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EXHIBIT 10.1
[EXECUTION COPY]
NOTE PURCHASE AGREEMENT,
dated as of January 12, 2000,
between
MCM CAPITAL GROUP, INC.
as the Issuer,
and
ING (U.S.) CAPITAL LLC,
as the Purchaser,
for
$10,000,000 Principal Amount of
12.0% Series No. 1 Senior Notes due January 15, 2007
and
Warrants to Purchase 428,571 Common Shares.
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS
SECTION 1.1 Defined Terms 1
SECTION 1.2 Use of Defined Terms 13
SECTION 1.3 Cross References 13
SECTION 1.4 Accounting and Financial Determinations 13
ARTICLE II PURCHASE AND SALE OF SECURITIES
SECTION 2.1 Purchase Commitment 14
SECTION 2.2 Issue Price 14
SECTION 2.3 Closing 14
ARTICLE III CONDITIONS TO CLOSING
SECTION 3.1 Certificate of Incorporation 15
SECTION 3.2 Resolutions, etc. 15
SECTION 3.3 Series No. 1 Note 15
SECTION 3.4 Warrants 15
SECTION 3.5 Guaranties. 15
SECTION 3.6 Material Contracts 16
SECTION 3.7 Performance; No Default 16
SECTION 3.8 Absence of Litigation, etc. 16
SECTION 3.9 Certificate as to Compliance, etc. 16
SECTION 3.10 Certificate as to Solvency, etc. 16
SECTION 3.11 Opinion of Counsel 16
SECTION 3.12 Fees 17
SECTION 3.13 Wire Instructions 17
SECTION 3.15 Legal Investment 17
SECTION 3.16 Satisfactory Legal Form 17
SECTION 3.17 Approvals, etc. 17
ARTICLE IV PAYMENTS, REGISTRATION, ETC.
SECTION 4.1 Place of Payment 17
SECTION 4.2 Home Office Payment 17
SECTION 4.3 Optional Payments 18
SECTION 4.4 Payment of Principal and Interest 18
SECTION 4.5 Allocation 19
SECTION 4.6 Mandatory Offer of Redemption of Series No. 1 Notes 19
SECTION 4.7 Assignments by Noteholders 20
SECTION 4.7.1 Consent to Certain Assignments 20
SECTION 4.7.2 Procedures 20
SECTION 4.7.3 Terms and Conditions 20
SECTION 4.7.4 Registration, Transfer, etc. 21
SECTION 4.8 Transfer and Exchange 21
SECTION 4.9 Replacement 21
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SECTION 4.10 Taxes 22
ARTICLE V WARRANTIES, ETC.
SECTION 5.1 Organization, Power, Authority, etc. 23
SECTION 5.2 Due Authorization 24
SECTION 5.3 Validity, etc. 24
SECTION 5.4 Financial Information 24
SECTION 5.5 Absence of Material Adverse Change 25
SECTION 5.6 Continuing Indebtedness 25
SECTION 5.7 Contingencies 25
SECTION 5.8 Litigation, etc. 25
SECTION 5.9 Capitalization 25
SECTION 5.10 Margin Regulations 26
SECTION 5.11 Government Regulation 26
SECTION 5.12 Title to and Condition of Properties; Material Contracts 26
SECTION 5.13 Patents, Trademarks, etc. 27
SECTION 5.14 Taxes 27
SECTION 5.15 Pension and Welfare Plans 27
SECTION 5.16 Environmental Matters 27
SECTION 5.17 Year 2000 Problem 28
SECTION 5.18 Solvency 28
SECTION 5.19 Subsidiaries, etc. 28
SECTION 5.20 Accuracy of Information 29
SECTION 5.21 Offering of Subject Securities 29
ARTICLE VI COVENANTS
SECTION 6.1 Certain Affirmative Covenants 29
SECTION 6.1.1 Financial Information, etc. 30
SECTION 6.1.2 Notice of Default, etc. 31
SECTION 6.1.3 Maintenance of Corporate Existence, etc. 32
SECTION 6.1.4 Performance of Purchase Documents 32
SECTION 6.1.5 Books and Records 32
SECTION 6.1.6 Subsidiary Guarantors 32
SECTION 6.1.7 Payment of Taxes, etc. 32
SECTION 6.1.8 Environmental Conduct 32
SECTION 6.1.9 Use of Proceeds 33
SECTION 6.1.10 Insurance 33
SECTION 6.1.11 Subsequent Note Issuance 33
SECTION 6.2 Certain Negative Covenants 33
SECTION 6.2.1 Business Activities 33
SECTION 6.2.2 Indebtedness 33
SECTION 6.2.3 Liens 35
SECTION 6.2.4 Bank of America Credit Agreement. 35
SECTION 6.2.5 Restricted Payments, etc. 35
SECTION 6.2.6 Investments 36
SECTION 6.2.7 Consolidation, Merger, etc. 36
SECTION 6.2.8 Rental Obligations 37
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SECTION 6.2.9 Take or Pay Contracts 37
SECTION 6.2.10 Negative Pledges, Upstream Restrictions, etc. 37
SECTION 6.2.11 Transactions with Affiliates 37
SECTION 6.2.12 Asset Dispositions, etc. 38
ARTICLE VII EVENTS OF DEFAULT
SECTION 7.1 Events of Default 38
SECTION 7.1.1 Non-Payment of Obligations 38
SECTION 7.1.2 Default on Other Indebtedness 38
SECTION 7.1.3 Bankruptcy, Insolvency, etc. 39
SECTION 7.1.4 Breach of Warranty 39
SECTION 7.1.5 Non-Performance of Certain Undertakings 39
SECTION 7.1.6 Non-Performance of Other Undertakings 39
SECTION 7.1.7 Judgments 39
SECTION 7.1.8 Pension Plans 40
SECTION 7.1.9 Clean Audit 40
SECTION 7.2 Action if Bankruptcy 40
SECTION 7.3 Action if Other Event of Default 40
SECTION 7.4 Suits for Enforcement 40
SECTION 7.5 Remedies Cumulative 40
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Waivers, Amendments, etc. 41
SECTION 8.2 Notices 41
SECTION 8.3 Costs and Expenses 41
SECTION 8.4 Indemnification 42
SECTION 8.5 Survival 42
SECTION 8.6 Severability 42
SECTION 8.7 Headings 43
