Exhibit 10.30
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SUBORDINATED NOTE AND
WARRANT PURCHASE AGREEMENT
among
MONITRONICS INTERNATIONAL, INC.,
and
THE PURCHASERS LISTED ON SCHEDULE A ATTACHED HERETO
Dated as of January 18, 2002
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MONITRONICS INTERNATIONAL, INC.
Subordinated Note and
Warrant Purchase Agreement
Dated as of January 18, 2002
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.01. Definitions............................................................1
1.02. Accounting Terms......................................................11
ARTICLE II
PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS
2.01. The Notes.............................................................12
2.02. Purchase and Sale of Notes............................................12
2.03. Issue Price; Original Issue Discount..................................12
2.04. Use of Proceeds.......................................................13
2.05. Payments and Endorsements.............................................13
2.06. Redemptions...........................................................13
2.07. Default Rate of Interest..............................................15
2.08. Maximum Legal Rate of Interest........................................15
2.09. Payment on Non-Business Days..........................................15
2.10. Transfer and Exchange of Notes........................................15
2.11. Replacement of Notes..................................................16
2.12. Subordination.........................................................16
ARTICLE III
PURCHASE, SALE AND TERMS OF WARRANTS
3.01. The Warrants..........................................................16
3.02. Purchase and Sale of Warrants.........................................16
3.03. [Intentionally Omitted]...............................................17
3.04. [Intentionally Omitted]...............................................17
3.05. [Intentionally Omitted]...............................................17
3.06. [Intentionally Omitted]...............................................17
3.07. [Intentionally Omitted]...............................................17
3.08. [Intentionally Omitted]...............................................17
3.09. Right to Purchase New Mezzanine Securities............................17
3.10. [Intentionally Omitted]...............................................17
3.11. Termination Upon Qualified IPO........................................17
3.12. Waiver of Preemptive Rights and Dilution Adjustments..................18
ARTICLE IV
CONDITIONS TO PURCHASERS' OBLIGATION
4.01. Representations and Warranties........................................18
4.02. Documentation at Closing..............................................18
4.03. Loan Agreement........................................................19
4.04. Series D-I Preferred Stock............................................20
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4.05. No Default............................................................20
4.06. Purchase Permitted by Applicable Law; Approvals.......................20
4.07. Amended Stock Purchase Agreement......................................20
4.08. Amended Shareholders Agreement........................................20
4.09. Amended Co-Sale Agreement.............................................20
4.10. Amended Registration Agreement........................................20
4.11. Amended Affiliate Registration Agreement..............................21
4.12. Amended Articles of Incorporation.....................................21
4.13. Seventh Amendment Agreement...........................................21
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
5.01. Representations and Warranties of the Purchasers......................21
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
6.01. Organization and Standing of the Company and Subsidiaries; Ownership..22
6.02. Corporate Action......................................................23
6.03. Governmental Approvals................................................23
6.04. Litigation............................................................23
6.05. Compliance with Law...................................................24
6.06. Federal Reserve Regulations...........................................24
6.07. Title to Assets, Patents..............................................24
6.08. Financial Information.................................................24
6.09. Taxes.................................................................25
6.10. ERISA.................................................................25
6.11. Transactions with Affiliates..........................................26
6.12. Assumptions or Guaranties of Indebtedness of Other Persons............26
6.13. Investments in Other Persons..........................................26
6.14. Equal Employment Opportunity..........................................26
6.15. Securities Act........................................................26
6.16. Disclosure............................................................26
6.17. No Brokers or Finders.................................................27
6.18. Other Agreements of Officers..........................................27
6.19. Capitalization of the Company; Status of Capital Stock................27
6.20. Capital Stock of Subsidiaries.........................................28
6.21. Labor Relations.......................................................28
6.22. Insurance.............................................................28
6.23. Books and Records.....................................................28
6.24. Foreign Corrupt Practices Act.........................................28
6.25. Registration Rights...................................................29
6.26. Other Agreements......................................................29
6.27. Hazardous and Toxic Materials.........................................30
6.28. [Intentionally Omitted]...............................................31
6.29. Representations and Warranties Incorporated from Loan Agreement.......31
6.30. U.S. Real Property Holding Corporation................................31
6.31. Status under Certain Statutes.........................................31
6.32. Foreign Asset Control Regulations.....................................31
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ARTICLE VII
COVENANTS OF THE COMPANY
7.01. Affirmative Covenants of the Company Other Than Reporting
Requirements.......................................................31
7.02. Negative Covenants of the Company.....................................36
7.03. Reporting Requirements................................................40
ARTICLE VIII
EVENTS OF DEFAULT
8.01. Events of Default.....................................................42
8.02. Annulment of Defaults.................................................44
ARTICLE IX
MISCELLANEOUS
9.01. No Waiver; Cumulative Remedies........................................44
9.02. Amendments, Waivers and Consents......................................44
9.03. Addresses for Notices, Etc............................................45
9.04. Costs, Expenses and Taxes.............................................45
9.05. Binding Effect; Assignment............................................46
9.06. Provisions of Loan Agreement..........................................46
9.07. Payments in Respect of Notes..........................................46
9.08. Payments in Respect of Warrants.......................................47
9.09. Indemnification.......................................................47
9.10. Survival of Representations and Warranties............................47
9.11. Entire Agreement......................................................47
9.12. Severability..........................................................47
9.13. Governing Law.........................................................47
9.14. WAIVER OF RIGHT TO JURY TRIAL.........................................48
9.15. Headings..............................................................48
9.16. [Intentionally Omitted]...............................................48
9.17. Counterparts..........................................................48
9.18. Further Assurances....................................................48
9.19. CONSENT TO JURISDICTION...............................................48
9.20. EFFECT OF JUDGMENT....................................................48
9.21. SERVICE OF PROCESS....................................................49
9.22. No Limitation.........................................................49
9.23. Specific Performance..................................................49
9.24. Actions by Purchasers.................................................49
9.25. FINAL AGREEMENT.......................................................49
9.26. MAKE-WHOLE AMOUNT.....................................................49
SCHEDULES
A Purchaser Schedule
EXHIBITS
2.01 Form of Subordinated Notes
3.0! Form of Common Stock Purchase Warrants
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6.01 Schedule of Subsidiaries
6.07 Schedule of Title Exceptions
6.08A Financial Statements
6.08B Schedule of Indebtedness
6.09 Schedule of Taxes
6.10 Schedule of ERISA Matter(s)
6.11 Schedule of Transactions with Affiliates
6.19 Schedule of Capital Stock. Options and Other Rights
6.26 Schedule of Other Agreements
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MONITRONICS INTERNATIONAL, INC.
00000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
January 18, 2002
To the Purchasers listed in
the Schedule A attached hereto:
Re: Subordinated Notes due 2009 and
Common Stock Purchase Warrants
Ladies and Gentlemen:
Monitronics International, Inc., a Texas corporation, hereby agrees with
the Purchasers listed in the attached Schedule A as follows:
ARTICLE I
DEFINITIONS
1.01. Definitions. As used herein, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Affiliate" means, as to any specified Person, any other Person
Controlling, Controlled by or under common Control with such specified Person.
As used in this definition, "Control means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Affiliate Registration Agreement" shall have the meaning assigned to that
term in Section 4.11.
"Agreement" means this Subordinated Note and Warrant Purchase Agreement as
from time to time amended and in effect between the parties.
"Anti-Terrorism Order" means Executive Order No. 13,224 66 Fed Reg. 49,079
(2001) issued by the President of the United States of America (Executive Order
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit, or Support Terrorism).
"Applicable Laws" shall have the meaning assigned to that term in Section
6.05.
"Approved Alarm Dealers" means Persons engaged in the business of selling,
installing or servicing security alarm products that are (or will be) monitored
in the Company's central station.
"Approved Alarm Purchase Agreements" shall have the meaning assigned to
that term in Section 9 of the Loan Agreement as in effect on the date hereof.
"Articles of Incorporation" means the Articles of Incorporation of the
Company, as amended.
"Austin III-A" means Austin Ventures III-A, L.P., a Delaware limited
partnership.
"Austin III-B" means Austin Ventures III-B, L.P., a Delaware limited
partnership.
"Austin Ventures" shall mean Austin III-A and Austin III-B, collectively.
"Banks" means and shall include Canadian Imperial Bank of Commerce, as
administrative agent and a lender, CIBC Inc., Citizens Bank of Massachusetts, as
documentation and collateral agent and as a lender, Fleet National Bank,
JPMorgan Chase Bank, Union Bank of California, N.A., Xxxxx Fargo Bank Texas,
National Association, LaSalle Bank National Association, Firstar Bank, N.A.,
National City Bank of Pennsylvania, Bank One, NA, Bank of America, N.A., Banc of
America Bridge LLC, Bank of Montreal and Texas Capital Bank, N.A., any other
lenders which from time to time become parties to the Loan Agreement, and their
respective successors and assigns.
"Budget" shall have the meaning assigned to that term in Section 7.03(d).
"Business Day" means any day other than a Saturday, Sunday or a day on
which commercial banks in New York, New York are required or authorized to be
closed.
"Called Principal" means the principal amount of any Note that is prepaid
in accordance with Section 2.06(a) or 2.06(c) hereof or has become or is
declared to be immediately due and payable pursuant to Section 8.01 hereof.
"Capital Expenditure" means any payment made directly or indirectly for the
purpose of acquiring or constructing fixed assets, real property or equipment
which in accordance with GAAP would be added as a debit to the fixed asset
account of the Person making such expenditure, including without limitation,
amounts paid or payable under any conditional sale or other title retention
agreement or under any lease or other periodic payment arrangement which is of
such a nature that payment obligations of the lessee or obligor thereunder would
be required by GAAP to be capitalized and shown as liabilities on the balance
sheet of such lessee or obligor.
"Capital Lease" means any lease of property (real, personal or mixed)
which, in accordance with GAAP, should be capitalized on the lessee's balance
sheet or for which the amount of the asset and liability thereunder as if so
capitalized should be disclosed in a note to such balance sheet.
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"Change in Control" means any transaction or any event as a result of which
(i) any one or more Persons (other than a Purchaser or a stockholder or a holder
of warrants or options to acquire capital stock of the Company on the Closing
Date) acquires or for the first time controls or is able to vote (directly or
through nominees or beneficial ownership) after the Closing Date (other than as
the direct result of a transfer by descent or distribution of a decedent's
estate) fifty percent (50%) or more of the issued and outstanding stock of the
Company having power ordinarily to vote for directors of the Company (on a fully
diluted, as converted basis); or (ii) Xxxxx X. Xxxx is no longer the chief
executive officer of the Company and the Company has not obtained a replacement
chief executive officer, satisfactory to the Requisite Noteholders in their
reasonable judgment, within 120 days of Xx. Xxxx'x ceasing to so serve.
"Class A Common Stock" means the Company's Class A Common Stock, $0.01 par
value per share, as authorized on the date of this Agreement.
"Class B Common Stock" means the Company's Class B Common Stock. $0.01 par
value per share, as authorized on the date of this Agreement.
"Closing" shall have the meaning assigned to that term in Section 2.02.
"Closing Date" shall have the meaning assigned to that term in Section
2.02.
"Code" shall have the meaning assigned to that term in Section 2.03.
"Commission" means the United States Securities and Exchange Commission (or
any other federal agency at that time administering the Securities Act).
"Common Stock" includes (a) the Class A Common Stock, (b) the Class B
Common Stock, (c) any other capital stock of any class or classes (however
designated, other than the Preferred Stock) of the Company, authorized on or
after the date hereof, the holders of which shall have the right, without
limitation as to amount per share, either to all or to a share of the balance of
current dividends and liquidating distributions after the payment of dividends
and distributions on any shares entitled to preference in the payment thereof,
and the holders of which shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors of the Company
(even though the right so to vote may have been suspended by the happening of
such a contingency), and (d) any other securities into which or for which any of
the securities described in (a), (b) or (c) above may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
"Company" means and shall include Monitronics International, Inc., a Texas
corporation, and its successors and assigns.
"Control Event" means:
(a) the execution by the Company or any of its Subsidiaries or
Affiliates of any agreement with respect to any proposed transaction or event or
series of transactions or events which, individually or in the aggregate, may
reasonably be expected to result in a Change in Control,
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(b) the execution of any written agreement which, when fully performed
by the parties thereto, would result in a Change in Control, or
(c) the making of any written offer by any person (as such term is
used in Section 13(d) and Section l4(d)(2) of the Exchange Act as in effect on
the date of the Closing) or related persons constituting a group (as such term
is used in Rule I 3d-5 under the Exchange Act as in effect on the date of the
Closing) to the holders of the stock of the Company, which offer, if accepted by
the requisite number of holders, would result in a Change in Control.
"Co-Sale Agreement" shall have the meaning assigned to that term in Section
4.09.
"CRL" means Capital Resource Lenders II, L.P., a Delaware limited
partnership, and its successors and assigns.
"Distribution" shall have the meaning assigned to that term in Section
7.02(g).
"ERISA" shall have the meaning assigned to that term in Section 6.10.
"Events of Default" shall have the meaning assigned to that term in Section
8.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Financial Statements" shall have the meaning assigned to that term in
Section 6.08.
"Fixed Charges" means, for any period, the aggregate of Senior Debt Service
plus required payments in respect of Holdback Debt plus state and federal income
taxes applicable to the taxable income for the period being tested, plus Capital
Expenditures plus Restricted Payments during the period.
"GAAP" means generally accepted accounting principles recognized as such by
the American Institute of Certified Public Accountants. Unless otherwise
specifically stated herein, use of the term "GAAP" means that such principles
are applied and maintained on a consistent basis for the Company and its
Subsidiaries throughout the period indicated and consistent with the prior
financial practices of the Company and its Subsidiaries as reflected on the
Financial Statements so as to properly reflect the financial condition, and the
results of operations and cash flow of the Company and its Subsidiaries.
"Hazardous Discharge" shall have the meaning assigned to that term in
Section 6.27.
"Hazardous Substances" shall have the meaning assigned to that term in
Section 6.27.
"High Yield Debt" means unsecured debt securities having a long term debt
rating of BB+ or less by Standard & Poor's Ratings Group, a division of the
McGraw Hill Companies, Inc., and Ba1 or less by Xxxxx'x Investors Services, Inc.
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"Holdback Debt" means, as of the date of determination, the total amount
due to Approved Alarm Dealers as deferred payments under Approved Alarm Purchase
Agreements less any reductions permitted under the terms of the Approved Alarm
Purchase Agreements.
"Hull Family Limited Partnership" means the Hull Family Limited
Partnership, a Texas limited partnership.
"Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with GAAP, be classified upon the obligor's balance sheet
as liabilities, but in any event including, without limitation, liabilities
secured by any mortgage on property owned or acquired subject to such mortgage,
whether or not the liability secured thereby shall have been assumed, and also
including, without limitation, (i) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be so reflected in said balance sheet, except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, and (ii) the present value of
any lease payments due under Capital Leases.
"Interest Hedge Agreement" means any interest rate swap agreements,
interest cap agreements, interest rate collar agreements or any similar
agreements or arrangements designed to hedge the risk of interest rate
volatility, exchange or similar agreements, as such agreements or arrangements
may be modified, supplemented and in effect from time to time.
"Junior Subordinated Debt" means all Indebtedness for borrowed money
(including purchase money obligations) of the Company and its Subsidiaries,
whether outstanding on the date hereof or hereafter created or incurred, which
is by its terms subordinate and junior to the Notes on terms acceptable to the
holders of the Notes and which is permitted by this Agreement at the time it is
created or incurred.
"Loan Agreement" means that certain Fourth Amended and Restated Revolving
Credit and Term Loan Agreement made as of February 4,2000 among the Company,
Canadian Imperial Bank of Commerce, as administrative agent, and the Banks and
other agents named therein, as amended by the First Amendment Agreement dated as
of March 1, 2001, the Second Amendment Agreement dated April 27, 2001, the Third
Amendment Agreement dated as of even date herewith, and as from time to time
further amended and in effect.
