
consideration equal to the fair market value thereof (net of customary discount
and commissions) provided that the net cash proceeds thereof are concurrently
with the receipt thereof applied to the prepayment of the Senior Debt or the
Loan; and (v) capital stock issued by the Company for fair consideration in
connection with a Permitted Acquisition.
Section 8.15 Sale-and-Leasebacks. No Company shall enter into any Sale-and-
Leaseback Transaction.
40
Section 8.16 Prohibition of Change in Fiscal Year. No Company will change its
fiscal year-end for accounting purposes from December 31 of any year.
Section 8.17 Sale or Discount of Receivables. No Company will discount or sell
its notes receivable or accounts receivable.
Section 8.18 [Intentionally Omitted.]
Section 8.19 Partnerships, Joint Ventures and LLC's'. No Company will act or
participate as a general or limited partner in any partnership or as a joint
venturer in any joint venture or as a member of any LLC, other than the Parent
as a member of P&M.
Section 8.20 Margin Securities. No Company will own, purchase or acquire (or
enter into any contract to purchase or acquire) any "margin security" as defined
by any regulation of the Board of Governors of the Federal Reserve System as now
in effect or as the same may hereafter be in effect other than Securities
received by a Company from an account debtor which is the subject of any
proceedings under the Bankruptcy Code or any other comparable bankruptcy or
insolvency law applicable under the law of any other country or political
subdivision thereof.
Section 8.21 Payments of Debt. No Company shall, directly or indirectly or
through any Affiliate, purchase, redeem, retire, acquire, advance or pay any
Debt of a Company or deposit with any trustee in defeasance of any indenture
under which such Debt may be outstanding, except: (a) the payment of the
Debentures; (b) the payment of Senior Debt; (c) Debt permitted by this Agreement
incurred within the limitations of Section 8.8(c) or (e).
Section 8.22 No Amendment of Organization Documents. The Companies covenant
that each will not permit any amendment to or modification of its Articles of
Incorporation or Bylaws or comparable constituent documents if such amendment or
modification could adversely affect the rights of the Holders.
Section 8.23 Guaranties. No Company will become or be liable in respect of any
Guaranty, except for a Debt of another Company permitted by Section 8.8 hereof;
Section 8.24 Amendments to Other Documents. No Company will cause or permit,
directly or indirectly, any amendment, waiver, consent or modification
(a) to the Senior Debt Documents which is inconsistent with
Section 4.1.2 of Exhibit 1.03 hereto; or
(b) to the Companies agreements with Messieurs ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇
set out as Exhibit 10.15, or
(c) to the Restricted Stock Agreements dated as of the date of
Closing between the Company and ▇▇▇▇▇▇▇▇ and, separately, ▇▇▇▇▇; or
41
(d) to the compensation plans set out in Schedule 8.06 hereof;
provided, however,
that the foregoing shall not preclude (i) routine ministerial modifications to
any employment or compensation agreement, (ii) amendments to compensations plans
(which shall not, in any event, include the Restricted Stock Agreement) and
Performance Bonuses provided, that such amendments are not otherwise prohibited
by this Agreement, including, without limitation, Section 8.6 hereof, and any
Performance Bonus so amended continues to constitute a Performance Bonus
hereunder and (iii) any holder of Senior Debt from waiving any default by a
Company under the Senior Debt Documents or from waiving compliance by the
Companies with any such provisions of the Senior Debt Documents, unless, as a
condition of obtaining such waiver, the Companies are required to comply with
additional terms or conditions which are inconsistent with Section 4.1.2 of
Exhibit 1.03 hereto.
Section 8.25 Transactions with Affiliates. No Company will enter into,
directly or indirectly, (a) any Material transaction or Material group of
related transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service and including
the employment as an officer of any immediate family member of an Affiliate), or
(b) any employment, management, consulting or advisory or similar arrangements,
in each case, with any Affiliate of such Company, provided that such
transactions shall be permitted if (x) pursuant to the reasonable requirements
of such Company's business and upon fair and reasonable terms no less favorable
to such Company than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate of such Company, and (y) any Material
transactions or Material employment management, consulting, advisory or similar
arrangements, are specifically approved by the Board of Directors of the Parent.
Prior to the consummation of the transactions required pursuant to the
provisions of Section 8.13, (i) no Company will enter into, directly or
indirectly, any transaction or arrangement with any Inactive Subsidiary or (ii)
permit any Inactive Subsidiary to engage in any transaction other than pursuant
to Section 10.13.
Section 8.26 Line of Business. No Company will enter into any line or area of
business other than scientific, litigation, financial or claims management
consulting services.
Section 8.27 Termination of Pension Plans. No Company will withdraw from any
Multiemployer Plan or permit any employee benefit plan maintained by an Company
to be terminated if such withdrawal or termination would result in withdrawal
liability (as described in Part 1 of Subtitle E of Title IV of ERISA) or the
imposition of a Lien on any Property of the Company pursuant to Section 4068 of
ERISA. No Company will, or will permit any ERISA Affiliate to, (i) maintain,
contribute to, or have any liability with respect to, any defined benefit plan
under ERISA or (ii) be subject to, or obligated under, any Multi-Employer Plan.
Section 8.28 Intentionally Omitted.
Section 8.29 Certain Compensation. No Company shall enter into any phantom
stock or similar compensation program with any Person unless such program
prohibits any rights of exercise, required repurchase or other direct or
indirect compensation if and so long as any of the Loan hereunder remain
outstanding.
42
ARTICLE 9
DEFAULT
Section 9.1 Events of Default. Any of the following events shall be an "Event
of Default" as that term is used herein:
(a) Principal and Interest Payments. The Companies fail to make
payment when due of any principal or interest installment on the Debentures
within three (3) business days of the date when due;
(b) Representations and Warranties. Any representation or warranty
made by the Companies herein proves to have been incorrect in any material
respect with reference to facts as they exist at the time the representation or
warranty was made or deemed made; or any representation, statement (including
financial statements), certificate or data furnished or made by any of the
Companies (or any officer, accountant or attorney of any of the Companies) under
this Agreement, or any representation by Messieurs ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ to the
Parent in connection with the Acquisition, proves to have been untrue in any
material respect, as of the date as of which the facts therein set forth were
stated or certified;
(c) Covenants. Any of the Companies, or Principals defaults in the
observance or performance of any of the covenants or agreements contained in
this Agreement other than Section 4.1, and, in the case of covenants and
agreements of the Companies, other than those in Sections 6.1(h), (i), (j), (l),
and (p), 7.6, 8.1, 8.2, 8.3, 8.4 and 8.5 hereof, such default continues
unremedied for a period of 30 days after the earlier of (i) notice thereof being
given by any Holder to the Parent and, if applicable, the Principals, or (ii)
such default otherwise actually becoming known to the officers or a Responsible
Officer of the Parent;
(d) Loan Documents. The Companies default in the observance or
performance of any of the covenants or agreements contained in any Loan Document
to which it is a party other than this Agreement, which continues beyond the
expiration of any notice and cure period pertaining thereto;
(e) Other Debt to Holders. The Companies default in the payment of
any amounts due to Holders, or Holders declares a default by any of the
Companies (which has not been cured within any applicable cure periods), in
connection with the observance or performance of any of the covenants or
agreements contained in any credit agreements, notes, collateral or other
documents relating to any indebtedness of the Companies to Holders, other than
the Debentures;
(f) Cross Acceleration to Senior Debt. Any holder or holders of
any portion of the Senior Debt shall accelerate the maturity of all or any
material portion of such Debt;
(g) Cross Default to Other Obligations. Without implying that such
other indebtedness is permitted, the Companies default in the payment of any
amounts due (other than the Senior Debt) to any person other than Holders, or in
the observance or performance of any of the covenants or agreements contained in
any Material credit agreements, notes, leases, collateral or
43
other documents relating to any Material obligation (other than the Senior Debt)
of any Company to any person other than Holders, and any grace period applicable
to such default shall lapse; for purposes hereof, a Debt shall be deemed
material if the unpaid principal balance thereof is $1,000,000 or more, a lease
shall be material if the aggregate rentals payable in the remaining term are
$1,000,000 or more, and any other agreement shall be material if the aggregate
consideration payable thereunder to or by any Company is $1,000,000 or more.