"Make-Whole Amount" means as to the Called Principal of any Note that is
prepaid in accordance with Section 2.06(a) or 2.06(c) hereof or has become or is
declared to be immediately due and payable pursuant to Section 8.01 hereof, the
amount computed by multiplying the percentage set forth below opposite the
Settlement Date by such Called Principal:
Settlement Date Make-Whole Amount
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From the Closing Date to and including
January 18, 2004 5%
From January 18, 2004 to and including
January 18, 2005 4%
5
From January 18, 2005 to and including
January 18, 2006 3%
From January 18, 2006 to and including
January 18, 2007 2%
From January 18, 2007 to and including
January 18, 2008 1%
Thereafter 0%
Notwithstanding the foregoing, if prior to January 18, 2004 the Company chooses
to redeem the entire outstanding principal amount of the Notes pursuant to
Section 2.06(c) concurrently with consummation of a Qualifying Sale Transaction
or a Qualifying Debt Issuance, the percentage used in computing the Make-Whole
Amount payable in connection with such redemption shall be 2%.
"Material Adverse Effect" shall have the meaning assigned to that term in
Section 6.01.
"Mezzanine Securities" shall have the meaning assigned to that term in
Section 3.09.
"Net Income" means the net income (or loss) of the Company and its
Subsidiaries for the period in question determined in accordance with GAAP.
"Net Operating Income" for any period means Net Income for such period,
plus an amount equal to the aggregate of all taxes, depreciation, amortization
and interest expense for such period (in each case to the extent deducted in
determining Net Income for such period), plus, solely for the fiscal year ended
June 30, 2002, up to five hundred fifty thousand dollars ($550,000) in one time
expenses attributable to the Company's proposed Rule 144A offering if such
offering is terminated prior to June 30, 2002 minus Out of Holdback Revenue and
extraordinary income.
"Notes" shall have the meaning assigned to that term in Section 2.01.
"Operative Documents" means each of the Notes, the Warrants, the
Subordination Agreement, the Shareholders Agreement, the Co-Sale Agreement, the
Pledge Agreements, the Preferred Stock Subordination Agreement, the Registration
Agreement, the Affiliate Registration Agreement and the letter, dated January
18, 2002, from the Purchaser to the Company regarding anti-dilution provisions
in the Warrant.
"Out of Holdback Revenue" means, as of any date of determination, any
revenue associated with credits to Holdback Debt.
"Permitted Liens" shall have the meaning assigned to that term in Section
7.02(a).
"Person" means and includes an individual, a corporation, a partnership, a
joint venture, a trust, an unincorporated organization, a limited liability
company or partnership, or a government or any agency or political subdivision
thereof.
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"Pledge Agreements" means each of the (a) Third Amended and Restated Pledge
Agreement, dated as of January 13, 1999, as amended to date, by and between
Austin Ventures, Austin Ventures V, L.P., Austin Ventures V Affiliates Fund,
L.P., CRL, Hull Family Limited Partnership, Xxxxxx Xxxxxxx, individually,
Xxxxxxx Xxxxxxx, individually, Xxxxxxx Xxxxxx individually, and Xxxxxxx Xxxxxxx,
individually and Canadian Imperial Bank of Commerce, as administrative agent
(the "AA"), and Citizens Bank of Massachusetts, as documentation and collateral
agent (collectively with the AA, the "Agents"), (b) Pledge Agreement dated as of
April 27, 2001, as amended to date, by and between ABRY Partners IV, L.P., ABRY
Investment Partnership, L.P., CRL and the Agents and (c) Pledge Agreement, dated
as of January 18, 2002, by and between the Purchasers and the Agents.
"Preferred Stock" means the Preferred Stock, $0.01 par value per share, of
the Company as authorized by the Company's Articles of Incorporation as filed
and in effect on April 27, 2001, and as the same may be amended from time to
time.
"Preferred Stock Subordination Agreement" shall have the meaning assigned
to that term in Section 4.02(h).
"Purchaser Majority" means (i) for as long as any of the Notes remain
outstanding, the Requisite Noteholders, or (ii) if no Notes are then
outstanding, the holders of at least sixty-six and two-thirds percent (662/3%)
of the Warrants and Warrant Shares.
"Purchasers" means and shall include each institutional investor listed in
Schedule A (so long as such institutional investor holds any of the Notes or
Warrants), and any other holder or holders from time to time of any of the Notes
or Warrants.
"Qualified IPO" means a firm commitment underwritten public offering of
shares of the Company's Common Stock in which (i) the aggregate proceeds to the
Company and/or any shareholders participating in the offering, if any, are at
least $20 million and (ii) the aggregate market valuation of the Company's
Common Stock is then not less than $60 million.
"Qualifying Debt Issuance" means a firm commitment underwritten public
offering of High Yield Debt of the Company or an issuance of High Yield Debt of
the Company in accordance with Rule 144A under the Securities Act, in either
case, the proceeds from which are used (in whole or in part) to prepay the Notes
in whole together with interest and the Make-Whole Amount due thereon pursuant
to Section 2.06(c) hereof.
"Qualifying Sale Transaction" means the sale of all or substantially all of
(i) the assets of the Company and its Subsidiaries to a Person other than an
Affiliate of the Company or (ii) the outstanding capital stock of the Company in
a single transaction or series of related transactions to one or more Persons
other than Affiliates of the Company.
"Requisite Noteholders" means, at any time, the holders of at least
sixty-six and two-thirds percent (662/3%) of the principal amount of all Notes
then outstanding.
"Registration Agreement" shall have the meaning assigned to that term in
Section 4.10.
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"Responsible Officer" means the chief executive officer, chief operating
officer, chief financial officer or chief accounting officer of the Company or
any other officer of the Company involved principally in its financial
administration or its controllership function.
"Restricted Payment" means (i) any cash dividend or other cash
distribution, direct or indirect, on or on account of any shares of any class of
stock of the Company (including but not limited to the Preferred Stock) now or
hereafter outstanding; (ii) any redemption, purchase or other acquisition,
direct or indirect, of any shares of any class of stock of the Company now or
hereafter outstanding or of any warrants, options or rights to purchase any such
stock (including, without limitation, the repurchase of any such stock, warrant,
option or right or any refund of the purchase price thereof in connection with
the exercise by the holder thereof of any right of rescission or similar
remedies with respect thereto); (iii) any salary, cost, fee (consulting,
management or other), fringe benefit, allowance or other expense directly or
indirectly paid or payable by the Company or any Subsidiary (as compensation or
otherwise) to any shareholder or Affiliate of the Company (other than to an
officer, director or full or part-time employee) or any partner, shareholder or
Affiliate thereof, and (iv) any payment in respect of Subordinated Debt
(including, without limitation, the Senior Subordinated Debt).
"Securities" means collectively the Notes, the Warrants and the Warrant
Shares.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Security Alarm Contracts" means contracts between Approved Alarm Dealers
and end users of alarm equipment for monitoring and servicing of alarm
equipment. These contracts must be assignable, contain standard industry limits
of liability, and must comply with all applicable consumer laws.
"Senior Debt" means (i) all Indebtedness of the Company and any of its
Subsidiaries for money borrowed from the Banks pursuant to the Loan Agreement or
from other banks or institutional lenders, including any extensions or renewals
thereof, whether outstanding on the date hereof or hereafter created or
incurred, which is not by its terms subordinate and junior to the Notes and
which is disclosed on the Financial Statements or is permitted by this Agreement
at the time it is created or incurred (and including, without limitation, the
Senior Subordinated Debt), (ii) all Indebtedness of the Company and any of its
Subsidiaries incurred to refinance any of the Indebtedness referred to in item
(i) above, where the security securing such Indebtedness is substantially the
same security as that securing the Indebtedness being refinanced, (iii)
obligations of the Company and any of its Subsidiaries under Capital Leases
disclosed in the Financial Statements or which are permitted by this Agreement
at the time they are incurred and (iv) all guarantees by the Company and any of
its Subsidiaries which are not by their terms subordinate and junior to the
Notes and which are permitted hereby at the time they are made of Indebtedness
of any Subsidiary if such Indebtedness would have been Senior Debt pursuant to
the provisions of clause (i), (ii) or (iii) of this sentence had it been
indebtedness of the Company.
"Senior Debt Service" means, for any period, required interest and
principal payments in respect of Senior Debt during such period; provided,
however, that so long as the Senior
8
Subordinated Debt is excluded under the Senior Subordinated Note Agreement from
"Senior Debt" for purposes of the definition of "Senior Debt Service" (as such
terms are defined in the Senior Subordinated Note Agreement), Senior
Subordinated Debt shall be excluded from Senior Debt for purposes of determining
Senior Debt Service in connection with the fixed charge coverage ratio set forth
in Section 7.01(v) hereof.
"Senior Subordinated Debt" means the Indebtedness evidenced by the
Company's 12% Senior Subordinated Notes due June 30, 2007 in the original
aggregate principal amount of $12,000,000 issued pursuant to the Senior
Subordinated Note Agreement.
"Senior Subordinated Note Agreement" means that certain Senior Subordinated
Note and Warrant Purchase Agreement dated as of May 10, 1996 among the Company,
Austin III-A, Austin III-B and CRL, as supplemented and modified by (i) the
Senior Subordinated Note and Warrant Purchase Agreement, dated as of November
22, 1996, (ii) the Senior Subordinated Note and Warrant Purchase Agreement dated
as of May 19, 1997, as amended by that certain Amendment, dated as of March 13,
1998, that certain Second Amendment, dated as of January 13, 1999, that certain
Termination of Put Rights, dated as of June 15, 1998, that certain Third
Amendment dated as of March 9, 1999, that certain Fourth Amendment, dated as of
February 4, 2000, (iii) that certain Sixth Amendment Agreement dated April 27,
2001 and (iv) the Seventh Amendment Agreement.
"Series A Preferred Stock" means the 4,000,000 shares of the Company's
Series A Preferred Stock, $01 par value per share, outstanding as of the date of
this Agreement.
"Series B Preferred Stock" means the Company's Series B Preferred Stock,
$.01 par value per share, outstanding as of the date of this Agreement.
"Series C Preferred Stock" means the 1,409,375 shares of the Company's
Series C Preferred Stock, $.01 par value per share, outstanding as of the date
of this Agreement.
"Series C-1 Preferred Stock" means the 251,420 shares of the Company's
Series C-l Preferred Stock, $.01 par value per share, outstanding as of the date
of this Agreement.
"Series D-l Preferred Stock" means the 70,000 shares of the Company's
Series D-l Preferred Stock, $.01 par value per share, to be outstanding
simultaneously with the Closing.
"Qualifying Sale Transaction" means the sale of all or substantially all of
(i) the assets of the Company and its Subsidiaries to a Person other than an
Affiliate of the Company or (ii) the outstanding capital stock of the Company in
a single transaction or series of related transactions to one or more Persons
other than Affiliates of the Company.
"Requisite Noteholders" means, at any time, the holders of at least
sixty-six and two-thirds percent (662/3%) of the principal amount of all Notes
then outstanding.
"Registration Agreement" shall have the meaning assigned to that term in
Section 4.10.
9
"Responsible Officer" means the chief executive officer, chief operating
officer, chief financial officer or chief accounting officer of the Company or
any other officer of the Company involved principally in its financial
administration or its controllership function.
"Restricted Payment" means (i) any cash dividend or other cash
distribution, direct or indirect, on or on account of any shares of any class of
stock of the Company (including but not limited to the Preferred Stock) now or
hereafter outstanding; (ii) any redemption, purchase or other acquisition,
direct or indirect, of any shares of any class of stock of the Company now or
hereafter outstanding or of any warrants, options or rights to purchase any such
stock (including, without limitation, the repurchase of any such stock, warrant,
option or right or any refund of the purchase price thereof in connection with
the exercise by the holder thereof of any right of rescission or similar
remedies with respect thereto); (iii) any salary, cost, fee (consulting,
management or other), fringe benefit, allowance or other expense directly or
indirectly paid or payable by the Company or any Subsidiary (as compensation or
otherwise) to any shareholder or Affiliate of the Company (other than to an
officer, director or full or part-time employee) or any partner, shareholder or
Affiliate thereof, and (iv) any payment in respect of Subordinated Debt
(including, without limitation, the Senior Subordinated Debt).
"Securities" means collectively the Notes, the Warrants and the Warrant
Shares.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Security Alarm Contracts" means contracts between Approved Alarm Dealers
and end users of alarm equipment for monitoring and servicing of alarm
equipment. These contracts must be assignable, contain standard industry limits
of liability, and must comply with all applicable consumer laws.
"Senior Debt" means (i) all Indebtedness of the Company and any of its
Subsidiaries for money borrowed from the Banks pursuant to the Loan Agreement or
from other banks or institutional lenders, including any extensions or renewals
thereof, whether outstanding on the date hereof or hereafter created or
incurred, which is not by its terms subordinate and junior to the Notes and
which is disclosed on the Financial Statements or is permitted by this Agreement
at the time it is created or incurred (and including, without limitation, the
Senior Subordinated Debt), (ii) all Indebtedness of the Company and any of its
Subsidiaries incurred to refinance any
"Series D-2 Preferred Stock" means the 70,000 shares of the Company's
Series D-2 Preferred Stock, $.01 par value per share, authorized by the
Company's Articles of Incorporation as filed and in effect on April 27, 2001,
and as the same may be amended from time to time.
"Settlement Date" means, with respect to the Called Principal of any Note,
the date on which such Called Principal is to be prepaid pursuant to Section
2.06(a) or 2.06(c) hereof, or is declared to be immediately due and payable
pursuant to Section 8.01 hereof.
"Seventh Amendment Agreement" means that certain Seventh Amendment
Agreement dated as of the date hereof among the Company and the Security Holders
named therein.
10
"Shareholders Agreement" shall have the meaning assigned to that term in
Section 4.08.
"Stock Purchase Agreement" shall have the meaning assigned to that term in
Section 4.07.
"Subordinated Debt" means all Indebtedness of the Company and any of its
Subsidiaries for money borrowed from any Person for which a written evidence of
indebtedness was executed, including any extensions or renewals thereof, whether
outstanding on the date hereof or hereafter created or incurred, which is by its
terms subordinate and junior to Senior Debt under the Loan Agreement on terms
acceptable to the holders of such Senior Debt and which is permitted by this
Agreement, including, without limitation, the Notes as they are subordinated to
the Banks pursuant to the Bank Subordination Agreement.
"Subordination Agreements" shall have the meaning assigned to that term in
Section 2.12.
"Subsidiary" or "Subsidiaries" means (i) any corporation more than fifty
percent (50%) of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned directly or indirectly by the
Company and/or any one or more of its Subsidiaries, and (ii) any partnership,
association, joint venture or other entity in which the Company and/or one or
more of its Subsidiaries has more than a fifty percent (50%) equity interest at
the time.
"Total Debt" means, as of any date of determination (but without
duplication), Senior Debt plus Subordinated Debt, in each case whether
outstanding on the date hereof or hereafter created or incurred.
"Total Interest Expense" means, for any period, the aggregate amount
(determined in accordance with GAAP) of interest paid or payable by the Company
and its Subsidiaries during such period in respect of all Indebtedness for money
borrowed, Capital Leases and the deferred purchase price of property, minus any
amounts paid to the Company pursuant to Interest Hedge Agreements.
"Total Senior Debt" means all Indebtedness of the Company and any of its
Subsidiaries for money borrowed from the Banks pursuant to the Loan Agreement,
plus (i) the book overdraft shown on the most recent financial statements, (ii)
accrued interest on the Indebtedness to the Banks under the Loan Agreement, and
(iii) accrued federal and state income taxes.
"Warrant Shares" shall have the meaning assigned to that term in Section
3.01.
"Warrants" shall have the meaning assigned to that term in Section 3.01.
1.02. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, and all financial data
submitted pursuant to this Agreement and all financial tests to be calculated in
accordance with this Agreement shall be prepared and calculated in accordance
with GAAP.