(h) Involuntary Bankruptcy or Receivership Proceedings. A
receiver, conservator, liquidator or trustee of the Companies or of their
property is appointed by order or decree of any court or agency or supervisory
authority having jurisdiction; or an order for relief is entered against the
Companies or any Principal under the U.S. Bankruptcy Code; or the Companies are
adjudicated bankrupt or insolvent; or any material portion of the properties of
the Companies or any Principal is sequestered by court order and such order
remains in effect for more than fifty (50) days after the Companies obtain
knowledge thereof; or a petition is filed against the Companies under any state,
reorganization, arrangement, insolvency, readjustment of debt, dissolution,
liquidation or receivership law of any jurisdiction, whether now or hereafter in
effect, and such petition is not dismissed within sixty (60) days;
(i) Voluntary Petitions. The Companies file a petition under the
U.S. Bankruptcy Code or seeks relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any case or petition against it under any such law;
(j) Assignments for Benefit of Creditors. The Companies make a
general assignment for the benefit of creditors, or admit in writing theirs
inability to pay its debts generally as they become due, or consents to the
appointment of a receiver, trustee or liquidator of all or any part of its
property;
(k) Change of Control. A Change of Control of the Companies shall
occur.
(l) Loss of Key Employees. For any reason except his death or
disability, either Principal fails to renew his Employment Agreement with the
Company, is otherwise no longer employed by the Companies and engaged in their
operations and management in substantially his present capacity, or fails to
give his full time and attention to the Companies business; unless the Board of
Directors of the Parent engages, within 90 days of such event, a replacement for
the relevant individual approved in writing by the Majority Holders, which
approval shall not unreasonably be withheld;
(m) a final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 are rendered against any Company and which
judgments are not, within 30 days after entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within 30 days after the expiration
of such stay; or
(n) the relevant Company shall have terminated the employment of
▇▇. ▇▇▇▇▇▇▇▇ or ▇▇. ▇▇▇▇▇ "Without Cause" as contemplated in the ▇▇▇▇▇▇▇▇ or
▇▇▇▇▇ Employment Agreement, as the case may be, or either of Messieurs ▇▇▇▇▇▇▇▇
or ▇▇▇▇▇ shall have terminated
44
his employment with the Company for "Good Reason" as contemplated in such
Agreements, unless the Board of Directors of P&M engages, within 90 days of any
such event, a replacement for the relevant individual approved by the Majority
Holders, which approval shall not be unreasonably withheld, it being understood
that nothing herein shall create any right by any such party to make any claim
of any type against ▇▇. ▇▇▇▇▇▇▇▇ or ▇▇. ▇▇▇▇▇ in any way related to the Event of
Default described in this paragraph.
Section 9.2 Remedies. Upon the occurrence of any Event of Default
(a) the Majority Holders may by written notice to the Parent,
declare the entire principal amount of the Loan then outstanding, including
interest accrued thereon, together with all other fees and charges payable in
connection with the Loan, to be immediately due and payable without presentment,
demand, protest, notice of protest or dishonor or other notice of default of any
kind, all of which are hereby expressly waived by each of the Companies; and
(b) any Holder may set-off any funds of the Companies in the
possession of such Holder (in its capacity hereunder), against any amounts then
due by the Companies to Holders pursuant to this Agreement.
Nothing in this Section 9.2 or this Agreement shall impair the right of the
lawful holder of any Debenture to accelerate the maturity thereof according to
the terms therein.
ARTICLE 10
CONDITIONS TO CLOSING
The obligations of the Holders to fund the Loan and purchase the Warrants
at Closing shall be subject to the satisfaction, prior to or at Closing, of the
following conditions:
Section 10.1 Issuance of Debentures and Warrants. The Companies shall have
issued to each Holder the respective Debenture and the Parent shall have issued
and sold the Warrants to such Holder hereunder.
Section 10.2 Transaction Documents. The Holders shall have received, in form
and substance satisfactory to them and its counsel, this Agreement, the other
Loan Documents and the Warrants, duly executed, and each such document shall be
in full force and effect.
Section 10.3 Certified Documents. The Companies shall have delivered or caused
to be delivered to the Holders copies of the following documents, duly
certified, or the following certificates, as applicable:
(a) Resolutions of the Board of Directors of each of the
Companies authorizing (i) the execution, delivery, and performance of the
Transaction Documents to which it is a party, (ii) the consummation of the
transactions contemplated by the Transaction Documents to which it is a party,
and (iii) all other actions to be taken by each such Company in connection with
the Transaction Documents or the Agreement
45
(b) Certificates, signed by the Secretary or an Assistant
Secretary of each of the Companies, dated as of the Closing Date, as to (i) the
incumbency, and containing the specimen signatures of the Persons authorized to
execute on behalf of each of the Companies the Loan Documents, together with
evidence of the incumbency of such Secretary or Assistant Secretary, and (ii)
the authenticity of the Company's Certificate of Incorporation and Bylaws; and
(c) A certificate of good standing of each of the Companies, from
the Secretary of State of each respective jurisdiction of organization, and of
each state in which the Company is qualified to do business, in each case, dated
within 15 days of the Closing Date.
Section 10.4 Representations and Warranties; No Default; No Adverse Change.
The representations and warranties of the Companies contained in this Agreement
shall be true in all material respects on the Closing Date except as affected by
the consummation of the subject transactions, and there shall exist on such date
and after giving effect to such transactions, no Event of Default or breach of
any Loan Document. The Companies shall have delivered to the Holders an
Officer's Certificate, dated the Closing Date, to all such effects.
Section 10.5 Solvency Opinions. Holders shall have received a solvency opinion
with respect to the Companies, in form and substance satisfactory to Holders
from Research Valuation Corporation, and Holders shall be satisfied that (i) the
facts assumed in such opinion shall be accurate, and (ii) the information given
to Research Valuation Corporation for such opinion shall be complete and shall
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make such information not misleading, and (iii) there shall
have been no Material change in the facts and circumstances thereof or to the
assumptions made therein.
Section 10.6 Solvency Certificate. The Holders shall have received a
certificate from the Financial Officer of the Parent, on behalf of the
Companies', dated as of the Closing Date, certifying each the Company is solvent
prior to and after giving effect to the consummation of the transactions
contemplated hereby, such certificate to be in form and substance satisfactory
to the Holders.
Section 10.7 Opinions of Counsel. The Holders shall have received the opinion
or opinions of counsel to the Companies addressed to the Holders and dated the
Closing Date satisfactory in form and substance to Holders and their counsel.
Section 10.8 Transaction Permitted by Applicable Laws; No Injunction. The entry
into the Loan and the sale and purchase of the Warrants hereunder shall not be
prohibited by any applicable law or governmental regulation. No preliminary,
temporary or permanent injunction or restraining order or other binding order,
decree or ruling issued by a court or governmental agency, shall be in effect or
be pending which shall or would have the effect of preventing the consummation
of the transactions contemplated by this Agreement.
Section 10.9 Compliance with Securities Laws. The offering, issuance, and sale
by the Company of the Debentures or of the Warrants by the Parent shall have
complied with all applicable requirements of Federal and state securities laws,
and the Holders shall have received evidence of such compliance in form and
substance satisfactory to them.
46
Section 10.10 Approvals and Consents. The Holders shall have received
evidence satisfactory to them that the Companies have received all
authorizations, consents, approvals, licenses, franchises, permits, and
certificates by or of all governmental bodies in each case, necessary for the
issuance of the Debentures and Warrants, and the execution and delivery of the
Transaction Documents, and all of the foregoing shall be in full force and
effect on the Closing Date. The Holders also shall have received evidence
satisfactory to them indicating that all material consents and approvals
necessary to complete the Acquisition have been obtained by the Companies on or
prior to the Closing Date, including all consents and approvals contemplated by
the Acquisition Agreement.
Section 10.11 Acquisition Documents. True, correct, and complete copies of each
of the Transaction Documents shall have been delivered to the Holders, certified
by the Secretary of the Parent.
Section 10.12 Credit Agreement. The Holders shall have received a true and
correct copy of the Credit Agreement and the other Credit Documents, each of
which shall be reasonably satisfactory in form and substance to the Holders; the
Credit Agreement and each of the other Credit Documents shall be in full force
and effect, and no material term or condition thereof shall have been amended,
modified, or waived except as disclosed to the Holders prior to the Closing;
and, as of the Closing date, there shall exist no default or event of default
under such Senior Loan Agreement. As of the Closing Date, the aggregate
principal amount of the Term Loan and Revolving Commitments included within the
Senior Debt shall not exceed $68,500,000.
Section 10.13 Subordination Agreement. The Holders and the Senior Holders
shall have entered into a subordination agreement in the form of Exhibit 1.03
hereof.
Section 10.14 Acquisition. The closing conditions set forth in Sections 5 and
6 of the Purchase Agreement other than delivery of funds shall have been
satisfied and the Agent shall have received evidence satisfactory to the Agent
of the satisfaction of such closing conditions;
Section 10.15 ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ Employment Agreements. P&M and/or the Parent
(as applicable) shall have entered into employment agreements and incentive
compensation agreements with Messieurs ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, in the form of
Exhibit 10.15 hereof;
Section 10.16 Seller Note Exchange or Repayment All promissory notes and other
obligations for cash payment owed by the Companies to sellers of businesses
previously acquired by the Companies shall have been exchanged for Shares or
repaid in full prior to or simultaneously with Closing.
Section 10.17 Pro Forma Financial Information. The Holders shall have received
(a) a consolidated balance sheet of the Parent, prepared in accordance with
GAAP, based upon the Parent's most recently prepared financial statements, and
giving pro forma effect to the Acquisition, and (b) the pro forma statement of
capitalization of the Parent, after giving effect to the Acquisition and the
Closing.
Section 10.18 Use of Proceeds. The Holders shall have received evidence
satisfactory to them that the proceeds of the Loan and the Warrants above are
being used and applied as set out in Schedule 5.14 hereof.
47
Section 10.19 Expenses. The Companies shall have paid all of the fees, costs,
and expenses of the Holders to the extent provided in the November 10, 1999
letter from Newcourt to the Parent, and all fees and expenses of Holders'
counsel ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP and ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇.
Section 10.20 Fees. The Holders shall have received payment, in immediately
available funds, of fees payable pursuant to Article 11 hereof.
Section 10.21 Insurance. The Companies shall have furnished evidence
satisfactory to the Holders that it has the insurance required by Section 7.2.
Section 10.22 Due Diligence. The Holders shall have completed their financial
and legal due diligence with the respect to the Companies, their respective
management and their respective industries, the results of which shall be
satisfactory to the Holders.
ARTICLE 11
FEES AND COSTS
The Companies shall pay:
Section 11.1 All closing costs, brokerage and other commissions, due diligence
costs and other fees and expenses incurred by the Companies or the Holders in
connection with the transactions contemplated by this Agreement;
Section 11.2 [Intentionally Omitted];
Section 11.3 The hourly fees and expenses of Holders' counsel for their
services in connection with the transactions contemplated by this Agreement;
Section 11.4 All of Holders' expenses of any nature which may be reasonably
necessary, either before or after a default hereunder, for the enforcement or
preservation of Holders' rights under this Agreement, the Debentures, the
Warrants, or any other agreement of any Company mentioned herein, including but
not limited to reasonable attorneys' fees, appellate costs and fees, and costs
incurred by any Holder as a participant in any bankruptcy proceeding, workout,
debt restructuring, extension of maturity or document amendment, involving any
of the Companies or any other obligor under the Debentures;
Section 11.5 All costs and fees, including attorneys' fees and expenses,
incurred by any of Holders or their affiliates in connection with:
(a) any suit, action or claim of Holders to enforce the
provisions of this Agreement or any other document related hereto; and
48
(b) any suit, action, claim or other liability asserted against
any of Holders or their affiliates by the Company and/or either of the
Principals, in any case in which such parties do not prevail with respect to
substantially all of their claims.
ARTICLE 12
INDEMNIFICATION. ENVIRONMENTAL LIABILITY
Each Company will indemnify Holders and their directors, officers,
employees, agents and controlling persons (hereinafter collectively,
"Indemnitees") against, and hold each such Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses (including attorneys'
fees and expenses) incurred by or asserted against Holders or any such
Indemnitee arising out of, in any way connected with, or resulting from the
following:
(a) this Agreement, the other documents contemplated hereby, the
performance by the parties hereto and thereto of their respective obligations
hereunder and thereunder, or consummation of the transactions contemplated
hereby and thereby;
(b) any and all liability and loss with respect to or resulting
from any and all claims for or on account of any broker's or finder's fees or
commissions with respect to this transaction as may have been created by the
Companies or their respective officers, partners, employees or agents, together
with any stamp or excise taxes which may become payable in connection with this
transaction or the issuance of stock hereunder;
(c) the spilling, leaking, pumping, pouring, unsettling,
discharging, leaching or releasing of hazardous substances on property owned by
any of the Companies or any violations by any of the Companies of CERCLA, the
Federal Clean Water Act or any other Federal, state or local environmental law,
regulation or ordinance; and
(d) any claim, litigation investigation or proceeding relating to
any of the foregoing, whether or not Holders or any such person is a party
thereto;
PROVIDED, HOWEVER, that any such indemnity shall not apply to any such
losses, claims, damages, liabilities or related expenses arising from Holders'
gross negligence or willful misconduct.
The provisions of this Section shall remain operative and in full force
and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of the
Debentures, the invalidity or unenforceability of any term or provision of this
Agreement, the Debentures, or any investigation made by or on behalf of Holders.
All amounts due under this Article shall be payable on written demand therefor.
49
ARTICLE 13
REMEDIES
Section 13.1 Cumulation. Receivership. None of the rights or remedies of the
Holders provided herein shall be exclusive, but each shall be cumulative with
and in addition to every other right or remedy of Holders, now or hereafter
existing, at law or in equity, by statute, agreement or otherwise. In any
action under this Agreement, the Debentures or the Warrants, the Holders shall
be entitled to appointment of a receiver to administer the Companies, or all or
any portion of its assets as may be subject to Holders' claims.
Section 13.2 No Implied Waiver. No course of dealing between a Holder and any
other party hereto, or any failure or delay on the part of a Holder in
exercising any rights or remedies hereunder, shall operate as a waiver of any
rights or remedies of any Holder under this or any other applicable agreement.
No single or partial exercise of any rights or remedies hereunder shall operate
as a waiver or preclude the exercise of any other rights or remedies hereunder.
Section 13.3 Limitation on Remedies Against Principals. The Holders' sole
remedy against any of the Principals for a violation of their agreements
contained in Article 4 hereof shall be to apply to a court of competent
jurisdiction for an injunction restraining such principal from committing or
continuing any violation of the Sections, and a Principal shall not object to
such application except to litigate whether, in fact, such Principal has
violated the relevant Sections, provided, however, that this Section 13.3 will
not in any case limit the Holders' remedies against the Companies for any
violation of such Article. It is expressly acknowledged by each Holder that the
purpose and intent of this Section 13.3 is to preclude any Holder from seeking
monetary damages from any Principal for any breach of any of their undertakings
herein. Each Holder expressly covenants and agrees with each Principal that
such Holder will not seek monetary damages from any Principal on account of any
covenant or other agreement made by any Principal in this Agreement and that
such Holder will not direct or request that the Parent or any of the Companies
seek such monetary damages from any Principal for any breach of any of their
undertakings in this Agreement. Each of the Companies expressly covenants and
agrees with each Principal that such Company will not seek monetary damages from
any Principal on account of any covenant or agreement made by any Principal in
this Agreement, or any cause of action arising from their being parties to this
Agreement. Nothing herein, however, will be construed to prohibit any Company
from seeking monetary damages or any other remedy against any Principal for a
breach of any other agreement or undertaking of such Principal to such Company,
or any duty otherwise owed to such company, whether or not such breach may
involve the same subject matter as a breach hereof, so long as the Companies do
not seek consequential or other damages from either Principal arising from or
related to an event of default under this Agreement or the Senior Debt Documents
resulting from, or alleged to have resulted from, either Principal's being no
longer employed by one of the Companies.
50
ARTICLE 14
PARTIES; TRANSFERS OF DEBENTURES AND WARRANTS; RIGHTS OF MAJORITY HOLDERS
Section 14.1 Parties. This Agreement will bind and accrue to the benefit of
each of the Companies, the Holders, any holders of the Warrants or the
Debentures, and their successors and assigns.