11
ARTICLE II
PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS
2.01. The Notes. The Company has authorized the issuance and sale to the
Purchasers of $40,000,000 aggregate principal amount of its 13.5% Subordinated
Notes due January 18, 2009. The 13.5% Subordinated Notes shall be substantially
in the form set forth as Exhibit 2.01 attached hereto and is herein referred to
individually as a "Note" and collectively as the "Notes" which term shall also
include any notes delivered in exchange or replacement therefor. Except as
otherwise provided in this Agreement, the entire unpaid principal amount of the
Notes shall (a) be payable on January 18, 2009 and (b) bear interest (based on a
360-day year counting actual days elapsed) until due and payable at the rate of
thirteen and one half percent (13.5%) per annum, which interest shall be payable
semi-annually in arrears on the last Business Day of June and December in each
year, commencing on the last Business Day of June, 2002, and at maturity or
prior prepayment of the Notes, provided that payment will be made in cash only
of interest accrued on the Notes at the rate of twelve percent (12%) per annum
and the remaining accrued interest shall be added to the outstanding principal
amount of the Notes (and thereafter bear interest at thirteen and one half
percent (13.5%) per annum).
2.02. Purchase and Sale of Notes. The Company agrees to issue and sell to
each Purchaser, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, each Purchaser agrees to
purchase, Notes in the principal amount specified opposite such Purchaser's name
in Schedule A. Such purchase and sale shall take place at a closing (the
"Closing") to be held at the offices of Xxxxxx Xxxxxx & Xxxxx, 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 11:00 a.m. local time, on the date on which this
Agreement is executed and delivered (the "Closing Date"). At the Closing, the
Company will initially issue to each Purchaser the Note to be purchased by such
Purchaser in the form of a single Note (or such greater number of Notes in
denominations of at least $500,000 as such Purchaser may request), payable to
the order of such Purchaser (or to the order of such Purchaser's nominee),
against receipt of funds by wire transfer to an account or accounts designated
by the Company prior to the Closing in the amount of the principal amount of the
Notes to be purchased by such Purchaser, in payment of the full purchase price
for the Notes.
2.03. Issue Price; Original Issue Discount. Having considered all facts
relevant to a determination of the value of the Notes and the Warrants being
acquired by the Purchasers, the Company and the Purchasers have concluded and do
hereby agree that (i) the present value of all scheduled payments of principal
of and interest on the Notes is $40,000,000, based on yields of comparable debt
instruments of comparable issuers and (ii) the consideration received by the
Company for the Warrants is hereby deemed to be fair and reasonable to the
Company and its shareholders. Accordingly, the Company and the Purchasers have
concluded and do agree that for purposes of the Internal Revenue Code of 1986,
as amended (the "Code"), and the Regulations thereunder, and for purposes of
determining any original issue discount with respect to the Notes thereunder,
the "issue price" for the Notes is $40,000,000 million (it being agreed that the
"issue price" for each individual Note is equal to the face amount thereof). The
Company and the Purchasers agree not to take a position on any income tax
return, before any governmental agency charged with the collection of any income
tax or in any judicial proceeding that is inconsistent with the terms of this
Section 2.03.
12
2.04. Use of Proceeds. The Company agrees to use the proceeds from the sale
of the Notes (after payment of costs and expenses of the sale) to repay a
portion of the outstanding Indebtedness under the Loan Agreement and for working
capital and general corporate purposes.
2.05. Payments and Endorsements. Payments to any Purchaser of principal,
interest and Make-Whole Amount on the Notes shall be made without setoff or
counterclaim directly by wire transfer of immediately available funds to the
location specified for such purpose by such Purchaser in Schedule A (or as
otherwise set forth in a written notice executed by such Purchaser and delivered
to the Company), without any demand, presentment or notation of payment, except
that prior to any transfer of any Note, the holder thereof shall endorse on such
Note a record of the date to which interest has been paid and all payments made
on account of principal of such Note. All payments and prepayments of principal
of and interest on the Notes shall be applied (to the extent thereof) to all of
the Notes p~ rata based on the principal amount outstanding and held by each
holder thereof; provided that prepayments under Section 2.06(a) shall be applied
only to the Notes of the holders who have elected to participate in such
prepayment.
2.06. Redemptions.
(a) Offer to Prepay Notes in the Event of a Change in Control.
(1) Notice of Change in Control or Control Event. The Company
will, within five Business Days after any Responsible Officer has knowledge
of the occurrence of any Change in Control or Control Event, give written
notice of such Change in Control or Control Event to each holder of Notes
unless notice in respect of such Change in Control (or the Change in
Control contemplated by such Control Event) shall have been given pursuant
to Section 2.06(a)(2) below. If a Change in Control has occurred, such
notice shall contain and constitute an offer to prepay Notes as described
in Section 2.06(a)(3) below and shall be accompanied by the certificate
described in Section 2.06(a)(7) below.
(2) Condition to Company Action. The Company will not take any
action that consummates or finalizes a Change in Control unless (i) at
least 15 days prior to such action it shall have given to each holder of
Notes written notice containing and constituting an offer to prepay Notes
as described in Section 2.06(a)(3) below, accompanied by the certificate
described in Section 2.06(a)(7) below, and (ii) contemporaneously with
consummation of such action, the Company prepays all Notes required to be
prepaid in accordance with this Section 2.06(a).
(3) Offer to Prepay Notes. The offer to prepay Notes contemplated
by Sections 2.06(a)(l) and 2.06(a)(2) shall be an offer to prepay, in
accordance with and subject to this Section 2.06(a), all, but not less than
all, Notes held by each holder (in this case only, "holder" in respect of
any Note registered in the name of a nominee for a disclosed beneficial
owner shall mean such beneficial owner) on a date specified in such offer
(the "Proposed Prepayment Date"). If such Proposed Prepayment Date is in
connection with an offer contemplated by Section 2.06(a)(1), such date
shall be not less than 15 days and not more than 60 days after the date of
such offer (if the Proposed
13
Prepayment Date shall not be specified in such offer, the Proposed
Prepayment Date shall be the 15th day after the date of such offer).
(4) Rejection; Acceptance. A holder of Notes may accept or reject
the offer to prepay made pursuant to this Section 2.06(a) by causing a
notice of such acceptance or rejection to be delivered to the Company at
least one Business Day prior to the Proposed Prepayment Date. A failure by
a holder of Notes to so respond to an offer to prepay made pursuant to this
Section 2.06(a) shall be deemed to constitute an acceptance of such offer
by such holder.
(5) Prepayment. Prepayment of the Notes to be prepaid pursuant to
this Section 2.06(a) shall be at 100% of the principal amount of such
Notes, together with interest on such Notes accrued to the date of
prepayment and the Make-Whole Amount with respect thereto. The prepayment
shall be made on the Proposed Prepayment Date.
(6) Deferral Pending Change in Control. The obligation of the
Company to prepay Notes pursuant to the offers required by Section
2.06(a)(2) and accepted in accordance with Section 2.06(aX4) is subject to
the occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in Control
does not occur on the Proposed Prepayment Date in respect thereof, the
prepayment shall be deferred until, and shall be made on the date on which,
such Change in Control occurs. The Company shall keep each holder of Notes
reasonably and timely informed of (i) any such deferral of the date of
prepayment, (ii) the date on which such Change in Control and the
prepayment are expected to occur, and (iii) any determination by the
Company that efforts to effect such Change in Control have ceased or been
abandoned (in which case the offers and acceptances made pursuant to this
Section 2.06(a) in respect of such Change in Control shall be deemed
rescinded).
(7) Officer's Certificate. Each offer to prepay the Notes
pursuant to this Section 2.06(a) shall be accompanied by a certificate,
executed by a Responsible Officer of the Company and dated the date of such
offer, speci1~'ing (i) the Proposed Prepayment Date, (ii) that such offer
is made pursuant to this Section 2.06(a), (iii) the principal amount of
each Note offered to be prepaid, (iv) the interest that would be due on
each Note offered to be prepaid, accrued to the Proposed Prepayment Date,
(v) the Make-Whole Amount that would be due on each Note offered to be
prepaid; (vi) that the conditions of this Section 2.06(a) have been
fulfilled, and (vii) in reasonable detail based on information then
available to the Company, the nature and date of the Change in Control.
(b) [Intentionally Omitted].
(c) Optional Redemptions. In addition to the redemptions of the Notes
required under Section 2.06(a), the Company may, at any time and from time to
time, redeem the Notes, in whole or in part (in an amount not less than
$1,000,000 in the case of a partial redemption), at 100% of the principal amount
so redeemed, together with interest accrued thereon through the date of
redemption plus the Make-Whole Amount determined for such redemption date with
respect to such principal amount.
14
(d) Notice of Redemptions; Pro Rata Redemptions. Notice of any
optional redemption pursuant to Section 2.06(c) shall be given to all holders of
the Notes at least ten (10) Business Days and not more than twenty (20) Business
Days prior to the date of such redemption. Each redemption of Notes pursuant to
Section 2.06(c) shall be made so that the Notes then held by each holder shall
be redeemed in a principal amount which shall bear the same ratio to the total
unpaid principal amount being redeemed on all Notes as the unpaid principal
amount of Notes then held by such holder bears to the aggregate unpaid principal
amount of the Notes then outstanding.
2.07. Default Rate of Interest. If an Event of Default has occurred and is
continuing, from and after the date such Event of Default occurred the entire
outstanding unpaid principal balance of the Notes and any unpaid interest from
time to time due thereon shall bear interest, payable on demand, at the rate of
16.5% per annum, or such lower rate as then may be the maximum rate permitted by
applicable law; provided, however, that upon the cessation or cure of such Event
of Default, if no other Event of Default is then continuing, the Notes shall
again bear interest at the rate of 13.5% per annum as set forth in Section 2.01.
2.08. Maximum Legal Rate of Interest. Nothing in this Agreement or in the
Notes shall require the Company to pay interest at a rate in excess of the
maximum rate permitted by applicable law. Any interest payable under the Notes
or under any other instrument relating to the indebtedness evidenced thereby
that is in excess of the maximum rate permitted by applicable law shall, in the
event of acceleration of maturity, late payment, prepayment, or otherwise, be
applied to a reduction of the unrepaid indebtedness evidenced thereby and not to
the payment of interest, or if such excessive interest exceeds the unpaid
balance of such unrepaid indebtedness, such excess shall be refunded to the
Company. To the extent not prohibited by applicable law, determination of the
maximum rate permitted by applicable law shall at all times be made by
amortizing, prorating, allocating and spreading in equal parts during the full
term of the indebtedness evidenced by the Notes, all interest at any time
contracted for, charged or received from the Company in connection with the
indebtedness evidenced thereby, so that the actual rate of interest on account
of such indebtedness is uniform throughout the term thereof.
2.09. Payment on Non-Business Days. Whenever any payment to be made shall
be due on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest due.
2.10. Transfer and Exchange of Notes. The holder of any Note or Notes may,
prior to maturity or prepayment thereof, surrender such Note or Notes at the
principal office of the Company for transfer or exchange. Any holder desiring to
transfer or exchange any Note shall first notify the Company in writing at least
five (5) days in advance of such transfer or exchange. Within a reasonable time
after such notice to the Company from a holder of its intention to make such
exchange and without expense (other than transfer taxes, if any) to such holder,
the Company shall issue in exchange therefor another Note or Notes, in such
denominations as requested by the holder, for the same aggregate principal
amount, as of the date of such issuance, as the unpaid principal amount of the
Note or Notes so surrendered and having the same maturity and rate of interest,
containing the same provisions and subject to the same terms and conditions as
the Note or Notes so surrendered. Each new Note shall be made payable to such
Person or
15
Persons, or assigns, as the holder of such surrendered Note or Notes may
designate, and such transfer or exchange shall be made in such a manner that no
gain or loss of principal or interest shall result therefrom.
2.11. Replacement of Notes. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; provided, however, if any Note of which a
Purchaser, its nominee, or any of its partners is the holder is lost, stolen or
destroyed, the affidavit of an authorized partner or officer of the holder
setting forth the circumstances with respect to such loss, theft or destruction
shall be accepted as satisfactory evidence thereof, and no indemnification bond
or other security shall be required as a condition to the execution and delivery
by the Company of a new Note in replacement of such lost, stolen or destroyed
Note other than the holder's written agreement to indemnify the Company.
2.12. Subordination. The indebtedness evidenced by the Notes and the rights
and remedies of the Purchasers under this Agreement shall be subordinate and
junior to (i) certain Indebtedness of the Company to the Banks in the manner and
to the extent provided in the Intercreditor and Subordination Agreement dated as
of the date hereof by and among the Banks, the Company and the Purchasers (the
"Bank Subordination Agreement") and (ii) certain Indebtedness of the Company to
the holders of the Senior Subordinated Debt in the manner and to the extent
provided in the Intercreditor and Subordination Agreement dated as of the date
hereof by and among the holders of the Senior Subordinated Debt, the Company and
the Purchasers (the "Senior Subordinated Debt Subordination Agreement"; the Bank
Subordination Agreement and the Senior Subordinated Debt Subordination Agreement
are collectively referred to herein as the "Subordination Agreements").
ARTICLE III
PURCHASE, SALE AND TERMS OF WARRANTS
3.01. The Warrants. The Company has authorized the issuance and sale to the
Purchasers of Common Stock Purchase Warrants for the purchase of an aggregate of
1,133,328 shares of the Company's Class A Common Stock representing 7.234% of
the outstanding Common Stock on a fully diluted basis as of the Closing Date
(subject to adjustment as provided therein) (the "Warrant Shares"). Such Common
Stock Purchase Warrants shall be substantially in the form set forth as Exhibit
3.01 attached hereto and are referred to herein individually as a "Warrant" and
collectively as the "Warrants", which term shall also include any warrants
delivered in exchange or replacement therefor. The Warrants shall be exercisable
at the purchase price provided therein.
3.02. Purchase and Sale of Warrants. The Company agrees to issue and sell
to each Purchaser, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, each Purchaser agrees to
purchase the number of Warrants specified opposite such Purchaser's name on
Schedule A. Such purchase and sale shall take
16
place at the Closing and at the Closing the Company will initially issue to each
Purchaser the Warrants to purchase (subject to adjustment as provided therein)
the number of Warrant Shares specified opposite such Purchaser's name on
Schedule A, against receipt of funds by check or by wire transfer to an account
or accounts designated by the Company prior to the Closing in the amount set
forth on Schedule A as the purchase price therefor, in payment of the full
purchase price for the Warrants.
3.03. [Intentionally Omitted].
3.04. [Intentionally Omitted].
3.05. [Intentionally Omitted].
3.06. [Intentionally Omitted].
3.07. [Intentionally Omitted].
3.08. [Intentionally Omitted].
3.09. Right to Purchase New Mezzanine Securities. Prior to issuing any
Subordinated Debt after the Closing Date that is not issued in connection with
any capital stock or similar security, including without limitation, securities
containing equity features and securities containing profit participation
features, or any security convertible or exchangeable, with or without
consideration, into or for any stock or similar security, or any security
carrying any warrant or right to subscribe for or purchase any stock or similar
security, or any such warrant or right (such Subordinated Debt herein referred
to as `~Mezzanine Securities `~, of the Company or any of its Subsidiaries to
any Person, the Company will first give, or cause such Subsidiary to give to
each of the holders of the Notes the right to purchase, on the same terms, the
same proportion of the Mezzanine Securities proposed to be sold by the Company
or such Subsidiary as the number of Warrants and Warrant Shares owned by such
holder bears to the total number of shares of Outstanding Common Stock at that
time. Persons electing to purchase Mezzanine Securities pursuant to this Section
shall also be entitled to purchase (pro rata according to their holdings of
Warrants and Warrant Shares) offered Mezzanine Securities that other holders
decline to purchase. Any such right of purchase shall be exercisable for a
period of twenty (20) days after the holders receive written notice of a
proposed issuance of Mezzanine Securities (and any such notice by the Company or
a Subsidiary shall be given not less than twenty (20) nor more than ninety (90)
days prior to any such issuance). The Company shall be entitled to sell any
Mezzanine Securities not purchased by the holders of Notes pursuant to this
Section 3.09: (i) during the period ending six (6) months after the date of the
Company's notice to such holders and (ii) at not less than the same price and
upon terms not materially less favorable to the Company than those offered to
the holders of Notes, but may not otherwise sell such Mezzanine Securities
without renewed compliance with this Section 3.09.