Section 14.2 Transfers of Debentures and Warrants; Debenture Registry. The
Debentures, Warrants and Shares shall be freely transferable, in whole or in
part, to Affiliated Persons of the Holders, and to institutional lenders and
investors, subject only to compliance with applicable securities laws and to the
limitation that no transferee shall receive any portion of any Debenture of less
than $1,000,000, or of any Warrant corresponding to less than 15,000 Shares (as
adjusted for stock splits, reverse splits, stock dividends and similar capital
events). Each such transfer shall be effective only to the extent reflected in
a register of Debentures and Holders, which the Parent shall maintain. Promptly
upon surrender of the transferred instruments, written instructions as to the
amounts being transferred to each such transferee, and execution by the
transferees of appropriate documents of joinder hereto, the Companies shall at
their expense issue replacement Warrants, Debentures or Share certificates (as
applicable) from time to time to such transferees in appropriate denominations
to reflect such transfers and register such transfer in the relevant registry or
ledger. Upon any such transfer the transferee shall be included within the
definition of Holder herein for all purposes.. Any purchaser, assignee,
transferee or pledgee of the Warrants or Debentures, or any document arising in
connection with the transaction subject to this Agreement (or any of them),
sold, assigned, transferred, pledged or repledged by a Holder in compliance with
this Section shall forthwith become vested with and entitled to exercise all
rights and remedies provided herein to Holders, as if said purchaser, assignee,
transferee or pledgee were originally named in this Agreement in place of the
Holders.
Section 14.3 Rights of Majority Holders. Except for amendments, modifications
and waivers which reduce the principal or interest amount payable to any Holder,
or extend the maturity of any Indebtedness owed to any Holder, which in each
case shall require the written consent of the subject Holder, and as otherwise
specifically provided herein, all actions or consents required or permitted to
be made by the Holders hereunder may be effected upon the agreement of any
Holder or group of Holders which (in either case) constitutes the Majority
Holders. Any Holder may initiate a request for such an assent by written
request therefor to all Holders, specifying the action or consent in reasonable
detail.
ARTICLE 15
NOTICE
All notices or communications under this Agreement or the Warrants or
Debentures shall be in writing and mailed, postage prepaid, or delivered as
follows:
To Holders: Allied Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇ Floor
51
Washington, D.C. 20006
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Principal
and
Newcourt Commercial Finance Group
C/o The CIT Group, Inc.
Two Gatehall Drive, First Floor
Parsippany, New Jersey 07054
Attn: Director-Merchant Banking
with a copy to:
Newcourt Commercial Finance Group
C/o The CIT Group, Inc.
Two Gatehall Drive, First Floor
Parsippany, New Jersey 07054
Attn: Vice President-Legal -
Merchant Banking Group
And
Newcourt Commercial Finance Group
c/o The CIT Group, Inc.
Two Gatehall Drive, First Floor
Parsippany, New Jersey 07054
Attn: Vice President-Credit -
Merchant Banking Group
and to
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
Washington, D.C. 20037
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
and to
SunTrust Bank N.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ Floor Mail Code 644
Atlanta, GA 30308
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice-President
and to
ReliaStar Financial Corporation
C/o Reliastar Investment Research, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
52
Minneapolis, MN 55401-2121
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice-President
and Portfolio Manager
To the Companies: FTI Consulting, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
and to
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
and to
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-3600
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
or, to such subsequent addresses as may hereafter be specified by the parties.
Rejection or other refusal to accept, or the inability to deliver because of a
changed address of which no notice was given, shall not affect the date of such
notice sent in accordance with the foregoing provisions. Each such notice,
request or other communication shall be deemed sufficiently given, served, sent
and received for all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt, the affidavit of the messenger
or the answer back being deemed conclusive [but not exclusive] evidence of such
delivery), or at such time as delivery is refused by addressee upon
presentation.
ARTICLE 16
RELATIONSHIP OF THE PARTIES
This Agreement provides, among other things, for the making, of loans by
Holders, in their capacity as lenders, to the Companies, in their capacity as a
borrower, and for the payment of interest and repayment of principal by the
Companies to Holders. The provisions herein for compliance with financial
covenants and delivery of financial statements are intended solely for the
benefit of Holders to protect their interests as lenders in assuring, payments
of interest and repayment of principal, and as warrant or stock holders in
preserving their equity stake in the Parent. Nothing contained in this
Agreement shall be construed as permitting or obligating Holders to act as
financial or business advisors or consultants to the Companies, as permitting or
obligating Holders to control any of the Companies or to conduct the Companies'
operations, as creating any fiduciary obligation on the part of Holders to the
Companies, or as creating any joint venture, agency or other relationship
between the parties, other than as explicitly and specifically stated in this
Agreement. A Holder is
53
not, and shall not be construed as, a partner, joint venturer, alter-ego,
manager, controlling person, operator or other business participant of any kind
of the Companies; neither Holders nor any Company intend Holders to assume such
status, and, accordingly, Holders shall not be deemed responsible for or a
participant in any acts or omissions of any Company. Each Company represents
that it has had the advice of experienced counsel of its own choosing in
connection with the negotiation and execution of this Agreement and with respect
to all matters contained herein.
ARTICLE 17
REPRESENTATION OF EACH HOLDER
Each Holder represents for itself that the sources of funds to be used by
it to make the portion of the Loan it is funding hereunder do not include assets
of any employee benefit plan. As used in this Article 17, the term "employee
benefit plan" shall have the meaning assigned to such term in Section 3 of
ERISA.
ARTICLE 18
EXPIRATION OR SUSPENSION OF COVENANTS
The covenants in Article 6, Sections 7.2, 7.3, 7.4, 7.7, 7.9, 7.10, 7.11,
7.14, 7.17, and all Sections of Article 8 except 8.22 and 8.25, shall be in
effect only when one or more Debentures are outstanding (which Debentures may
include any Allied Debentures, Newcourt Debentures, or Debentures issued
pursuant to Section 3.7(d) hereof, or any replacements, reissues, modifications
or renewals thereof or therefor). The remaining covenants in Articles 7 and 8
shall be in effect while any Debentures are outstanding and until all Holders
have transferred or disposed of more than 90% of the voting or economic
interests represented by the Warrants. For purposes of this article, the
exercise of Warrants in exchange for Shares shall not be deemed a disposition of
the voting or economic interests represented by the Warrants, but the
disposition of Shares issued as a result of the exercise of the Warrants shall
be deemed a disposition of a proportionate interest in the Warrants.
ARTICLE 19
CONTROLLING LAW; NON-EXCLUSIVE VENUE AND JURISDICTION; SERVICE OF PROCESS
This Agreement shall be interpreted, and the rights and liabilities of
the parties hereto determined, in accordance with the laws of the District of
Columbia, without regard to its principles of conflicts of law. Non-exclusive
venue for any adjudication hereof may be in the courts of the District of
Columbia or the Federal courts in such District, to the jurisdiction of which
courts all undersigned parties hereby submit as the agreement of such parties,
as not inconvenient, and as not subject to review by any court other than such
courts in the District of Columbia. All parties intend and agree that the
courts of jurisdictions in which the Companies are incorporated and conduct
their businesses shall afford full faith and credit to any judgment rendered by
a court of the District of Columbia against the Companies or other obligees
hereunder, and that such District of Columbia and
54
federal courts shall have non-exclusive in personam jurisdiction to enter a
valid judgment against the Companies or other obligees hereunder. Service of any
summons and/or complaint and any other process which may be served on the
Companies in any action in respect hereto, may be made by mailing via registered
mail, or delivering a copy of such process to the Companies at its address
specified above. The parties hereto agree that this submission to jurisdiction
and consent to service of process are reasonable and made for the express
benefit of Holders.
ARTICLE 20
WAIVER OF TRIAL BY JURY
EACH PARTY TO THIS AGREEMENT WAIVES ALL RIGHT TO TRIAL BY JURY OF ALL
CLAIMS, DEFENSES, COUNTERCLAIMS AND SUITS OF ANY KIND DIRECTLY OR INDIRECTLY
ARISING FROM OR RELATING TO THIS AGREEMENT, THE LOAN, THE LOAN DOCUMENTS OR THE
DEALINGS OF THE PARTIES IN RESPECT THERETO. THE PARTIES HERETO ACKNOWLEDGE AND
AGREE THAT THIS ARTICLE IS A MATERIAL TERM OF THIS AGREEMENT AND THAT THE
HOLDERS WOULD NOT EXTEND ANY FUNDS HEREUNDER IF THIS WAIVER OF JURY TRIAL WERE
NOT A PART OF THIS AGREEMENT. EACH PARTY HERETO ACKNOWLEDGES THAT THIS IS A
WAIVER OF A LEGAL RIGHT AND THAT IT MAKES THIS WAIVER VOLUNTARILY AND KNOWINGLY
AFTER CONSULTATION WITH, OR THE OPPORTUNITY TO CONSULT WITH, COUNSEL OF ITS
CHOICE. EACH PARTY HERETO AGREES THAT ALL SUCH CLAIMS, DEFENSES, COUNTERCLAIMS
AND SUITS SHALL BE TRIED BEFORE A JUDGE OF COMPETENT JURISDICTION, WITHOUT A
JURY.
ARTICLE 21
CAPTIONS; SEVERANCE
The captions in this Agreement and the Warrants and Debentures are
inserted for convenience of reference only and shall be construed neither to
limit nor amplify the meaning of the other text of such documents. To the
extent any provision herein violates any applicable law, such provision shall be
void and the balance of this Agreement shall remain unchanged.
ARTICLE 22
COUNTERPARTS; ENTIRE AGREEMENT
This Agreement may be executed in as many counterpart copies and with as
many counterpart signature pages as may be convenient. It shall not be
necessary that the signature of, or on behalf of, each party appear on each
counterpart, but it shall be sufficient that the signature of, or on behalf of,
each party appear on one or more of the counterparts. All counterparts shall
collectively constitute a single agreement; it shall not be necessary in any
proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of, or on behalf of, all of
the parties. This Agreement, the Warrants, the Debentures, the exhibits hereto
and the documents mentioned herein set forth the entire agreements and
understandings of the parties hereto in respect of this transaction. Any verbal
agreements in respect of this transaction are hereby
55
terminated. The terms herein may not be changed verbally but only by a writing
signed by the party against which enforcement of the change is sought.
ARTICLE 23
DEFINITIONS AND RULES OF CONSTRUCTION
Section 23.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms shall have the meanings as
follow:
(a) "Accumulated Funding Deficiency" shall have the definition
for such term in Section 302 of the Employee Retirement Income Security Act of
1974;
(b) "Acquisition Agreement" shall have the definition set out in
Recital A hereof;
(c) "Adjusted EBITDA" means, in respect of any period, EBITDA
plus, in the event that any Company has acquired any Person during the period
with respect to which EBITDA was calculated, the EBITDA of such Person
(including pro-forma overhead and expenses) for the entire 12-month period
ending on the last day of the month immediately preceding the date of such
acquisition, provided, that (i) the Holders shall have received audited
financial statements of such Person accompanied by a report satisfactory to the
Holders by a nationally recognized accounting firm acceptable to the Holders and
(ii) any adjustments to EBITDA to give effect to the acquisition of such Person
shall be acceptable to the Holders in their reasonable opinion. The foregoing is
in no way intended to permit any transaction otherwise prohibited by this
Agreement including, without limitation, any transaction prohibited by Section
8.11.
(d) "Affiliate" and "Affiliated Person" shall have the definition
for affiliated person set out in section 2(a)(3) of the Investment Company Act
of 1940, as amended;
(e) "Agreement" is defined as this Investment and Loan Agreement
and the exhibits and schedules hereto, as the same may be amended, supplemented,
extended, modified or replaced in accordance with the terms hereof;
(f) "Appraised Value" shall have the meaning set forth in Section
3.3(b) hereof;
(g) "Asset Disposition" is defined as any Transfer except a
Transfer (so long as such Transfer is not prohibited by any Loan Document) which
is either (i) made in the ordinary course of business and involving (x) only
property that is inventory held for sale and (y) de minimus Transfers in the
ordinary course of business of damaged or obsolete property of a Company, or
(ii) made by a Subsidiary to another Subsidiary if at the time thereof and after
giving effect thereto, no Default or Event of Default exists hereunder;
56
(h) "Associate" shall have the definition for such term set out
in section 107.50 of the amended Regulations promulgated under the SBA Act;
(i) "Business Day" is defined as any day other than a Saturday, a
Sunday or a day on which commercial banks in Washington, D.C. or New York, New
York, are required or authorized to be closed;
(j) "Closing" is defined as the consummation of this Agreement;
(k) "Capital Expenditures" for any period of determination hereof
shall mean (a) all expenses incurred during such period by the Companies in
connection with capital replacements, additions, renewals or improvements to any
of the capital assets of the Companies which are required to be capitalized on
the books and accounts of the Companies in accordance with GAAP and (b) the
amount of Capital Lease Obligations relating to all Capital Leases entered into
during such period by the Companies;
(l) "Capital Lease" means, with respect to any Person, any lease
by that Person which requires such Person to concurrently recognize the
acquisition of an asset and the incurrence of a liability in accordance with
GAAP;
(m) "Capital Lease Obligation" means, with respect to any Person
and a Capital Lease, the amount of the obligations of such Person as the lessee
under such Capital Lease which would, in accordance with GAAP, appear as a
liability on a balance sheet of such Person;
(n) "Cash Interest Charges" means, with respect to any period,
the sum (without duplication) of the following: all cash interest (paid or
accrued and payable in cash) in respect of Debt of the Companies (including
imputed interest on Capital Leases of the Companies) deducted in determining Net
Income for such period;
57
(o) "Change of Control" is defined as any of the following events
or circumstances:
(i) the failure for any reason of the Parent to own and
hold not less than 100% of the outstanding shares of all voting stock or equity
interests of the all Subsidiaries free and clear of any Liens other than the
Liens securing the Senior Debt;
(ii) any sale of all or substantially all of the capital
stock or assets of any of the Companies or other obligors of the Loan,
regardless of whether or not in connection with the merger or consolidation
thereof, provided, however, that the foregoing shall not include any transaction
among Subsidiaries permitted by Section 8.12;
(iii) a "change in control" of the Parent occurs of a nature
which would be required to be reported in response to Item 1 of Form 8-K
promulgated under the Exchange Act;
(iv) any "person" (as such term is used in Section 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Parent representing more than fifty percent
(50%) of the combined voting power of the Parent's then outstanding voting
securities; or
(v) or during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Parent cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the Parent's
shareholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of
such two (2) year period.
(p) "Changes in Working Capital" for any Fiscal Year shall mean
the Working Capital as at the end of such Fiscal Year, minus Working Capital as
at the beginning of such Fiscal Year;
(q) "Company" and "Companies" shall have the definition set out
in the preamble hereof;
(r) "Consolidated Net Worth" means, as of the date of any
determination, consolidated stockholders' equity of the Parent, determined in
accordance with GAAP;
(s) "Current Assets" means current assets of the Companies
determined in accordance with GAAP excluding, however, cash and cash
equivalents;
(t) "Current Liabilities" means current liabilities of the
Companies determined in accordance with GAAP excluding, Current Maturities of
Funded Debt;
(u) "Current Maturities of Funded Debt" means, at any time and
with respect to any item of Funded Debt, the portion of such Funded Debt
outstanding at such time which by the terms of such Funded Debt or the terms of
any instrument or agreement relating thereto is due on
58
demand or within one year from such time (whether by sinking fund, other
required prepayment or final payment at maturity) and is not directly or
indirectly renewable, extendible or refundable at the option of the obligor
under an agreement or firm commitment in effect at such time to a date one year
or more from such time.
(v) "Current Ratio" means, as of the date of any determination,
the ratio, of Current Assets to Current Liabilities;
(w) "Debentures" shall have the definition set out in Section 1.1
hereof, as it may be supplemented by the terms of Section 3.7(d) hereof;
(x) "Debt" means, with respect to any Person, all obligations of
such Person which in accordance with GAAP shall be classified upon a balance
sheet of such Person as liabilities of such Person, and in any event shall
include without duplication:
(i) its liabilities for borrowed money including principal
and all accrued interest (whether such interest is due and payable or
capitalized and compounded);
(ii) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable and accrued
liabilities arising in the ordinary course of business but including,
without limitation, all liabilities created or arising under any
conditional sale or other title retention agreement with respect to such
property);
(iii) its Capital Lease Obligations;
(iv) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities, provided if such
Person shall not have assumed or otherwise become liable for such
liability, the amount of such liability shall be the then Fair Market Value
of such property);
(v) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money);
(vi) Swaps of such Person; and
(vii) any Guaranty of such Person with respect to liabilities
of a type described in any of clauses (i) through (v) hereof.