3.10. [Intentionally Omitted].
3.11. Termination Upon Qualified IPO. The right of each holder of Notes to
purchase new Mezzanine Securities set forth in Section 3.09 shall terminate
immediately prior to the closing of a Qualified IPO.
17
3.12. Waiver of Preemptive Rights and Dilution Adjustments. The Purchasers
waive any (i) preemptive rights and (ii) any anti-dilution adjustments to the
Warrants, in each case which such Purchasers have with regard to the issuance of
up to 522,953 shares of Class A Common Stock to be issued to certain employees
of the Company after the date hereof in amounts and subject to the terms and
conditions to be determined by the Compensation Committee of the Company.
ARTICLE IV
CONDITIONS TO PURCHASERS' OBLIGATION
The obligation of each Purchaser to purchase and pay for the Notes and
Warrants to be purchased by such Purchaser at the Closing is subject to
satisfaction of the following conditions, all or any of which may be waived in
writing by such Purchaser:
4.01. Representations and Warranties. Each of the representations and
warranties of the Company set forth in Article VI hereof shall be true and
correct in all material respects at the time of, and immediately after giving
effect to, the sale of the Notes and the Warrants.
4.02. Documentation at Closing. Each Purchaser shall have received prior to
or at the Closing all of the following, each in form and substance satisfactory
to such Purchaser and such Purchaser's special counsel:
(a) A certified copy of the charter documents and by-laws of the
Company and each of its Subsidiaries; a certified copy of the resolutions of the
board of directors and, to the extent required, the stockholders of the Company
evidencing approval, as applicable, of this Agreement, the Operative Documents
and all other matters contemplated hereby and thereby; and certified copies of
all documents evidencing other necessary corporate or other action and
governmental approvals, if any, with respect to this Agreement, the Operative
Documents and all other matters contemplated hereby or thereby.
(b) A favorable opinion of Xxxxxx & Xxxxxx L.L.P., counsel for the
Company, in form and substance reasonably satisfactory to the Purchasers and
their special counsel.
(c) A certificate of the Secretary or an Assistant Secretary of the
Company which shall certify the names of the officers of the Company authorized
to sign this Agreement, the Operative Documents and any other documents or
certificates to be delivered pursuant hereto or thereto by the Company or any of
its officers, together with the true signatures of such officers. Each Purchaser
may conclusively rely on such certificate until such Purchaser shall receive a
further certificate of the Secretary or an Assistant Secretary of the Company
canceling or amending the prior certificate and submitting the signatures of the
officers named in such further certificate.
(d) A certificate from a duly authorized officer of the Company
stating that the representations and warranties contained in Article VI hereof
and otherwise made by the Company in writing in connection with the transactions
contemplated hereby are true and correct in all material respects and that no
condition or event has occurred or is continuing or will result from the
execution and delivery of this Agreement or the Operative Documents which
18
constitutes an Event of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
(e) The Subordination Agreements in form and substance satisfactory to
the Purchasers and their special counsel executed by the parties thereto.
(f) Payment for the costs, expenses, taxes and filing fees identified
in Section 9.04 as to which the Purchasers give the Company notice prior to the
Closing.
(g) A certificate from a duly authorized officer of the Company
stating that all the conditions set forth in this Article IV have been
satisfied, other than those, if any, waived by the Purchasers in writing.
(h) The Preferred Stock Subordination Agreement dated as of May 10,
1996, amended by that certain Amendment Agreement dated as of November 22, 1996
(the "First Amendment Agreement"), that certain Second Amendment Agreement dated
as of May 19, 1997 (the "Second Amendment Agreement"), that certain Transfer,
Assignment and Assumption Agreement and Third Amendment Agreement dated as of
January 1, 1998 (the "Third Amendment Agreement"), that certain Transfer,
Assignment and Assumption Agreement and Fourth Amendment Agreement dated as of
July 22, 1998 (the "Fourth Amendment Agreement"), that certain Fifth Amendment
Agreement dated as of March 9, 1999 (the "Fifth Amendment Agreement"), that
certain Sixth Amendment Agreement dated as of April 27, 2001 (the "Sixth
Amendment Agreement") and the Seventh Amendment Agreement (the "Preferred Stock
Subordination Agreement") among the Company and the security holders named
therein shall have been amended in form and substance satisfactory to the
Purchasers and their special counsel.
(i) A private placement number issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) shall have been obtained for
the Notes and the Warrants.
(j) Evidence that all preemptive rights relating to the issuance by
the Company of the Warrants and the Warrant Shares upon exercise of the Warrants
have been waived and all rights of first offer relating to the issuance and sale
by the Company of the Notes have been waived.
(k) Such other documents referenced in any Exhibit hereto or relating
to the transactions contemplated by this Agreement as such Purchaser or such
Purchaser's special counsel may reasonably request.
4.03. Loan Agreement. The Company shall have contemporaneously with the
Closing entered into the Third Amendment Agreement to the Loan Agreement with
the Banks on terms satisfactory to the Purchasers and their special counsel and
shall have closed or shall close simultaneously the transactions contemplated
thereby and have access to the funds with respect thereto. Copies of all
documents delivered to the Company and the Banks in conjunction with the closing
of the transactions contemplated by the Third Amendment Agreement to the Loan
Agreement shall have been delivered to the Purchasers or their special counsel.
19
4.04. Series D-I Preferred Stock. The Company shall have contemporaneously
with the Closing sold 20,000 shares of Series D- I Preferred Stock pursuant to
that certain Series D- I Preferred Stock Purchase Agreement dated April 27,
2001, as amended, and received not less than $20,000,000 as gross proceeds
thereof.
4.05. No Default. At the time of and immediately after giving effect to the
sale of the Notes and the Warrants there shall exist no Event of Default and no
condition, event or act that, with the giving of notice or lapse of time, or
both, would constitute such an Event of Default.
4.06. Purchase Permitted by Applicable Law; Approvals. The purchase of and
payment for the Notes and Warrants to be purchased by each Purchaser on the
Closing Date and the issuance of the Warrant Shares on the terms and conditions
herein provided (including the use of the proceeds of such Notes by the Company)
shall not violate any Applicable Law (including, without limitation, Section 5
of the Securities Act or Regulation T, U or X of the Board of Governors of the
Federal Reserve System) and shall not subject such Purchaser to any tax,
penalty, liability or other onerous condition under or pursuant to any
Applicable Law, and such Purchaser shall have received such certificates or
other evidence as it may request to establish compliance with this condition;
each Purchaser hereby acknowledges that such compliance with Applicable Laws is
based in part on the accuracy of the Purchasers' representations and warranties
set forth in Sections 5.01(b), (c), (d), (e) and (f). All necessary
authorizations, consents, approvals, exceptions or other actions by or notices
to or filings with any court or administrative or governmental body or other
Person required in connection with the execution, delivery and performance of
this Agreement, the Notes, the Warrants and the other Operative Documents or the
consummation of the transactions contemplated hereby or thereby shall have been
issued or made, shall be final and in full force and effect and shall be in form
and substance satisfactory to such Purchaser.
4.07. Amended Stock Purchase Agreement. The Stock Purchase Agreement dated
as of October 21, 1994 among the Company, Austin III-A and Austin III-B, as
amended on November 10, 1994 and May 10, 1996 (the "Stock Purchase Agreement"),
shall have been amended in form and substance satisfactory to the Purchasers and
their special counsel.
4.08. Amended Shareholders Agreement. The Third Amended and Restated
Shareholders Agreement dated as of April 27, 2001 among the Company, CRL, Austin
III-A, Austin III-B, and the other parties thereto shall have been amended in
form and substance satisfactory to the Purchasers and their special counsel (as
so amended, the "Shareholders Agreement").
4.09. Amended Co-Sale Agreement. The Second Amended and Restated Co-Sale
Agreement dated as of April 27,2001 among the Company, CRL, Austin III-A and
Austin III-B and the other parties thereto shall have been amended in form and
substance satisfactory to the Purchasers and their special counsel (as so
amended, the "Co-Sale Agreement").
4.10. Amended Registration Agreement. The Third Amended and Restated
Registration Agreement dated as of April 27, 2001 among the Company, CRL, Austin
III-A and Austin III-B and the other parties thereto shall have been amended in
form and substance satisfactory to the Purchasers and their special counsel (as
so amended, the "Registration Agreement").
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4.11. Amended Affiliate Registration Agreement. The Amended and Restated
Affiliate Registration Agreement dated as of May 10, 1996, as amended by the
First Amendment Agreement, the Second Amendment Agreement, the Third Amendment
Agreement and the Fourth Amendment Agreement (as so amended, the "Affiliate
Registration Agreement") among the Company and Hull Family Limited Partnership
shall have been amended in form and substance satisfactory to the Purchasers and
their special counsel.
4.12. Amended Articles of Incorporation. The Articles of Incorporation
shall have been amended in accordance with all Applicable Laws and in form and
substance satisfactory to the Purchasers and their special counsel (including,
without limitation, to prohibit any redemption of the Preferred Stock until 91
days after the indefeasible payment in full of all principal of, interest on,
Make-Whole Account, if any, and all other amounts due under the Notes and this
Agreement).
4.13. Seventh Amendment Agreement. The Seventh Amendment Agreement shall
have been duly authorized, executed and delivered by each of the parties thereto
and the Purchaser shall have received a copy thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
5.01. Representations and Warranties of the Purchasers. Each Purchaser, for
itself only, hereby represents and warrants that:
(a) Such Purchaser has duly authorized, executed and delivered this
Agreement and such of the Operative Documents as require execution by such
Purchaser.
(b) It is such Purchaser's present intention to acquire the Securities
for its own account.
(c) The Securities it is acquiring are for the purpose of investment
and not with a view to distribution thereof; subject, nevertheless, to the
condition that the disposition of the property of such Purchaser shall at all
times be within its control.
(d) Such Purchaser acknowledges that it has reviewed and discussed the
Company's business, affairs and current prospects with such officers of the
Company and others as it has deemed appropriate or desirable in connection with
the transactions contemplated by this Agreement. Such Purchaser further
acknowledges that it has requested, received and reviewed such information,
undertaken such investigation and made such further inquiries of officers of the
Company and others as it has deemed appropriate or desirable in connection with
such transactions, provided, however, no investigation made heretofore or
hereafter by or on behalf of such Purchaser shall have any effect whatsoever on
the representations and warranties of the Company hereunder, each of which will
survive any such investigation.
(e) Such Purchaser understands that it must bear the economic risk of
its investment for an indefinite period of time because the Securities are not,
and will not be, registered under the Securities Act or any applicable state
securities laws, except as may be provided in this Agreement and the
Registration Agreement, and may not be resold unless
21
subsequently registered under the Securities Act and such other laws or unless
an exemption from such registration is available.
(f) Such Purchaser represents that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its investment in the Securities. Such Purchaser further
represents that it is an "accredited investor" as such term is defined in Rule
501 of Regulation D of the Commission under the Securities Act with respect to
the purchase of the Securities.
(g) No Person has or will have, as a result of the transactions
contemplated by this Agreement, any rights, interest or valid claim against or
upon the Company or any of its Subsidiaries for any commission, fee or other
compensation as a finder or broker because of any written agreement made by such
Purchaser to pay any such compensation.
(h) Such Purchaser hereby acknowledges that the Notes, the Warrants
and each certificate representing the Warrant Shares and any other securities
issued in respect of such shares upon any stock split, stock dividend,
recapitalization, merger or similar event (unless no longer required in the
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to the Company, it being agreed that Xxxxxx Xxxxxx & Xxxxx shall be
satisfactory) shall bear a legend substantially in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREFROM.
The acquisition by such Purchaser of the Securities on the Closing Date shall
constitute a confirmation by it of the foregoing representations and warranties
as if made by such Purchaser on the date of such acquisition.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Purchaser as of the Closing
Date as follows:
6.01. Organization and Standing of the Company and Subsidiaries; Ownership.
The Company and each of its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority for the
ownership and operation of its properties and for the carrying on of its
business as now conducted and as now proposed to be conducted. The Company and
each of its Subsidiaries is duly licensed or qualified and in good standing as a
foreign corporation authorized to do business in all jurisdictions wherein the
character of the property owned or leased, or the nature of the activities
conducted, by it makes such licensing or qualification necessary, except where
the failure to be so licensed or qualified, either individually or in the
aggregate, would not have (or be reasonably likely to have) a material adverse
effect on
22
the prospects, business, assets, liabilities, condition (financial or
otherwise), or results of operations of the Company and its Subsidiaries taken
as a whole or the Company's ability to perform its obligations under this
Agreement and the Notes (a "Material Adverse Effect"). Except as set forth on
Exhibit 6.01 attached hereto, neither the Company nor any of its Subsidiaries
owns, directly or indirectly, any capital stock or other equity or ownership or
proprietary interest in any corporation, partnership, association, trust, joint
venture or other entity.
6.02. Corporate Action. The Company has all necessary corporate power and
has taken all corporate action required to make all the provisions of this
Agreement, the Operative Documents and any other agreements and instruments
executed in connection herewith and therewith valid and enforceable obligations
of the Company. The Company has duly executed and delivered this Agreement, each
of the Operative Documents and each other agreement and instrument executed by
it in connection herewith and therewith and each is a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors' rights and by equitable principles
regardless of whether enforcement is sought in equity or at law. Sufficient
shares of authorized but unissued Common Stock of the Company have been reserved
by appropriate corporate action in connection with the prospective exercise of
the Warrants. Neither the issuance of the Notes or Warrants, nor the issuance of
shares of Common Stock upon the exercise of the Warrants, is subject to
preemptive or other similar statutory or contractual rights or will conflict
with any provisions of any agreement or instrument to which the Company is a
party or by which the Company is bound.
6.03. Governmental Approvals. No authorization, consent, approval, license,
exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for, or in connection with, the offer,
issuance, sale, execution or delivery by the Company of, or for the performance
by the Company of its obligations under, this Agreement, any of the Operative
Documents or the Warrant Shares.
6.04. Litigation. Except as set forth in Exhibit 6.04 hereto, there is no
litigation, action or governmental proceeding or investigation pending or, to
the best knowledge of the Company, threatened against the Company or any of its
Subsidiaries, affecting any of their respective properties or assets, or against
any officer, key employee or principal stockholder of the Company or any of its
Subsidiaries. Nothing disclosed in Exhibit 6.04 hereto (i) either individually
or in the aggregate would have (or be reasonably likely to have) a Material
Adverse Effect, (ii) might call into question the validity of this Agreement,
any Operative Document or any action taken or to be taken pursuant hereto or
thereto or (iii) seeks to prevent the consummation of the transactions
contemplated by this Agreement, nor, to the best knowledge of the Company, has
there occurred any event on the basis of which any litigation, proceeding or
investigation meeting the criteria of (i), (ii) or (iii) above could reasonably
be expected to be instituted. Neither the Company nor any of its Subsidiaries
nor, to the best knowledge of the Company, any of their respective officers, key
employees or principal stockholders (in their capacities as such), is in default
with respect to any order, writ, injunction, decree, ruling or
23
decision of any court, commission, board or other government agency affecting
the Company or any of its Subsidiaries.