Debt of any Person shall include all obligations of such Person of the character
described in clauses (i) through (vii) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed to
be extinguished under GAAP.
59
(y) "Debt to Cash Flow Ratio" means, at the date of determination,
the ratio of (a) all Debt of the Companies at such date to (b) Adjusted EBITDA
for the 12-month period ending on such date;
(z) "Debt Service" means, at the date of determination the sum of
the following: (a) Cash Interest Charges for the 12-month period ending on such
date, (b) all installments of principal scheduled to be paid on the Senior Debt
and debt hereunder during such period, and (c) the principal component of any
payments in respect of Capital Lease Obligations of the Companies (and in the
event of any acquisition occurring during such period, the Capital Lease
Obligations of the acquired company) scheduled to be paid during such period. In
the case of any such date of determination on or prior to the first anniversary
of the date of Closing, each of the foregoing calculations shall be determined
on an annualized basis;
(aa) "Default" is defined as an Event of Default or an event or
circumstance which upon the giving of notice or lapse of time, will constitute
an Event of Default;
(bb) "Distribution" means:
(a) dividends or other distributions or payments on capital stock
(including so-called phantom stock) of a Company or any ERISA Affiliate (except
distributions by a Subsidiary to a Company or another Subsidiary);
(b) the redemption or acquisition of such stock or of warrants,
rights or other options to purchase such stock (except when solely in exchange
for such stock) unless made, contemporaneously, from the net proceeds of a sale
of such stock; and
(c) any payment to any stockholder of a Company or to any
Affiliate of any of them whether in respect of services rendered to a Company or
otherwise.
(d) any management, consulting, advisory, earn-out or other
generally similar payment or fee to any Person.
Notwithstanding the foregoing, "Distribution" shall not mean or include (i)
stock splits and other common stock dividends made on a pro-rata basis to all
stockholders, (ii) the issuance of preferred stock of the Parent provided, that
such preferred stock is not subject to any redemption, re-purchase or
acquisition by a Company which is either mandatory or at the option of the
holder of such preferred stock or (iii) payments of the type described in
clauses (c) or (d) made in the ordinary course of business to employees for
actual services rendered, provided that such payments are otherwise permitted by
the terms and provisions of this Agreement.
(cc) "EBITDA" means, in respect of any period, the sum of (a) Net
Income for such period plus, (without duplication) to the extent deducted in the
determination of Net Income for such period, (b) Cash Interest Charges, (c)
taxes imposed on or measured by income or excess profits (for such period and
without regard to any prior periods) and, (d) the amount of all depreciation and
amortization allowances and other non-cash expenses of the Companies during such
period, and minus (e) to the extent added in the determination of Net Income for
such period, (i) non-cash
60
income of the Companies and (ii) any cash payments made or required to have been
made during such period by any Company in respect of any earn-out arrangement to
which such Company is subject;
(dd) "Employer" and "Substantial Employer" shall have the
definitions set out therefor in Sections 3(5) and 4001(a)(2) of ERISA,
respectively;
(ee) "Environmental Laws" are defined as all Federal, state, local,
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems;
(ff) "Equity Percentage" is defined, with respect to a Holder, as
such Holder's percentage of actual or potential equity ownership of the Parent's
capital stock (as the case may be), which percentage shall be calculated on a
Fully Diluted Basis, expressed as a decimal fraction calculated to five (5)
decimal places, and shall reflect the number of Shares owned by such Holder, and
the number of Shares deliverable upon full exercise of any unexercised Warrants
owned by the Holder;
(gg) "ERISA" is defined as the Employee Retirement Income Security
Act of 1974;
(hh) "ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with a Company under
Section 414 of the Code.
(ii) "Event of Default" shall have the meaning set out in Section
9.1 hereof;
(jj) "Excess Cash Flow" is defined, with respect to a Fiscal Year,
as the Companies' consolidated EBITDA for such Fiscal Year, minus (a) the amount
of Capital Expenditures for such Fiscal Year (provided such amount is not
greater than the amount of Capital Expenditures permitted pursuant to Section
8.7), (b) Current Maturities of Funded Debt for such Fiscal Year including all
principal installments required to be paid on the Senior Debt for such Fiscal
Year, (c) Changes in Working Capital for such Fiscal Year, (d) Cash Interest
Charges for such Fiscal Year, (e) taxes imposed on or measured by income or
excess profits which is current tax expense during such Fiscal Year, (f)
prepayments on the Senior Debt made by the Companies during such Fiscal Year and
(g) the aggregate amount of any payments made without violation of this
Agreement in respect of earn-outs during such Fiscal Year. No deductions shall
be made in calculating "Excess Cash Flow" for any Fiscal Year a result of any
transactions which are not permitted or required by the terms and provisions of
the Loan Documents.
(kk) "Exchange Act" is defined as the Securities Exchange Act of
1934, as amended;
(ll) "Exempt Transfer" shall have the definition set out in Section
4.3 hereof;
61
(mm) "Fair Market Value" means at any time with respect to any
Property, the sale value of such Property that would be realized in an arm's
length sale at such time between an informed and willing buyer and an informed
and willing seller (neither being under a compulsion to buy or sell);
(nn) "Fiscal Quarter" means and includes each fiscal quarter of the
Company, which fiscal quarters end on March 31, June 30, September 30 and
December 31 of each year;
(oo) "Fiscal Year" means the fiscal year of the Companies which
ends on December 31 of each year;
(pp) "Fully Diluted Basis" shall mean, in respect to a corporation
or other legal entity, the condition wherein all outstanding options, warrants
and other securities of such entity which are exercisable or exchangeable for
capital stock or other equity interests in the entity, are, for the purpose of
calculating relative ownership rights, presumed to have been exercised or
exchanged in full;
(qq) "Funded Debt" means, with respect to any Person, all Debt of
such Person including, without limitation, the Loan and all Senior Debt and any
other Debt excluding Debt of the type described in clause (vi) of the definition
of "Debt;"
(rr) "GAAP" is defined as generally accepted accounting principles
as established from time-to-time by the Financial Accounting Standards Board,
consistently applied and maintained throughout the period indicated;
(ss) "Governmental Authority" is defined as
(i) the government of the United States of America, any
state or other political subdivision thereof, or any jurisdiction in which an
obligor of the Loan conducts all or any part of its business, or which asserts
jurisdiction over any properties of such an obligor; and
(ii) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government;
(tt) "Guaranty" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(i) to purchase such indebtedness or obligation or any
property constituting security therefor;
(ii) to advance or supply funds (i) for the purchase or
payment of such
62
indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
indebtedness or obligation;
(iii) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(iv) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor;
(uu) "Hazardous Material" is defined as any pollutants, toxic or
hazardous wastes or any other substances which might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls);
(vv) "Hedging Agreements" means the agreements from time to time
entered into by any one or more of the Companies evidencing Hedging Liability or
otherwise setting forth the terms and condition applicable thereto.
(ww) "Hedging Liability" means the liability of any one or more of
the Companies to any of the Lenders identified in the Senior Debt Documents, or
any affiliates of such Lenders, in respect to any interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
floor agreements, interest rate exchange agreements, or other similar interest
rate hedging arrangements as any one or more of the Companies may from time to
time enter into with any one or more of such Lenders or their affiliates.
(xx) "Inactive Subsidiary" or "Inactive Subsidiaries" shall mean
and include Bodaken Associates, a Nevada corporation and Anamet Laboratories,
Inc., a California corporation.
(yy) "Holders" shall have the definition set out in the preamble
hereof;
(zz) "Indemnitees" is defined as Holders and their directors,
officers, employees, agents and controlling persons;
(aaa) "Independent Third Parties" shall have the meaning set forth
in Section 3.2(b) hereof;
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(bbb) "Investment Company" shall have the definition for such term
set out in the Investment Company Act of 1940, as amended;
(ccc) "Key Employees" shall mean and include ▇▇▇▇ ▇. ▇▇▇▇, ▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇ and, (without limiting the right of approval by the Majority Holders)
of any replacements for Messrs. ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, any and all
replacements for each of the foregoing individuals.
(ddd) "Liens" is defined as any interest in property securing an
obligation owed to, or a claim by, a person other than the owner of such
property, whether such interest is based on common law, statute or contract, and
including, but not limited to, the security interest, security title or lien
arising from a security agreement, mortgage, deed of trust, deed to secure debt,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes;
(eee) "Litigation Schedule" shall have the meaning set forth in
Section 5.3 hereof;
(fff) "Loan" shall have the definition set out in Recital B hereof;
(ggg) "Loan Documents" shall have the definition set out in Section
1.2 hereof;
(hhh) "Loans for Stock Purchases" shall mean and include full
recourse loans by the Parent to individuals who are employees of one or more
Companies as of the date of Closing provided, that (i) the proceeds of each such
loan are used by such individual, concurrently with the making of such loan, to
acquire shares of common stock of the Parent through a program of loans by the
Parent to such individual, (ii) each such loan shall be secured by a perfected
pledge of the stock acquired by such employee with the proceeds of such loan,
and (iii) the proceeds of any sale or transfer of such pledge stock shall be
applied to the payment of accrued and unpaid interest and principal on such
loan.
(iii) "Majority Holders" is defined as (i) any group of Holders
which shall include at least one Holder in Group 1 and at least one Holder in
Group 2, and which shall collectively own more than fifty one percent (51%) of
the principal balance of the Debentures outstanding at the time of
determination, or (ii) if the Debentures have been repaid in full, any group of
Holders which shall include at least one Holder in Group 1 and at least one
Holder in Group 2 and which shall own collectively more than fifty-one percent
(51%) of the Shares issued or issuable pursuant to the Warrants at such time; or
(iii) any single Holder own all Debentures outstanding at such time, or (iv) if
the Debentures have been repaid in full, any single Holder owning 100% of all
Warrants and Warrant Shares outstanding at such time;
(jjj) "Material" is defined as material in relation to the business,
operations, affairs, financial condition, assets, properties or business
prospects of the Companies taken as a whole;
(kkk) "Material Adverse Effect" is defined as a material adverse
effect on (a) the business, operations, affairs, financial condition, assets,
properties or business prospects of the
64
Companies taken as a whole, or (b) the ability of a Company to perform its
respective payment or other obligations under any of the Loan Documents, or (c)
the validity or enforceability of any of the Loan Documents or the Warrants;
(lll) "Multiemployer Plan" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
(mmm) "NASDAQ" is defined as the automated quotation system for
securities prices maintained by the National Association of Securities Dealers;
(nnn) "Net Income" means, with reference to any period, the
consolidated net income (or loss) of the Companies for such period (taken as a
cumulative whole), as determined in accordance with GAAP, provided that there
shall be excluded:
(a) the income (or loss) of any Person, substantially all of the
assets of which have been acquired in any manner, realized by such other
Person prior to the date of acquisition,
(b) the income (or loss) of any Person in which any Company has an
ownership interest, except to the extent that any such income has been
actually received by an Company in the form of cash dividends or similar
cash distributions,
(c) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of income accrued
during such period,
(d) any aggregate net gain (but not any aggregate net loss) during
such period arising from the sale, conversion, exchange or other
disposition of capital assets (such term to include, without limitation,
(i) all non-current assets and, without duplication, (ii) the following,
whether or not current: all fixed assets, whether tangible or intangible,
all inventory sold in conjunction with the disposition of fixed assets, and
all Securities),
(e) any gains resulting from any write-up of any assets (but not any
loss resulting from any write-down of any assets),
(f) any net gain from the collection of the proceeds of life
insurance policies,
(g) any gain arising from the acquisition of any Security, or the
extinguishment, under GAAP, of any Debt, of any of the Companies,
(h) any net income or gain (but not any net loss) during such period
from (i) any change in accounting principles in accordance with GAAP, (ii)
any prior period adjustments resulting from any change in accounting
principles in accordance with GAAP, (iii) any extraordinary items, or (iv)
any discontinued operations or the disposition thereof, and
(i) any portion of such net income that cannot be freely converted
into United States Dollars.
65
(ooo) "Net Worth" is defined as (i) the value of the assets of the
Company, less (ii) the aggregate obligations of the Company, both current and
long-term, for the payment or re-payment of money, all as determined in
accordance with GAAP and as adjusted to include any accretions as a result of
exercise of the Warrants;
(ppp) "Offeree" shall have the definition set out in Section 3.2(a)
hereof;
(qqq) "Performance Bonus" shall mean and include each bonus or bonus
plan which, in each case, relates specifically and directly to ascertainable
revenue, profit, cash flow or hourly benchmarks, and, in addition, in the case
of not more than three senior executives of the Parent, in the aggregate, for
any annual fiscal period, any increase in the equity value of the Parent.
(rrr) "Permitted Acquisitions" shall mean and include any
acquisition by the Parent of another Person, provided, that (i) the sole
consideration paid by the Parent for such acquisition shall consist of shares of
common stock of the Parent, (ii) such acquisition shall be a stock for stock
acquisition such that after giving effect thereto, the acquired Person shall be
a wholly-owned Subsidiary of the Parent, (iii) at the time of such acquisition
and after giving effect thereto, no Default or Event of Default exists under
this Agreement, (iv) concurrently with such acquisition, 100% of the shares of
capital stock of the acquiree shall be pledged and delivered as collateral for
the Senior Debt and such acquiree shall have executed an agreement of joinder
hereto assuming all obligations hereunder and under all Debentures, (v)
Consolidated Net Worth immediately after giving effect to such acquisition is
not less than Consolidated Net Worth immediately preceding such acquisition,
(vi) pro forma EBITDA after giving effect to such acquisition for the 12 month
period immediately preceding such acquisition is greater than the actual EBITDA
of the Parent for said period without giving effect to such acquisition, and
(vii) in the event the proposed acquiree has Material contingent liabilities (as
determined in the sole discretion of the Majority Holders), the Majority Holders
shall have given their prior written consent to such acquisition.
(sss) "Permitted Liens" shall have the definition set out in Section
8.9, hereof;
(ttt) "PIK Amount" shall have the meaning ascribed to such term in
the Debentures.
(uuu) "Principals" shall have the definition set out in the preamble
hereof;
(vvv) "Prohibited Transaction" shall have the definition for such
term set out in Section 4975 of the Internal Revenue Code of 1986, as amended;
(www) "Publicly Traded" shall mean, with respect to any security,
that such security is (i) listed on a domestic securities exchange, (ii) quoted
on NASDAQ or (iii) traded in the domestic over-the-counter market, which trades
are reported by the National Quotation Bureau, Incorporated;
66
(xxx) "Responsible Officer" is defined as any chief financial
officer, principal accounting officer, treasurer or comptroller of a Company
with responsibility for the administration of the Loan or Warrants, and for
purposes of Section 9.1(c), the President or Vice President of the Company;
(yyy) "Restricted Investments" means all Investments except the
following:
(a) property to be used in the ordinary course of business of a
Company;
(b) current assets arising from the sale or lease of goods and
services in the ordinary course of business of a Company;
(c) Investments existing on the date of the Closing and disclosed in
Schedule 5.15;
(d) Investments in United States Governmental Securities, provided
that such obligations mature within 365 days from the date of acquisition
thereof;
(e) Investments in certificates of deposit or banker's acceptances
issued by an Acceptable Bank, provided that such obligations mature within
365 days from the date of acquisition thereof;
(f) Investments in commercial paper given the highest rating by a
credit rating agency of recognized national standing and maturing not more
than 270 days from the date of creation thereof;
(g) Investments in Repurchase Agreements;
(h) Investments in tax-exempt obligations of any state of the United
States of America, or any municipality of any such state, in each case
rated "AA" or better by S&P, "Aa2" or better by Moody's or an equivalent
rating by any other credit rating agency of recognized national standing,
provided that such obligations mature within 365 days from the date of
acquisition thereof;
(i) loans to officers and employees of a Company made in the
ordinary course of business, so long as the outstanding amount of all such
loans to all officers or employees of all Companies shall not, in the
aggregate, exceed at any time $1,000,000, provided the outstanding amount
of all loans to any individual officer and employees shall not exceed at
any time $250,000 (it being agreed that for the purposes of this clause (i)
of this definition of "Restricted Investments," the aforementioned loans
shall not include loans or advances which constitute compensation for the
purposes of, and which are otherwise permitted by Section 8.6);
(j) Loans for Stock Purchases;
67
(k) Permitted Acquisitions; and
(l) Investments in Person who are either (i) Subsidiaries as of the
date of Closing or (ii) either with the consent of the Majority Holders or
pursuant to a Permitted Acquisition, Persons who after giving effect to
such investments, will be Subsidiaries.