6.05. Compliance with Law. The Company and each of its Subsidiaries is in
compliance in all respects with the terms and provisions of this Agreement and
of its Articles of Incorporation (or comparable charter documents), as amended,
and By-laws, as amended, and in all respects with the terms and provisions of
all judgments, decrees, governmental orders, statutes, rules and regulations to
which it and its properties and assets are subject (collectively, the
"Applicable Laws"), except for such failures to be in compliance with Applicable
Laws which would not, individually or in the aggregate, have (or be reasonably
likely to have) a Material Adverse Effect. Neither the execution and delivery of
this Agreement and the Operative Documents, nor the consummation of any
transactions contemplated hereby or thereby, has constituted or resulted in, or
will constitute or result in, a violation of any provision of any Applicable
Laws.
6.06. Federal Reserve Regulations. Neither the Company nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of the Notes or Warrants will be used to purchase or carry any margin security
or to extend credit to others for the purpose of purchasing or carrying any
margin security or in any other manner which would involve a violation of any of
the regulations of the Board of Governors of the Federal Reserve System.
6.07. Title to Assets, Patents. Except as set forth on Exhibit 6.07
attached hereto, the Company and each of its Subsidiaries has good and
indefeasible title in fee to such of its fixed assets as are real property, and
good and indefeasible title to all of its other assets, now carried on its books
including those reflected in the most recent balance sheet of the Company
included in the Financial Statements, or acquired since the date of such balance
sheet (except personal property disposed of since said date in the ordinary
course of business), free of any mortgages, pledges, charges, liens, security
interests or other encumbrances. The Company and each of its Subsidiaries enjoys
peaceful and undisturbed possession under all leases under which it is
operating, and all of said leases are valid and subsisting and in full force and
effect. The Company and each of its Subsidiaries owns or has a valid right to
use the patents, patent rights, licenses, permits, trade secrets, trademarks,
trademark rights, trade names, trade name rights or domain names or franchises,
copyrights, inventions and intellectual property rights being used to conduct
its business as now operated and as now proposed to be operated; and the conduct
of its business as now operated and as now proposed to be operated does not and
will not to the best knowledge of the Company conflict with valid patents,
patent rights, licenses, permits, trade secrets, trademarks, trademark rights,
trade names, trade name rights or domain names or franchises, copyrights,
inventions and intellectual property rights of others. Neither the Company nor
any of its Subsidiaries has any obligation to compensate any Person for the use
of any such patents or such rights nor has the Company or any of its
Subsidiaries granted to any Person any license or other rights to use in any
manner any of such patents or such rights.
6.08. Financial Information. (a) Attached hereto as Exhibit 6.08A is the
audited balance sheet of the Company and its Subsidiaries as of June 30, 2001
and the related statements of operations and stockholders' equity and of cash
flows for the fiscal year then ended, certified
24
by Ernst & Young, LLP, the Company's independent public accountants, and the
unaudited balance sheet of the Company and its Subsidiaries as of September 30,
2001 and the related statements of operations and stockholders' equity ant' of
cash flows for the three months then ended (all such financial statements,
including the notes to the annual financial statements, being referred to herein
collectively as the "Financial Statements"). All Financial Statements have been
prepared in accordance with GAAP and consistent with prudent business management
practices, are complete in all material respects and fairly present the
financial position of the Company and its Subsidiaries as of the respective
dates thereof and results of operations and changes in financial position of the
Company and its Subsidiaries for each of the periods then ended except that the
unaudited Financial Statements lack footnotes and are subject to normal year end
audit adjustments which will not be material, individually or in the aggregate.
(b) Since June 30, 2001, there has been no material adverse change in
the prospects, business, assets, liabilities, condition (financial or
otherwise), or in the results of operations of the Company and its Subsidiaries
taken as a whole.
(c) Neither the Company nor any of its Subsidiaries has any liability,
contingent or otherwise, not disclosed in the Financial Statements or in the
notes thereto that could, together with all such other liabilities, have a
Material Adverse Effect, nor does the Company have any reasonable grounds to
know of any such liability.
(d) A schedule of Indebtedness of the Company and its Subsidiaries as
of the Closing Date (including lease obligations required to be capitalized in
accordance with applicable Statements of Financial Accounting Standards) is
attached hereto as Exhibit 6.08B.
6.09. Taxes. Except as set forth in Exhibit 6.09, the Company and each of
its Subsidiaries has accurately prepared and timely filed all federal, state and
other tax returns required by law to be filed by it, and all taxes shown to be
due and all additional assessments have been paid or provision made therefor.
The Company does not know of any additional assessments or adjustments pending
or threatened against the Company or any of its Subsidiaries for any period, nor
of any basis for any such assessment or adjustment. The charges, accruals and
reserves on the books of the Company and its Subsidiaries in respect of taxes or
other governmental charges are, in the opinion of the Company, adequate.
6.10. ERISA. (a) Except as set forth on Exhibit 6.10 hereto, the Company
and each of its Subsidiaries is in compliance in all material respects with the
currently applicable provisions of The Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and the applicable provisions of Section 401(a) of
the Code. No matter set forth on Exhibit 6.10 hereto has had or could reasonably
be expected to have a Material Adverse Effect. No employee benefit plan
established or maintained, or to which contributions have been made, by the
Company or any of its Subsidiaries, which is subject to part 3 of Subtitle B of
Title I of ERISA, had an accumulated funding deficiency (as such term is defined
in Section 302 of ERISA) as of the last day of the most recent fiscal year of
such plan ended prior to the date hereof, and no material liability to the
Pension Benefit Guaranty Corporation has been incurred with respect to any such
plan by the Company or any of its Subsidiaries.
25
(b) The execution and delivery of this Agreement and the issuance and
sale of the Notes and Warrants hereunder will not involve any transaction that
is subject to the prohibitions of Section 406 of ERISA or in connection with
which a tax could be imposed pursuant to Section 4975(c)(l)(A)-(D) of the Code.
6.11. Transactions with Affiliates. Except as set forth in Exhibit 6.11
hereto, or pursuant to the terms of the Operative Documents, there are no loans,
leases, royalty agreements or other continuing transactions between the Company
or any of its Subsidiaries, on the one hand, and any Person owning, or who did
own at any time within the two-year period preceding the date of this Agreement,
five percent (5%) or more of any class of capital stock of the Company or any of
its Subsidiaries or other entity controlled by such stockholder or a member of
such stockholder's family, on the other hand, except for existing agreements
with employees of the type described in Section 7.02(m).
6.12. Assumptions or Guaranties of Indebtedness of Other Persons. Neither
the Company nor any of its Subsidiaries has assumed, guaranteed., endorsed or
otherwise become directly or contingently liable on (including, without
limitation, liability by way of agreement, contingent or otherwise, to purchase,
to provide funds for payment, to supply funds to or otherwise invest in the
debtor or otherwise to assure the creditor against loss) any Indebtedness of any
other Person.
6.13. Investments in Other Persons. Neither the Company nor any of its
Subsidiaries has made any loan or advance to any Person which is outstanding on
the date of this Agreement other than any loan or advance made in the ordinary
course of business in accordance with customary trade practices, nor is the
Company or any of its Subsidiaries obligated or committed to make any such loan
or advance.
6.14. Equal Employment Opportunity. Each of the Company and its
Subsidiaries has reviewed its employment practices and policies and, to the best
of the Company's knowledge, is in compliance with all applicable laws of the
United States, of the State of Texas, and of each other applicable jurisdiction,
relating to equal employment opportunity.
6.15. Securities Act. Neither the Company nor anyone acting on its behalf
has offered or will offer to sell the Notes, Warrants or similar securities to,
or solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any Person, so as to bring
the issuance and sale of the Notes and Warrants under the registration
provisions of the Securities Act.
6.16. Disclosure. Neither this Agreement, the Financial Statements, the
Operative Documents, nor any other agreement, document, certificate or written
statement furnished to any Purchaser or the Purchasers' special counsel by or on
behalf of the Company or any of its Subsidiaries in connection with the
transactions contemplated hereby or thereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact within
the knowledge of the Company or any of its executive officers which has not been
disclosed herein or in writing by the Company to the Purchasers and which has a
Material Adverse Effect, or in the future could reasonably be expected to have a
Material Adverse Effect. Without limiting the foregoing, the
26
Company has no knowledge of any specific existing, pending or planned patent,
invention or device which would have (or be reasonably likely to have) a
Material Adverse Effect.
6.17. No Brokers or Finders. No Person had, has or will have, as a result
of the transactions contemplated by this Agreement, any right, interest or valid
claim against or upon any Purchaser for any commission, fee or other
compensation as a finder or broker because of any written agreement by the
Company, any of its Subsidiaries or any of its or their agents to pay any such
compensation.
6.18. Other Agreements of Officers. To the best knowledge of the Company,
no officer or key employee of the Company or any of its Subsidiaries is a party
to or bound by any agreement, contract or commitment, or subject to any
restrictions, particularly but without limitation in connection with any
previous employment of any such person, which has a Material Adverse Effect, or
in the future may (so far as the Company can reasonably foresee) have a Material
Adverse Effect. To the best knowledge of the Company, no officer or key employee
of the Company or any of its Subsidiaries has any present intention of
terminating his employment with the Company or any of its Subsidiaries and
neither the Company nor any of its Subsidiaries has any present intention of
terminating any such employment.
6.19. Capitalization of the Company; Status of Capital Stock. The Company
has a total authorized capitalization consisting of (i) 50,000,000 shares of
Class A Common Stock, of which 1,387,752 shares are issued and outstanding, (ii)
700,000 shares of Class B Common Stock, of which no shares are issued and
outstanding, and (iii) 10,800,795 shares of Preferred Stock, of which (a)
4,000,000 shares are designated Series A Preferred Stock, all of which are
issued and outstanding, (b) 5,000,000 shares are designated Series B Preferred
Stock, all of which are issued and outstanding, (c) 1,409,375 shares are
designated Series C Preferred Stock, all of which shares are issued and
outstanding, (d) 251,420 shares are designated Series C-I Preferred Stock, all
of which shares are issued and outstanding, (e) 70,000 shares are designated
Series D--l Preferred Stock, all of which (after giving effect to issuance of
20,000 such shares concurrently herewith) are issued and outstanding, and (f)
70,000 shares of designated Series D-2 Preferred Stock, none of which have been
issued or are outstanding. Exhibit 6.19 sets forth a correct and complete list
of the holders of all capital stock of the Company, showing (both on a fully
diluted basis (including after giving effect to the conversion, exchange or
exercise of any outstanding capital stock of the Company) and non-fully diluted
basis, in each case after giving effect to the issuance, sale and delivery of
the Warrants in accordance with this Agreement) (I) the number and percentage of
shares of Class A Common Stock, Class B Common Stock, Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series C-I Preferred Stock,
Series D- 1 Preferred Stock, Series D-2 Preferred Stock, warrants or other
securities of the Company held by each shareholder as of the date of this
Agreement, (2) the consideration paid to the Company, if any, therefor and, (3)
with respect to any holder of preferred stock, warrants, options or other
similar convertible security or conversion or exchange right, (a) the number of
such securities or rights granted, (b) the number and type of security of the
Company into which such securities or rights are exercisable, convertible or
exchangeable for, (c) the conversion or exercise price, if any, of such
securities and (d) the number of such securities or rights that have not been
exercised, converted or exchanged. All the outstanding shares of capital stock
of the Company have been duly authorized, are validly issued and are fully paid
and nonassessable. The shares of Common Stock issuable upon exercise of the
Warrants, when so issued, will he duly authorized,
27
validly issued and fully paid and nonassessable. Except as otherwise set forth
on Exhibit 6.19 and except for the Warrants, there are no options, warrants or
rights to purchase shares of capital stock or other securities of the Company
authorized, issued or outstanding, nor is the Company obligated in any other
manner to issue shares of its capital stock or other securities. Except as
otherwise set forth on Exhibit 6.19 or as set forth in the Shareholders
Agreement and the Co-Sale Agreement, there are no restrictions on the transfer
of shares of capital stock of the Company other than those imposed by relevant
state and federal securities laws. Except as set forth in this Agreement, in the
Warrants, in the Shareholders Agreement, in the Co-Sale Agreement or as
otherwise set forth on Exhibit 6.19, no holder of any security of the Company is
entitled to preemptive or similar statutory or contractual rights, either
arising pursuant to any agreement or instrument to which the Company is a party,
or which are otherwise binding upon the Company. The offer and sale of all
shares of capital stock and other securities of the Company issued before the
Closing complied with or were exempt from all federal and state securities laws.
6.20. Capital Stock of Subsidiaries. The Company owns all of the
outstanding capital stock of each of the Subsidiaries, beneficially and of
record, free and clear of all liens, encumbrances, restrictions and claims of
every kind. All the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized, are validly issued and are fully paid
and nonassessable. There are no options, warrants or rights to purchase shares
of capital stock or other securities of any of the Subsidiaries authorized,
issued or outstanding, nor is any Subsidiary obligated in any other manner to
issue shares of its capital stock or other securities.
6.21. Labor Relations. To the best knowledge of the Company, no labor union
or any representative thereof has made any attempt to organize or represent
employees of the Company or any of its Subsidiaries. There are no unfair labor
practice charges, pending trials with respect to unfair labor practice charges,
pending material grievance proceedings or adverse decisions of a Trial Examiner
of the National Labor Relations Board against the Company or any of its
Subsidiaries. Furthermore, to the best knowledge of the Company, relations with
employees of the Company and its Subsidiaries are good and there is no reason to
believe that any material labor difficulties will arise in the foreseeable
future.
6.22. Insurance. The Company and each of its Subsidiaries has insurance
covering its properties and business adequate and customary for the type and
scope of its properties and business, but in any event in amounts sufficient to
prevent the Company and its Subsidiaries from becoming co-insurers.
6.23. Books and Records. The books of account, ledgers, order books,
records and documents of the Company and its Subsidiaries accurately and
completely reflect all material information relating to the business of the
Company and its Subsidiaries, the nature, acquisition, maintenance, location and
collection of the assets of the Company and its Subsidiaries, and the nature of
all transactions giving rise to the obligations or accounts receivable of the
Company and its Subsidiaries.
6.24. Foreign Corrupt Practices Act. Each of the Company and its
Subsidiaries has reviewed its practices and policies and to the best of its
knowledge and belief is not engaged, nor, to the best of its knowledge, has any
of its officers, directors, employees or agents engaged,
28
in any act or practice which would constitute a violation of the Foreign Corrupt
Practices Act of 1977, or any rules or regulations promulgated thereunder.
6.25. Registration Rights. Other than pursuant to the terms of the
Registration Agreement and the Warrant Agreement dated November 10, 1994 between
the Company and Xxxxxx Financial, Inc., no Person has demand or other rights to
cause the Company or any of its Subsidiaries to file any registration statement
under the Securities Act relating to any securities of the Company or any of its
Subsidiaries or any right to participate in any such registration statement.
6.26. Other Agreements. Except for alarm monitoring contract purchase
agreements and master contract monitoring agreements entered into in the
ordinary course of business and except as specifically contemplated by this
Agreement or as set forth on Exhibit 6.26 attached hereto, neither the Company
nor any of its Subsidiaries is a party to or otherwise bound or affected by any
written or oral:
(a) agreement, contract or commitment with any present or former
shareholder, director, officer, employee or consultant or for the employment of
any Person, including without limitation any consultant;
(b) agreement, contract, commitment or arrangement with any labor
union or other representative of employees;
(c) agreement, contract or commitment for the purchase of, or payment
for, supplies or products, or for the performance of services by a third party,
involving in any one case future payments of $150,000 or more;
(d) agreement, contract or commitment to sell or supply products or to
perform services, involving in any one case future payments of $150,000 or more;
(e) agreement, contract or commitment continuing over a period of more
than six months from the date hereof or exceeding future payments of $150,000 in
value;
(f) representative or sales agency agreement, contract or commitment;
(g) lease under which it is either lessor or lessee;
(h) note, debenture, bond, conditional sale agreement, equipment trust
agreement, letter of credit agreement, loan agreement or other agreement or
contract, commitment or arrangement for the borrowing or lending of money
(including without limitation loans to or from officers, directors, any
shareholder or any member of any of their immediate families), agreement,
contract, commitment or arrangement for a line of credit or guarantee, pledge or
undertaking in any manner whatsoever of the indebtedness of any other Person;
(i) agreement, contract or commitment for any charitable or political
contribution;
29
(j) agreement, contract or commitment for any capital expenditure
after the date hereof in excess of $150,000;
(k) agreement, contract or commitment limiting or restraining it from
engaging or competing in any lines of business with any Person, nor is any
officer or employee of the Company or any Subsidiary subject to any such
agreement except where such limitation runs to the benefit of the Company;
(l) license, franchise, distributorship or other similar agreement,
contract or commitment, including without limitation those which relate in whole
or in part to any patent, trademark, trade name, service xxxx or copyright or to
any ideas, technical assistance or other know-how of or used by the Company or
any Subsidiary; or
(m) agreement, contract or commitment not made in the ordinary course
of business exceeding the sum of $150,000 in value or liability after the date
hereof.