As used in this definition of "Restricted Investments":
"Acceptable Bank" means any bank or trust company (i) which is
organized under the laws of the United States of America or any State
thereof, (ii) which has capital, surplus and undivided profits aggregating
at least $250,000,000, and (iii) whose long-term unsecured debt obligations
(or the long-term unsecured debt obligations of the bank holding company
owning all of the capital stock of such bank or trust company) shall have
been given a rating of "A" or better by S&P, or "A2" or better by Moody's.
"Acceptable Broker-Dealer" means any Person other than a natural
person (i) which is registered as a broker or dealer pursuant to the
Securities Exchange Act Exchange Act of 1934, as amended, and (ii) whose
long-term unsecured debt obligations shall have been given a rating of "A"
or better by S&P, "A2" or better by Moody's.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
"Repurchase Agreement" means any written agreement
(a) that provides for (i) the transfer of one or more United
States Governmental Securities in an aggregate principal amount at
least equal to the amount of the Transfer Price (defined below) to a
Company from an Acceptable Bank or an Acceptable Broker-Dealer against
a transfer of funds (the "Transfer Price") by such Company to such
Acceptable Bank or Acceptable Broker-Dealer, and (ii) a simultaneous
agreement by such Company, in connection with such transfer of funds,
to transfer to such Acceptable Bank or Acceptable Broker-Dealer the
same or substantially similar United States Governmental Securities
for a price not less than the Transfer Price plus a reasonable return
thereon at a date certain not later than 365 days after such transfer
of funds,
(b) in respect of which a Company shall have the right,
whether by contract or pursuant to applicable law, to liquidate such
agreement upon the occurrence of any default thereunder, and
(c) in connection with which a Company, or an agent thereof,
shall have taken all action required by applicable law or regulations
to perfect a Lien in such United States Governmental Securities.
"S&P" means Standard & Poor's Ratings Group, a division of The ▇▇▇▇▇▇-
▇▇▇▇ Companies, Inc.
68
"United States Governmental Security" means any direct obligation of,
or obligation guaranteed by, the United States of America, or any agency
controlled or supervised by or acting as an instrumentality of the United
States of America pursuant to authority granted by the Congress of the
United States of America, so long as such obligation or guarantee shall
have the benefit of the full faith and credit of the United States of
America which shall have been pledged pursuant to authority granted by the
Congress of the United States of America.
(zzz) "The Securities Act" is defined as the Securities Act of 1933,
as amended;
(aaaa) "Security" has the meaning set forth in Section 2(a)(1) of the
Securities Act;
(bbbb) "Seller" shall have the definition set out in Recital A hereof;
(cccc) "Selling Holders" is defined, with respect to a particular
offering of securities, as those Holders which have requested their Shares be
included in the registration of such offering, according to the terms of
Sections 3.1 or 3.2 hereof;
(dddd) "Senior Debt" shall have the definition set out in Section 1.3
hereof;
(eeee) "Senior Debt Documents" are defined as the documents from time
to time evidencing the Senior Debt or setting out its material terms, and all
amendments, renewals and replacements thereof and therefor;
(ffff) "Senior Debt to Cash Flow Ratio" means, at the date of
termination, the ration of (a) all Senior Debt of the Companies at such date to
(b) Adjusted EBITDA for the 12-month period ending on such date.
(gggg) "Shares" shall have the meaning set forth in Section 2.1
hereof;
(hhhh) "SBA" is defined as the U.S. Small Business Administration;
(iiii) "The SBA Act" is defined as the Small Business Investment Act
of 1958, as amended;
(jjjj) "Subsidiaries"shall have the meaning set forth in the initial
sentence of this Agreement;
(kkkk) "Swaps" means, with respect to any Person, payment obligations
with respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of any Loan Document, the amount of
the obligation under the Swap shall be the amount reasonably anticipated to be
payable by such Person thereunder, and in making such determination, if any
agreement relating to such Swap provides for the netting of amounts payable by
and to
69
such Person thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case, the amount of
such obligation shall be the net amount so determined.
(llll) "Total Debt Service Coverage Ratio" means, at the date of
determination, the ratio of (a) Adjusted EBITDA minus Capital Expenditures for
the 12-month period ending on such date minus taxes imposed on or measured by
income or excess profits for the 12-month period ending on such date to (b) Debt
Service for the 12-month period ending on such date;
(mmmm) "Total Interest Charges Coverage Ratio" means, at the date of
determination, the ratio of (a) Adjusted EBITDA for the 12-month period ending
on such date to (b) Cash Interest Charges for such 12-month period (or if such
date is on or prior to the first anniversary of the date of Closing, the period
from the date of Closing to such date, on an annualized basis) ending on such
date;
(nnnn) "Transfer" is defined as any transaction in which any Person
sells, conveys, leases (as lessor) or otherwise transfers any of its property or
any interest therein;
(oooo) "Warrants" are defined as the Series A, Series B and Series C
Warrants collectively, and any additional stock purchase warrants issuable
pursuant to paragraph 5(b) of the Series A Warrants, and all modifications,
renewals, extensions and replacements thereof and therefor; and
(pppp) "Working Capital" shall mean, as of the date of any
determination, the difference between (a) Current Assets, minus (b) Current
Liabilities.
Section 23.2 Rules of Construction. The rule of ejusdem generis shall not be
applicable herein to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned. Unless the context otherwise requires:
(a) A term has the meaning assigned to it;
(b) "Or" is not exclusive;
(c) Provisions apply to successive events and transactions;
(d) "Herein", "Hereof", "Hereto", "Hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision unless otherwise so provided;
(e) The word "person" shall mean any natural person, partnership,
corporation, nation, state, government, union, association, agency, tribunal,
board, bureau and any other form of business or legal entity;
70
(f) All words or terms used in this Agreement, regardless of the
number or gender in which they are used, shall be deemed to include any other
number and any other gender; and
(g) All financial terms used herein and not capitalized shall
have the meaning accorded them under GAAP.
Remainder of page intentionally left blank; signature pages follow
71
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly
executed as of the date first above written.
Companies:
[Seal] FTI Consulting Inc.
Witness: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
-------------------------- -------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
Title: CEO
Teklicon, Inc.
[Seal]
Witness: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
-------------------------- -------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
Title: CEO
L.W.G., Inc.
[Seal]
Witness: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
-------------------------- -------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
Title: CEO
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇, Inc.
[Seal]
Witness: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
-------------------------- -------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
Title: CEO
▇▇▇▇ Consulting, Inc.
[Seal]
Witness: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
-------------------------- -------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
Title: CEO
72
S.E.A., Inc.,
[Seal]
Witness: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
-------------------------- -------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
Title: CEO
RestorTek, Inc.
[Seal]
Witness: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
-------------------------- -------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
Title: CEO
KCI Management Corp.
[Seal]
Witness: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
-------------------------- -------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
Title: CEO
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLC
[Seal]
Witness: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
-------------------------- -------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
Title: Manager
Holders:
Allied Capital Corporation
[Seal]
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Principal
[Seal] Newcourt Commercial Finance Corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
-------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: Vice President
73
[Seal] Reliastar Financial Corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
[Seal] SunTrust Banks, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Group Vice President
Principals: with respect only to the provisions contained in Articles 4, 13, 15,
16 and 19 through 23 (inclusive), and Sections 14.1 and 14.3.
Witness: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇
------------------------- ----------------------------------
▇▇▇▇ ▇. ▇▇▇▇ ▇▇, individually
Witness: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
------------------------- ----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇, individually
74