The Company and each of its Subsidiaries and, to the best of the Company's
knowledge, each other party thereto have in all material respects performed all
the obligations required to be performed by them to date, have received no
notice of default and are not in material default under any lease, agreement or
contract now in effect to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or its respective
property may be bound. Neither the Company nor any of its Subsidiaries has any
present expectation or intention of not fully performing all its obligations
under each such lease, contract or other agreement, and the Company has no
knowledge of any material breach or anticipated material breach by the other
party to any contract or commitment to which the Company or any of its
Subsidiaries is a party. Neither the execution and delivery of this Agreement
and the Operative Documents, nor the consummation of any of the transactions
contemplated hereby or thereby, has constituted or resulted in or will
constitute or result in a default or violation of any term or provision of any
such lease, contract or other agreement.
6.27. Hazardous and Toxic Materials. (a) None of the properties owned,
leased or operated by the Company or any of its Subsidiaries is in material
violation of any federal, state or local laws, ordinances, regulations, or
policies existing or enacted relating to the environment, health and safety, any
Hazardous Discharges (as hereinafter defined) or to industrial hygiene or the
environmental conditions on, under or about any of the property owned, leased or
operated by the Company or any of its Subsidiaries, including, without
limitation, soil and ground water conditions; (b) neither the Company nor any of
its Subsidiaries has received any complaint, order, citation or notice with
regard to air emissions, Hazardous Discharges or other environmental, health or
safety matters affecting any of the properties at any time owned, leased or
operated by the Company or any of its Subsidiaries or the businesses therein
conducted, and (c) there has been no spill, discharge, release or cleanup of any
hazardous or toxic waste or substance or any oil or pesticide which would result
(or be reasonably likely to result) in a Material Adverse Effect ("Hazardous
Substances") at any of the properties at any time owned, leased or operated by
the Company or any of its Subsidiaries, including, without limitation, into or
upon any of its soils, surface water, ground water or the improvements located
thereon (a "Hazardous Discharge"). To the extent that any of the properties
owned, leased or operated by the Company or any of its Subsidiaries are used for
the handling, storage, transportation or
30
disposal of hazardous or toxic materials, such use is in accordance with all
federal, state and local environmental laws, rules, and regulations which apply
to the handling, storage, transportation or disposal of hazardous or toxic
materials and the Company and each of its Subsidiaries has obtained any and all
necessary permits, licenses and approvals with respect to such use, including
without limitation, United States Environmental Protection Agency identification
numbers, hazardous waste manifests and hazardous waste permits required under
the Federal Resource Conversation and Recovery Act.
6.28. [Intentionally Omitted].
6.29. Representations and Warranties Incorporated from Loan Agreement. Each
of the representations and warranties given by the Company to the Banks in the
Third Amendment Agreement to Loan Agreement is true and correct in all material
respects as of the Closing Date.
6.30. U.S. Real Property Holding Corporation. Neither the Company nor any
of its Subsidiaries is now, nor will it be immediately after the Closing, a
"United States Real Property Holding Corporation" as defined in Section
897(c)(2) of the Code and Section 1.897-2(b) of the Regulations promulgated by
the Internal Revenue Service.
6.31. Status under Certain Statutes. Neither the Company nor any Subsidiary
is subject to regulation under the Investment Company Act of 1940, as amended,
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.
6.32. Foreign Asset Control Regulations. Neither the sale of the Notes and
the Warrants by the Company hereunder nor its use of the proceeds thereof will
violate the Anti-Terrorism Order, 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.
ARTICLE VII
COVENANTS OF THE COMPANY
7.01. Affirmative Covenants of the Company Other Than Reporting
Requirements. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that, as long as any of the Securities are
outstanding (except that (1) the provisions of Sections 7.01(a), (m), (r), (s),
(t) and (v) shall terminate upon repayment in full of the aggregate outstanding
principal balance of the Notes together with all interest and Make-Whole Amount,
if any, due thereon, and (2) the remainder of the provisions of this Article
shall terminate upon the later to occur of (1) above and a Qualified IPO), it
will perform and observe the following covenants and provisions and will cause
each Subsidiary to perform and observe such of the following covenants and
provisions as are applicable to such Subsidiary:
(a) Punctual Payment. Pay the principal of, and the Make-Whole Amount
and interest on, each of the Notes at the times and place and in the manner
provided in the Notes and herein.
31
(b) Payment of Taxes and Trade Debt. Pay and discharge, and cause each
Subsidiary to pay and discharge, all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits or business, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
and all lawful claims which, if unpaid, could reasonably be expected to become a
lien or charge upon any properties of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary shall be required to pay any such
tax, assessment, charge, levy or claim which is being contested in good faith
and by appropriate proceedings if the Company or the Subsidiary concerned shall
have set aside on its books adequate reserves with respect thereto. Pay and
cause each Subsidiary to pay, when due, or in conformity with customary trade
terms, all lease obligations, all trade debt, and all other Indebtedness
incident to the operations of the Company or the Subsidiaries, except such as
are being contested in good faith and by appropriate proceedings if the Company
or the Subsidiary concerned shall have set aside on its books adequate reserves
with respect thereto.
(c) Maintenance of Insurance. Maintain, and cause each Subsidiary to
maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or such Subsidiary operates, but in any
event in amounts sufficient to prevent the Company or such Subsidiary from
becoming a co-insurer.
(d) Preservation of Corporate Existence. Preserve and maintain, and
cause each Subsidiary to preserve and maintain, its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation, and qualify
and remain qualified, and cause each Subsidiary to qualify and remain qualified,
as a foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
of its properties, except where the failure to remain so qualified would not,
either individually or in the aggregate, have (or be reasonably likely to have)
a Material Adverse Effect; provided, however, that nothing herein contained
shall prevent any merger, consolidation or transfer of assets permitted by
subsection 7.02(e). Preserve and maintain, and cause each Subsidiary to preserve
and maintain, all intellectual property licenses and other rights to use
patents, processes, licenses, trademarks, trade names, inventions, intellectual
property rights or copyrights owned or possessed by it and necessary to the
conduct of its business.
(e) Compliance with Laws. Comply, and cause each Subsidiary to comply,
with all applicable laws, rules, regulations and orders of any governmental
authority, the noncompliance with which could have a Material Adverse Effect.
(f) Inspection Rights. At any reasonable time during the Company's
normal business hours and upon at least three days' prior written notice, permit
the Purchasers or any of their agents or representatives to examine and make
copies of and extracts from the records and books of account of, and visit and
inspect the properties of, the Company and any Subsidiary, and to discuss the
affairs, finances and accounts of the Company and any Subsidiary with any of
their officers or directors and independent accountants. All reasonable
out-of-pocket expenses of the Purchasers (or their agents or representatives),
the Company or any Subsidiary incurred in connection with such inspection rights
shall be borne by the Company until the Notes and all interest and Make-Whole
Amount thereon are paid in full, and thereafter the Purchasers shall
32
bear their own expenses. Notwithstanding the foregoing, so long as no Event of
Default has occurred and is continuing, the Company shall only be required to
reimburse the Purchasers for their expenses related to one, but not more than
one, examination per calendar year.
(g) Keeping of Records and Books of Account. Keep, and cause each
Subsidiary to keep, adequate records and books of account, in which complete
entries will be made in accordance with GAAP, reflecting all financial
transactions of the Company and each Subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
(h) Maintenance of Properties, Etc. Maintain and preserve, and cause
each Subsidiary to maintain and preserve, all of its properties, necessary or
useful in the proper conduct of its business, in good repair, working order and
condition, ordinary wear and tear excepted.
(i) Compliance with ERISA. Comply, and cause each Subsidiary to
comply, with all minimum funding requirements applicable to any pension or other
employee benefit or employee contribution plans which are subject to ERISA or to
the Code, and comply, and cause each Subsidiary to comply, in all other material
respects with the provisions of ERISA and the Code, and the rules and
regulations thereunder, which are applicable to any such plan. Neither the
Company nor any Subsidiary will permit any event or condition to exist which
could permit any such plan to be terminated under circumstances which would
cause the lien provided for in Section 4068 of ERISA to attach to the assets of
the Company or any Subsidiary.
(j) Foreign Corrupt Practices Act. Comply, and cause each Subsidiary
to comply, and cause each officer, director, employee and agent of the Company
and each Subsidiary to comply, at all times with the prohibitions on certain
acts and practices set forth in the Foreign Corrupt Practices Act of 1977, and
any rules of regulations promulgated thereunder.
(k) Equal Employment Opportunity. Comply, and cause each Subsidiary to
comply, in all material respects with all applicable laws of the United States,
the State of Texas, and of each other applicable jurisdiction relating to equal
employment opportunity, any rules, regulations, administrative orders and
executive orders relating thereto and the applicable terms, relating to equal
employment opportunity; provided, however, that neither the Company nor any
Subsidiary shall be considered to have failed to comply with the foregoing
during any period that any matter relating to the Company's or such Subsidiary's
employment practices is being contested by the Company or such Subsidiary in
appropriate proceedings, or thereafter, if the Company or such Subsidiary
complies with any final determination issued in such proceedings.
(l) Attendance at Board Meetings. Permit each Purchaser or its
designee to have one observer attend each meeting of the board of directors of
the Company and any committee thereof. The Company will send to the Purchasers
and their designee the notice of the time and place of any such meeting in the
same manner and at the same time as notice is sent to the directors or committee
members, as the case may be; provided, however, that the Purchasers and their
designee shall always receive at least 48 hours' prior notice of any meeting.
The Company shall also provide to the Purchasers copies of all notices, reports,
minutes, consents
33
and other documents at the time and in the manner as they are provided to the
board of directors or committees.
(m) Payment of Senior Debt by the Purchasers. In the event that any
default occurs in the payment of the principal of or any interest on any Senior
Debt and such default shall continue for a period of thirty (30) days (or such
shorter period as is necessary in order to permit the Purchasers to act pursuant
to this subsection prior to any acceleration of such Senior Debt) without waiver
or forbearance by the Bank, permit the Purchasers, on behalf of the Company, to
cure such default, to prepay in full any such Senior Debt or to purchase such
Senior Debt, upon the terms and conditions set forth in the Bank Subordination
Agreement.
(n) Board of Directors and Committees. The board of directors of the
Company shall meet at least four (4) times per calendar year. The Company shall
at all times maintain a Compensation Committee and an Audit Committee of its
board of directors. For as long as any Notes are outstanding, the Company shall
reimburse the Purchasers' board observer for all reasonable out-of-pocket costs
incurred by it in connection with traveling to and from and attending meetings
of the board of directors and committees of the board of directors of the
Company; thereafter, the Purchasers shall bear any and all such expenses
incurred by their board observer.
(o) U.S. Real Property Holding Corporation. The Company shall, and
shall cause each Subsidiary (if and when such Subsidiary exists) to, conduct its
business, and do or cause to be done any and all actions as are necessary, so
that neither the Company nor any Subsidiary shall at any time be a "United
States Real Property Holding Corporation" as defined in Section 897(c)(2) of the
Code and Section 1.897-2(b) of the Regulations promulgated by the Internal
Revenue Service.
(p) [Intentionally Omitted].
(q) [Intentionally Omitted].
(r) Maximum Total Debt to Annualized Net Operating Income Ratio.
Maintain a ratio of (i) Total Debt outstanding as of the end of the month
immediately preceding the last day of each fiscal quarter of the Company to (ii)
an amount equal to four (4) times Net Operating Income for the three months
ending on the last day of such fiscal quarter of not greater than the following
ratios for the periods indicated (such compliance to be determined as of the
last day of each fiscal quarter of the Company ending during such period):
Maximum Ratio of Total Debt to
Four times (4x) trailing three months' Net
Period Operating Income
----------------------------- ------------------------------------------
From the Closing Date through
December 31, 2002 4.31 to 1
From January 1, 2003 through
December 31, 2003 4.03 to 1
34
From January 1, 2004 through
June 30, 2004 3.74 to 1
Thereafter 3.45 to 1
(s) Maximum Total Senior Debt to Annualized Net Operating Income
Ratio. Maintain a ratio of (i) Total Senior Debt outstanding as of the end of
the immediately preceding month to (ii) an amount equal to twelve (12) times Net
Operating Income for the month then ending of not greater than the following
ratios for the periods indicated (such compliance to be determined as of the
last day of any month ending during such period):
Maximum Ratio of Total Senior Debt to
Period Twelve times (12x) Net Operating Income
for Month then Ended
----------------------------- ------------------------------------------
From the Closing Date through
January 31, 2002 4.31 to 1
From February 1, 2002 through
December 31, 2002 3.74 to 1
From January 1, 2003 through
December 31, 2003 3.45 to 1
Thereafter 3.16 to 1
(t) Minimum Interest Coverage Ratio. Maintain a ratio of (i) an amount
equal to Net Operating Income for each fiscal quarter of the Company to (ii)
Total Interest Expense for such fiscal quarter of at least 1.91 to 1.0 (such
compliance in each case to be determined as of the last day of each fiscal
quarter of the Company ending during such period).
(u) [Intentionally Omitted.]
(v) Minimum Fixed Charge Coverage Ratio. Maintain a ratio of(i) an
amount equal to Net Operating Income for the period of twelve (12) consecutive
months ended on the date of determination to (ii) Fixed Charges for the same
twelve (12) month period of not less than the following ratios for the periods
indicated (such compliance to be determined as of the last day of each fiscal
quarter of the Company ending during such period):
Period Fixed Charge Cover Ratio
----------------------------- ------------------------------------------
From the Closing Date through
December 31, 2003 1.49 to 1
35
From January 1, 2004 through 1.06 to 1
June 30, 2004
Thereafter 0.89 to 1
7.02. Negative Covenants of the Company. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that, as long
as any of the Securities are outstanding (except that (1) the provisions of
Sections 7.02(a), (b),(c), (d), (e), (f), (g), (i), (j), (k), (1) and (m) shall
terminate upon repayment in full of the aggregate outstanding principal balance
of the Notes together with all interest and Make-Whole Amount due thereon, and
(2) the remainder of the provisions of this Article shall terminate upon the
later to occur of (1) above and a Qualified IPO), it will comply with and
observe the following covenants and provisions, and will cause each Subsidiary
to comply with and observe such of the following covenants and provisions as are
applicable to such Subsidiary, and will not:
(a) Liens. Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any mortgage, deed of
trust, pledge, lien, security interest or other charge or encumbrance (including
the lien or retained security title of a conditional vendor) of any nature, upon
or with respect to any of its properties, now owned or hereafter acquired, or
assign or otherwise convey any right to receive income, except that the
foregoing restrictions shall not apply to mortgages, deeds of trust, pledges,
liens, security interests or other charges or encumbrances (collectively,
"Permitted Liens"):
(i) for taxes, assessments or governmental charges or levies on
property of the Company or any Subsidiary if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are being contested in
good faith and by appropriate proceedings (and as to which adequate reserves are
being maintained);
(ii) imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business;
(iii) arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation;
(iv) securing the performance of bids, tenders, contracts (other
than for the repayment of borrowed money), statutory obligations and surety
bonds;
(v) in the nature of zoning restrictions, easements and rights or
restrictions of record on the use of real property which do not materially
detract from its value or impair its use;
(vi) arising by operation of law in favor of the owner or
sublessor of leased premises and confined to the property rented;
(vii) arising from any litigation or proceeding which is being
contested in good faith by appropriate proceedings, provided, however, that no
execution or levy has been made;
36
(viii) described on Exhibit 6.07 which secure the Indebtedness
set forth on Exhibit 6.08B, provided that no such lien is extended to cover
other or different property of the Company or any Subsidiary; and
(ix) liens which secure Indebtedness permitted by Section
7.02(b)(i).
(b) Indebtedness. Without the prior written consent of the Requisite
Noteholders, create, incur, assume or suffer to exist, or permit any Subsidiary
to create, incur, assume or suffer to exist, any liability with respect to
Indebtedness for borrowed money (including, without limitation, the amount of
any purchase price which is secured by a purchase money security interest) other
than (i) Senior Debt (other than Senior Subordinated Debt) in an amount not to
exceed $359,500,000, (ii) Senior Subordinated Debt in an amount not to exceed
$12 million, (iii) the Notes, (iv) Holdback Debt incurred in the ordinary course
of business and (v) an unlimited amount of Junior Subordinated Debt outstanding
at any time on a consolidated basis, provided that the incurrence and
maintenance of all such Indebtedness does not result in the Company's or any
Subsidiary's failure to comply with any of the other provisions of Article VII
hereof.
(c) Lease Obligations. Become obligated to pay rent under any leases
or other rental arrangements (including Capital Leases) under which the amount
of the aggregate lease or other payments for all such agreements or arrangements
exceeds $1,725,000 on a consolidated basis for any twelve-month period.
(d) Assumptions or Guaranties of Indebtedness of Other Persons.
Assume, guarantee, endorse or otherwise become directly or contingently liable
on, or permit any Subsidiary to assume, guarantee, endorse or otherwise become
directly or contingently liable on (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss) any Indebtedness of any other Person, except
for guarantees by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business and except by the Company with
respect to any Indebtedness of any Subsidiary which is permitted by this
Agreement.
(e) Mergers, Sale of Assets, Etc. Without the prior written consent of
the Requisite Noteholders, merge or consolidate with, or sell, assign, lease or
otherwise dispose of or voluntarily part with the control of (whether in one
transaction or in a series of transactions) any of its assets (whether now owned
or hereafter acquired) or permit any Subsidiary to do so, except tat (i) any
Subsidiary may merge into or consolidate with or transfer assets to any other
Subsidiary, (ii) any Subsidiary may merge into or transfer assets to the Company
and (iii) the Company or any Subsidiary may sell, assign, lease or otherwise
dispose of (1) inventory in the ordinary course of business, (2) equipment that
is no longer used or useful in the Company's or any of its Subsidiaries'
business or that is physically obsolete, provided that the proceeds thereof are
used first to reduce outstanding Senior Debt and then to reduce other
outstanding Indebtedness, (3) equipment the proceeds of which are applied within
thirty (30) days of such sale to the purchase of replacement equipment with like
value and function and (4) other assets, provided that: (A) the fair market
value of all of the assets sold in a given fiscal year in the aggregate does not
exceed the lesser of: (1) $15 million or (II) fifteen percent (15%) of the total
37
amount outstanding in respect of principal and unpaid interest under the Loan
Agreement immediately prior to any such sale (provided, however, that the
foregoing limitation on the value of assets that may be sold in a given fiscal
year shall not be applicable if there then exists an event of default under the
Loan Agreement), (B) the assets are sold at their fair market value (determined
in good faith by the Board of Directors), (C) the sale is approved by the Board
of Directors and (D) the proceeds from such dispositions are applied first to
reduce outstanding Senior Debt and then to reduce other outstanding
Indebtedness. Notwithstanding the foregoing, the provisions of this Section
7.02(e) shall not apply to any transaction if, as a result of such transaction,
the Notes and any outstanding unpaid interest (Make-Whole Amount and other
amounts) thereon are repaid in full at the closing of such transaction.
(f) Investments in Other Persons. Without the prior written consent of
the Requisite Noteholders, make or permit any Subsidiary to make, any loan or
advance to any Person, or purchase, otherwise acquire, or permit any Subsidiary
to purchase or otherwise acquire, any capital stock, assets or other property
of, obligations of, or any interest in, any Person, except:
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America and
having a maturity of not more than one year from the date of acquisition;
(ii) investments by the Company or a Subsidiary in certificates
of deposit, notes, acceptances and repurchase agreements having a maturity of
not more than one year from the date of acquisition issued by a bank organized
in the United States having capital, surplus and undivided profits of at least
$100,000,000 and whose parent holding company has long-term debt rated Aal or
higher, and whose commercial paper (if rated) is rated Prime 1, by Xxxxx'x
Investors Service, Inc.;
(iii) loans or advances from a Subsidiary to the Company or from
the Company to a Subsidiary;
(iv) investments by the Company or a Subsidiary in the
highest-rated commercial paper having a maturity of not more than one year from
the date of acquisition;
(v) advances to employees for travel or relocation in accordance
with the ordinary course of business; and
(vi) acquisitions of assets, capital stock or other property
which individually and in the aggregate are not material to the Company or such
Subsidiary (assets, capital stock and other property with a fair market value of
less than $100,000 acquired in any one-year period in the aggregate shall not be
deemed "material"); provided, however, that each such acquisition can be made in
compliance with the other terms of this Agreement, including, without
limitation, Section 7.02(1); and provided further, however, that this Section
7.02(f)(vi) shall not prohibit the acquisition (either directly or indirectly
through the purchase of 100% of the outstanding ownership interests of a Person)
of alarm system monitoring contracts in the ordinary course of business.
38
(g) Distributions. Without the prior written consent of the Requisite
Noteholders, declare or pay any dividends, purchase, redeem, retire, or
otherwise acquire for value any of its capital stock (or rights, options or
warrants to purchase such shares) now or hereafter outstanding, return any
capital to its stockholders as such, or make any distribution of assets to its
stockholders as such, or permit any Subsidiary to do any of the foregoing (such
transactions being hereinafter referred to as "Distributions"); provided,
however, that nothing herein contained shall prevent:
(i) the Company from effecting a stock split or declaring or
paying any dividend consisting of shares of any class of Common Stock to the
holders of shares of such class of Common Stock, provided that such stock split
or dividend is effected equally across all classes of Common Stock; or
(ii) [Intentionally Omitted]; or
(iii) any Subsidiary from declaring or making payment of cash and
stock dividends, returns of capital or distributions of assets to the Company;
or
(iv) the Company from issuing (A) Class A Common Stock pursuant
to the 1999 Stock Plan and the 2001 Stock Plan (as in effect on the date
hereof), (B) Class A Common Stock upon conversion of shares of Series A
Preferred Stock pursuant to the Articles of Incorporation, (C) Class A Common
Stock upon conversion of shares of Series B Preferred Stock pursuant to the
Articles of Incorporation, (D) Class A Common Stock upon conversion of shares of
Series C Preferred Stock pursuant to the Articles of Incorporation, (E) Class A
Common Stock and Series D-2 Preferred Stock upon conversion of the Series D-l
Preferred Stock pursuant to the Articles of Incorporation, (F) the issuance of
the Warrant Shares upon the exercise of the Warrants (capitalized terms used in
this Clause (F) shall have the meanings ascribed to them in the Articles of
Incorporation), or (G) Class A Common Stock issuable upon conversion of any
outstanding Class B Common Stock;
if in the case of any such transaction the Distribution can be made in
compliance with the other terms of this Agreement.
(h) Dealings with Affiliates. Without the prior written consent of the
Purchaser Majority, enter or permit any Subsidiary to enter into any transaction
with any holder of five percent (5%) or more of any class of capital stock of
the Company, or any member of their families or any corporation or other entity
in which any one or more of such stockholders or members of their immediate
families directly or indirectly holds five percent (5%) or more of any class of
capital stock; provided, however, that this Section 7.02(h) shall not apply to
any transaction which is governed by Section 7.02(m) or to any transaction which
is approved by the Board of Directors, is on terms no less favorable to the
Company than could be obtained from an independent third party and of which the
Purchasers have been provided with ten (10) days' prior written notice.
(i) Maintenance of Ownership of Subsidiaries. Sell or otherwise
dispose of any shares of capital stock of any Subsidiary, except to the Company
or another Subsidiary, or permit any Subsidiary to issue, sell or otherwise
dispose of any shares of its capital stock or the
39
capital stock of any Subsidiary, except to the Company or another Subsidiary,
provided, however, that nothing herein contained shall prevent any merger,
consolidation or transfer of assets permitted by subsection 7.02(e).
(j) Change in Nature of Business. Without the prior written consent of
the Requisite Noteholders, make, or permit any Subsidiary to make, any material
change in the nature of its business as carried on at the date hereof.
(k) No Amendment or Waiver of Charter Documents. Amend, alter, repeal
or terminate its Articles of Incorporation (or comparable charter documents), as
amended and in effect on the date hereof, in any manner detrimental or adverse
to the interests of the holders of Notes without the prior written consent of
the Requisite Noteholders.
(l) Capital Expenditures. Make, or permit any Subsidiary to make any
Capital Expenditure, if, after giving effect thereto, the aggregate amount of
all Capital Expenditures made by the Company and its Subsidiaries during such
fiscal year would exceed Three Million Four Hundred Fifty Thousand Dollars
($3,450,000), provided that the Company may, during the fiscal year ending June
30, 2002 and during any fiscal year thereafter, carry forward up to Four Hundred
Thousand Dollars ($400,000) of permitted but unused Capital Expenditures from
the immediately preceding fiscal year, and provided further, that in no event
shall Capital Expenditures exceed Three Million Eight Hundred Fifty Thousand
Dollars ($3,850,000) in any such fiscal year.
(m) Compensation. Pay, directly or indirectly, as salary, bonuses,
fringe benefits, expenses, stock option grants, drawing accounts or otherwise
any compensation to any executive officer (or any relative of any executive
officer) of the Company or any Subsidiary not approved by the Compensation
Committee of the Board of Directors of the Company other than such compensation
arrangements as are in place as of the Closing Date.
7.03. Reporting Requirements. The Company will furnish (i) to each holder
of any Note, and (ii) until the occurrence of a Qualified IPO, except as
expressly otherwise set forth below in this Section 7.03, to each holder of any
Warrants or Warrant Shares:
(a) until the Notes, and any outstanding unpaid interest thereon, are
paid in full, together with any Make-Whole Amount due thereon, as soon as
possible and in any event within five (5) days after the occurrence of each
Event of Default or each event which, with the giving of notice or lapse of time
or both, would constitute an Event of Default, the statement of the chief
financial officer of the Company setting forth details of such Event of Default
or event and the action which the Company proposes to take with respect thereto;
(b) (i) as soon as available and in any event within thirty (30) days
after the end of each month, consolidated and consolidating balance sheets of
the Company and its Subsidiaries as of the end of such month and consolidated
and consolidating statements of income and retained earnings and of cash flows
of the Company and its Subsidiaries for such month and for the periods
commencing at the end of the previous fiscal year and ending with the end of
such month, all duly certified (subject to normal year-end adjustments) by the
chief financial officer of the Company, in the name of and on behalf of the
Company, as having been
40
prepared in accordance with GAAP, and (ii) as soon as available and in any event
within forty-five (45) days after the end of each fiscal quarter until the
Notes, and any outstanding unpaid interest thereon, are paid in full, a report
setting forth the calculation of the Company's compliance with the covenants set
forth in Sections 7.0 1(r), (s), (t) and (v), duly certified (subject to normal
year-end adjustments) by the chief financial officer of the Company, in the name
of and on behalf of the Company;
(c) as soon as available and in any event within one hundred (100)
days after the end of each fiscal year of the Company, commencing with the
fiscal year ending June 30, 2002, a copy of the annual audit report for such
year for the Company and its Subsidiaries, including therein consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such fiscal year and consolidated and consolidating statements of income and
retained earnings and of cash flows of the Company and its Subsidiaries for such
fiscal year, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, all duly certified by Ernst & Young LLP
or other independent public accountants of recognized national standing
acceptable to the Requisite Noteholders and including a discussion by the
Company's management of any variance from the Budget for the fiscal year just
ended.
(d) each year at the time and in the form customarily prepared by
management for internal use, (x) an operating budget (the "Budget") of the
Company and its Subsidiaries for the next fiscal year, and (y) three to five
year financial plans for the Company and the Subsidiaries;
(e) until the Notes, and any outstanding unpaid interest thereon,
together with any Make-Whole Amount due thereon, are paid in full, at the time
of delivery of each monthly and annual statement, (1) a certificate, executed by
the chief financial officer of the Company, in the name of and on behalf of the
Company, stating that such officer has caused this Agreement, the Notes, and the
Warrants to be reviewed and has no knowledge of any default by the Company or
any Subsidiary in the performance or observance of any of the provisions of this
Agreement, the Notes or the Warrants or, if such officer has such knowledge,
specifying such default and the nature thereof, and setting forth computations
in reasonable detail demonstrating compliance with the provisions of Sections
7.02(b) and (d); and (2) a statement setting forth computations in reasonable
detail demonstrating compliance with the provisions of Section 7 of the Loan
Agreement;
(f) until the Notes, and any outstanding unpaid interest thereon, are
paid in full, at the time of delivery of each annual statement, a certificate
executed by the Company's independent public accountants, setting forth
computations in reasonable detail demonstrating compliance with the provisions
of Sections 7.01(r), (s), (t) and (v) and Sections 7.02(b) and (d);
(g) promptly upon receipt thereof, any written report submitted to the
Company or any Subsidiary by independent public accountants in connection with
an annual or interim audit of the books of the Company and the Subsidiaries made
by such accountants;
(h) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or
41
instrumentality, domestic or foreign, affecting the Company or any Subsidiary of
the type described in Section 6.04;
(i) unless otherwise provided pursuant to this Section 7.03,
simultaneously as they are sent to the Bank, copies of all financial statements,
reports and other information delivered by the Company to the Banks;
(j) promptly after sending, making available, or filing the same, such
reports and financial statements as the Company or any Subsidiary shall send or
make available to the stockholders of the Company or the Commission; and
(k) until the Notes, and any outstanding unpaid interest (Make-Whole
Amount and other amounts) thereon, are paid in lull, such other information
respecting the business, assets, liabilities, financial condition, results of
operations or prospects of the Company or any of its Subsidiaries as the
Purchasers may from time to time reasonably request, and to make available to
the Purchasers and their representatives, members of management and employees
with significant responsibilities (such as department heads) for the purposes of
updating the Purchasers as to the condition of the Company and its Subsidiaries.
ARTICLE VIII
EVENTS OF DEFAULT
8.01. Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) The Company shall fail to pay any principal of or Make-Whole
Amount on any of the Notes when due, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise, or
(b) The Company shall fail to pay any interest on any of the Notes
when due and such failure shall continue for five (5) Business Days; or
(c) he Company (i) shall default in the performance of any covenant
contained in Sections 7.01(r), (s), (t) and (v) or Sections 7.02(a), (b)or (g)
or Section 7.03(a); or (ii) shall default in the performance of any other
covenant contained in Section 7.02 and such default shall remain unremedied for
ten (10) days; or
(d) Any representation or warranty made by the Company in this
Agreement or by the Company (or any of its officers) in any certificate,
instrument or written statement contemplated by or made or delivered pursuant to
or in connection with this Agreement, shall prove to have been incorrect when
made in any material respect; or
(e) The Company or any Subsidiary shall fail to perform or observe any
other term, covenant or agreement contained in this Agreement, the Notes or the
Warrants on its part to be performed or observed and any such failure remains
unremedied for twenty (20) days after written notice thereof shall have been
given to the Company by any registered holder of the Notes; or
42
(f) The Company or any Subsidiary shall fail to pay any Indebtedness
exceeding $100,000 owing by the Company or such Subsidiary (as the case may be),
or any interest or premium thereon, when due (or, if permitted by the terms of
the relevant document, within any applicable grace period), whether such
Indebtedness shall become due by scheduled maturity, by required prepayment, by
acceleration, by demand or otherwise, unless such failure to pay shall be waived
by the holder or holders of such Indebtedness or such trustee or trustees; or
(g) The Company or any Subsidiary shall be involved in financial
difficulties evidenced (i) by its admitting in writing its inability to pay its
debts generally as they become due; (ii) by its commencement of a voluntary case
under Title II of the United States Code as from time to time in effect, or by
its authorizing, by appropriate proceedings of its board of directors or other
governing body, the commencement of such a voluntary case; (iii) by its filing
an answer or other pleading admitting or failing to deny the material
allegations of a petition filed against it commencing an involuntary case under
said Title 11, or seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material allegations of any
such petition; (iv) by the entry of an order for relief in any involuntary case
commenced under said Title 11; (v) by its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or by its consenting to or acquiescing in such relief;
(vi) by the entry of an order by a court of competent jurisdiction (A) finding
it to be bankrupt or insolvent, (B) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors,
or (C) assuming custody of, or appointing a receiver or other custodian for, all
or a substantial part of its property; or (vii) by its making an assignment for
the benefit of, or entering into a composition with, its creditors, or
appointing or consenting to the appointment of a receiver or other custodian for
all or a substantial part of its property; or
(h) Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
the Company or any Subsidiary and such judgment, writ, or similar process shall
not be released, vacated or fully bonded within sixty (60) days after its issue
or levy;
then, and in any such event,
(1) the Requisite Noteholders may, by notice to the Company,
declare the entire unpaid principal amount of the Notes, all interest
accrued and unpaid thereon, the Make-Whole Amount with respect thereto and
all other amounts payable under this Agreement to be forthwith due and
payable, whereupon the Notes, all such accrued interest, all such
Make-Whole Amount and all such amounts shall become and be forthwith due
and payable (unless there shall have occurred an Event of Default under
Section 8.01(g) in which case all such amounts shall automatically become
due and payable), without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived by the Company, and
(2) the Requisite Noteholders may proceed to protect and enforce
their rights by suit in equity (including without limitation a suit for
rescission), action at law
43
and/or other appropriate proceeding either for specific performance of any
covenant, provision or condition contained or incorporated by reference in
this Agreement or any term of the Articles of Incorporation, or in aid of
the exercise of any power granted in this Agreement or in the Articles of
Incorporation.
Without in any way limiting the rights of the holders of the Notes, the
Company hereby agrees that the holders of the Warrants or the Warrant Shares
would have no adequate remedy at law, for monetary compensation or otherwise,
for the damages that would be suffered if the Company were to fail to comply
with its obligations under Article III hereof, and that the Company therefore
agrees that the holders of the Warrants and the Warrant Shares shall be entitled
to obtain specific performance of the Company's obligations under Article III of
this Agreement.
8.02. Annulment of Defaults. Section 8.01 is subject to the condition that,
if at any time after the principal of any of the Notes shall have become due and
payable, and before any judgment or decree for the payment of the moneys so due,
or any thereof, shall have been entered, then and in every such case the
Requisite Noteholders may, by written instrument filed with the Company, rescind
and annul such declaration and its consequences; but no such rescission or
annulment shall extend to or affect any subsequent default or Event of Default
or impair any right consequent thereon.
ARTICLE IX
MISCELLANEOUS
9.01. No Waiver; Cumulative Remedies. No failure or delay on the part of
any Purchaser, or any other holder of the Notes, Warrants or Warrant Shares in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
9.02. Amendments, Waivers and Consents. Any provision in this Agreement,
the Notes, the Warrants or the other Operative Documents to the contrary
notwithstanding, changes in or additions to this Agreement may be made, and
compliance with any covenant or provision herein set forth may be omitted or
waived, if the Company shall obtain prior consent thereto in writing from the
Purchaser Majority, and shall, in any case, deliver copies of such consent in
writing to all other holders of Notes and Warrants (or Warrant Shares); provided
that no such consent shall be effective to reduce or to postpone the date fixed
for the payment of the principal (including any required redemption) or interest
(or Make-Whole Amount) payable on any Note without the prior written consent of
the holder thereof, or, without the prior written consent of each holder of a
Note and Warrant (or Warrant Shares), to alter or amend the consent mechanism
provided for under this Section 9.02 or to alter or amend any provision of
Section 2.05, 2.06, 3.09, 3.10, 9.07, 9.08 or 9.09 hereof. Any waiver or consent
may be given subject to satisfaction of conditions stated therein and any waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given. Written notice of any waiver or consent effected under
this subsection shall promptly be delivered by the Company to any holders who
did not execute the same.
44
9.03. Addresses for Notices, Etc. All notices, requests, demands and other
communications provided for hereunder shall be in writing and mailed (by first
class registered or certified mail, postage prepaid), telegraphed, sent by
express overnight courier service or electronic facsimile transmission with a
copy by mail, or delivered to the applicable party at the addresses indicated
below:
If to the Company:
Monitronics International, Inc.
00000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxx
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxxxx Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
If to a Purchaser:
To the address of such Purchaser
specified in Schedule A attached hereto
If to any other holder of the Notes or Warrants:
at such holder's address for notice as set
forth in the transfer records of the
Company
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall, when mailed, telegraphed or sent, respectively, be
effective (i) two days after being deposited in the mails or (ii) one day after
being delivered to the telegraph company, deposited with the express overnight
courier service or sent by electronic facsimile transmission (with receipt
confirmed), respectively, addressed as aforesaid.
9.04. Costs, Expenses and Taxes. The Company agrees to pay on demand all
costs and expenses of the Purchasers in connection with the preparation,
execution and delivery of this Agreement, the Notes, the Warrants, the other
Operative Documents and other instruments and documents to be delivered
hereunder, and in connection with the consummation of the
45
transactions contemplated hereby and thereby, as well as all costs and expenses
of the Purchasers in connection with the amendment, waiver (whether or not such
amendment or waiver becomes effective) or enforcement of this Agreement, the
Notes, the Warrants, the other Operative Documents, and other instruments and
documents to be delivered hereunder and thereunder. Notwithstanding the
preceding sentence, and in addition to the provisions of such sentence, the
Company agrees to pay on demand all fees and out-of-pocket expenses of Xxxxxx
Xxxxxx & Xxxxx, special counsel to the Purchasers, in connection with the
transactions contemplated by this Agreement, including any amendment, waiver
(whether or not such amendment or waiver becomes effective) or enforcement of
this Agreement, the Notes, the Warrants, the Operative Documents, aid other
instruments and documents to be delivered hereunder and thereunder. En addition,
the Company agrees to pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Agreement, the Notes, the Warrants, the other Operative Documents, and the other
instruments and documents to be delivered hereunder or thereunder and the
Company agrees to save each Purchaser harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and filing fees.
9.05. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Company and each of the Purchasers and their
respective successors and assigns, except that the Company shall not have the
right to assign its rights hereunder or any interest therein without the prior
written consent of the Purchasers. Except as expressly set forth herein, nothing
in this Agreement shall confer any claim, right, interest or remedy on any third
party or inure to the benefit of any third party.
9.06. Provisions of Loan Agreement. Whenever any provision of the Loan
Agreement is referred to herein or in any instrument furnished hereunder as
expressing or constituting a covenant, obligation, condition or limitation of
this Agreement or of such instrument or as expressing or constituting a
representation herein or therein (a) such provision shall be deemed incorporated
herein or therein at length, (b)except as otherwise provided herein or in such
instrument the terms used in such provision referred to shall have the meanings
set forth in the Loan Agreement, and (c) any covenant incorporated herein by
reference from such agreement shall continue in effect for the benefit of the
Purchasers so long as the Notes, or any unpaid principal or interest thereon,
are outstanding. Except as otherwise specifically provided herein, and except
for amendments or modifications to which the Purchasers consent in writing, no
modification of or amendment to, or waiver of, any provision of any of the Loan
Agreement and no payment of the indebtedness outstanding thereunder or
satisfaction or cancellation thereof, shall modify, amend, waive or otherwise
affect any provision thereof as referred to in this Agreement or in any
instrument furnished hereunder, which provision, for the purpose of this
Agreement and such instrument, shall remain unmodified and in full force and
effect.
9.07. Payments in Respect of Notes. Each Purchaser and any successor holder
of the Notes, by their acceptance thereof, agree that, with respect to all sums
received by them applicable to the payment of principal of or interest (or
Make-Whole Amount) on the Notes, equitable adjustment will be made among them so
that, in effect, all such sums shall be shared ratably by all of the holders of
the Notes whether received by voluntary payment, by realization upon security,
by the exercise of the right of setoff, by counterclaim or cross-action or by
the enforcement of any or all of the Notes. If any holder of the Notes receives
any payment on its
46
Notes in excess of its pro rata portion, then such holder receiving such excess
payment shall purchase for cash from the other holders an interest in their
Notes in such amounts as shall result in a ratable participation by all of the
holders in the aggregate unpaid amount of Notes then outstanding. The Company
shall not have any obligation to any Person under this Section 9.07.
9.08. Payments in Respect of Warrants. Each Purchaser and any successor
holder of the Warrants, by their acceptance thereof, agree that, with respect to
the sale to, or repurchase by, the Company or any Person directly or indirectly
affiliated with the Company or any of its directors, officers, or shareholders,
of the Warrants, equitable adjustment will be made among the holders of the
Warrants so that in effect all sums so received shall be shared ratably in
proportion to their respective holdings of Warrants. If any holder of the
Warrants receives any such sum in respect of its Warrants in excess of its pro
rats portion, then such holder receiving such excess shall purchase for cash
from the other holders of the Warrants an interest in their Warrants in such
amount as shall result in a ratable participation of all of the holders in the
aggregate of all Warrants then outstanding. The Company shall not have any
obligation to any Person under this Section 9.08.
9.09. Indemnification. The Company agrees to indemnify and hold harmless
each Purchaser, its subsidiaries, directors, officers, partners, counsel and
employees, from and against any and all liability (including, without
limitation, reasonable legal fees incurred in defending against any such
liability) under, arising out of or relating to this Agreement, the Notes, the
Warrants and the Warrant Shares, the transactions contemplated hereby or thereby
or in connection herewith or therewith, including (to the maximum extent
permitted by law) any liability arising under federal or state securities laws,
except to the extent such liability shall result from any act or omission on the
part of such Purchaser or its employees, agents, brokers or other
representatives. The obligations of the Company under this Section 9.09 shall
survive and continue to be in full force and effect notwithstanding (a) the
repayment of the Notes and (b) the termination of this Agreement.
9.10. Survival of Representations and Warranties. All representations and
warranties made in this Agreement, the Notes, the Warrants, the Operative
Documents or any other instrument or document delivered in connection herewith
or therewith, shall survive the execution and delivery hereof and thereof,
regardless of any investigation made by the Purchasers or on behalf of the
Purchasers.
9.11. Entire Agreement. This Agreement, as the same may be amended from
time to time, constitutes the entire agreement between the parties and
supersedes any prior understandings or agreements concerning the subject matter
hereof.
9.12. Severability. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
9.13. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York.
47
9.14. WAIVER OF RIGHT TO JURY TRIAL. THE PARTIES HEREBY WAIVE ALL RIGHTS TO
A TRIAL BY JURY FOR ALL LEGAL PROCEEDINGS CONCERNING THIS AGREEMENT, THE NOTES
OR THE WARRANTS.
9.15. Headings. Article, Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
9.16. [Intentionally Omitted].
9.17. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.
9.18. Further Assurances. From and after, the date of this Agreement, upon
the request of the Purchasers, the Company and each Subsidiary shall execute and
deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement, the Notes and the Warrants. Without
limiting the foregoing, the Company agrees at any time upon request of the
Purchaser Majority, at the Company's sole expense, to take such actions as the
Purchaser Majority may request to establish a paying agent for the Purchasers
for purposes of this Agreement located in the State of New York.
9.19. CONSENT TO JURISDICTION. THE COMPANY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF
NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE NOTES OR THE WARRANTS OR WARRANT SHARES. TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, THE COMPANY IRREVOCABLY
WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE,
ANY CLAIM THAT IT IS NOT SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
9.20. EFFECT OF JUDGMENT. THE COMPANY AGREES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, THAT A JUDGMENT IN ANY SUIT, ACTION OR
PROCEEDING OF THE NATURE REFERRED TO IN SECTION 9.19 BROUGHT IN ANY SUCH COURT
SHALL, SUBJECT TO SUCH RIGHTS OF APPEAL ON ISSUES OTHER THAN JURISDICTION AS MAY
BE AVAILABLE TO THE COMPANY, BE CONCLUSIVE AND BINDING UPON THE COMPANY AND MAY
BE ENFORCED IN THE COURTS OF THE UNITED STATES OF AMERICA OR THE STATE OF NEW
YORK (OR ANY
48
OTHER COURTS TO THE JURISDICTION OF WHICH THE COMPANY IS OR MAY BE SUBJECT) BY A
SUIT UPON SUCH JUDGMENT.
9.21. SERVICE OF PROCESS. THE COMPANY CONSENTS TO SERVICE OF PROCESS IN ANY
SUIT, ACTION OR PROCEEDING OF THE NATURE REFERRED TO IN SECTION 9.19 BY ACTUAL
RECEIPT OF A COPY THEREOF BY REGISTERED OR CERTIFIED MALL, POSTAGE PREPAID,
RETURN RECEIPT REQUESTED, TO THE ADDRESS OF THE COMPANY SPECIFIED IN OR
DESIGNATED PURSUANT TO SECTION 9.C3. THE COMPANY AGREES THAT SUCH SERVICE (I)
SHALL BE DEEMED EN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE COMPANY
IN ANY SUCH SUIT, ACTION OR PROCEEDING AND (II) SHALL, TO THE FULLEST EXTENT
PERMITTED BY LAW, BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON AND
PERSONAL DELIVERY TO THE COMPANY.
9.22. No Limitation. Nothing in Section 9.19, 9.20, 9.21 or 9.23 shall
affect the right of any Purchaser to serve process in any manner permitted by
law, or limit any right that any Purchaser may have to bring proceedings against
the Company in the courts of any jurisdiction or to enforce in any lawful manner
a judgment obtained in one jurisdiction in any other jurisdiction.
9.23. Specific Performance. Upon breach or default by the Company with
respect to any obligation hereunder, under the Notes, the Warrants or Warrant
Shares each Purchaser shall be entitled to protect and enforce its rights at
law, or in equity or by other appropriate proceedings for specific performance
of such obligation, or for an injunction against such breach or default, or in
aid of the exercise of any power or remedy granted hereby or thereby or by law.
9.24. Actions by Purchasers. Wherever in this Agreement action is required
or permitted to be taken by, or consent is required of, or a matter requires the
satisfaction of, the Purchasers, unless the context otherwise requires, such
action may be taken by, and/or such consent may be obtained from, and/or such
satisfaction may be expressed by the Purchaser Majority.
9.25. FINAL AGREEMENT. THIS AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS
EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERCEDE
ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF. THIS AGREEMENT AND THE OPERATIVE DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
9.26. MAKE-WHOLE AMOUNT. The parties hereto acknowledge and agree that each
holder of a Note has the right to maintain its investment in the Notes free from
repayment by the Company (except as herein specifically provided for) and that
the provision for payment of a
49
Make-Whole Amount by the Company in the event the Notes are accelerated as a
result of an Event of Default or prepaid for any reason (including, without
limitation, a Change in Control), is intended to provide compensation for the
deprivation of such right under such circumstances.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
50
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
the date first above written.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Authorized Representative
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
the date first above written.
MONITRONICS INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxx
-------------------------------
Name: Xxxxx X. Xxxx
Title: President & CEO
[Corporate Seal]