SECTION 8.8 Counterparts 43
SECTION 8.9 Governing Law 43
SECTION 8.10 Jurisdiction 43
SECTION 8.11 Successors and Assigns 43
SECTION 8.12 Waiver of Jury Trial. 43
SCHEDULE I - Disclosure Schedule
Item 3.4 - Capital Stock
Item 5.6 - Ongoing Indebtedness
Item 5.8 - Litigation
Item 5.9 - Repurchase, etc. Agreements
Item 5.12 - Defaults
Item 5.13 - Patents, Trademarks
Item 5.15 - Employee Benefit Plans
Item 5.16 - Environmental Matters
Item 5.19 - Subsidiaries
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EXHIBIT A - Form of Series No. 1 Note
EXHIBIT B - Certificate as to Certificate of Incorporation
EXHIBIT C - Certificate as to Authorizing Resolutions, etc.
EXHIBIT D - Form of Subsidiary Guaranty
EXHIBIT E - Form of Warrant Agreement
EXHIBIT F - Form of Assignment and Acceptance
EXHIBIT G - Certificate as to Compliance
EXHIBIT H - Certificate as to Solvency
EXHIBIT I - Form of Opinion of Counsel
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NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of January 12, 2000, between MCM
CAPITAL GROUP, INC., a Delaware corporation (the "Company") and ING (U.S.)
CAPITAL LLC, a Delaware limited liability company (alternatively, "ING" or the
"Purchaser"),
W I T N E S S E T H:
WHEREAS, the Company desires to obtain financing for the purchase of
charged-off accounts, the making of acquisitions in the Company's existing lines
of business and lines of business reasonably related thereto, and working
capital and general corporate purposes; and
WHEREAS, the Company has authorized the sale to the Purchaser, and the
Purchaser is willing on the terms and conditions hereinafter set forth
(including Article III) to purchase, directly or through nominees, on the
Closing Date:
(a) $10,000,000 principal amount of 12.0% senior promissory
notes in the form of Exhibit A hereto due January 15, 2007; and
(b) Warrants to purchase 428,571 of the Common Shares of the
Company at an exercise price of $0.01 per share;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Defined Terms. The following terms (whether or not
italicized) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"1998 Audited Financial Statements" is defined in clause (a) of Section
5.4.
"1999 Interim Financial Statements" is defined in clause (c) of Section
5.4.
"Affiliate" means, relative to any Person, any other Person which,
directly or indirectly, controls or is controlled by or under common control
with such Person (excluding, however, any trustee under, or any committee with
responsibility for administering, any Plan). For the purposes of this
definition, "control" (including the correlative terms "controlling",
"controlled by" and "under common control with") means, relative to any Person,
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of Voting Stock, by agreement or otherwise; provided, however, that
(x) beneficial ownership of 15% or more of the
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Voting Stock of a Person shall be deemed to be control and (y) any of the
foregoing to the contrary notwithstanding, the term "Affiliate," relative to the
Company and Subsidiaries, shall not include ING.
"this Agreement" means, on any date, this Purchase Agreement as
originally in effect and as thereafter from time to time amended, supplemented
or otherwise modified in accordance with the terms hereof and in effect on such
date.
"Applicable Law" means, relative to any Person, (x) all provisions of
laws, statutes, ordinances, rules, regulations, requirements, restrictions,
permits, certificates or orders of any Governmental Authority applicable to such
Person or any of its assets or property and (y) all judgments, injunctions,
orders and decrees of all courts in proceedings or actions in which such Person
is a party or by which any of its assets or properties are bound.
"Approval" means, relative to any Person, each approval, license,
permit, consent, exemption, filing or registration by or with any Governmental
Authority (x) necessary to authorize or permit the execution, delivery or
performance of, or for the validity or enforceability of, any Transaction
Document or (y) that the failure to have or obtain would have a Materially
Adverse Effect on its conduct of its business.
"Assignment and Acceptance" is defined in Section 4.7.
"Authorized Officer" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the
Purchaser pursuant to clause (a)(ii) of Section 3.2. or Section 3.5.
"Bank of America Credit Agreement" means the credit agreement dated as
of July 15, 1999, between Bank of America, N.A. and Midland, as in effect on the
Closing Date or as amended thereafter in accordance with Section 6.2.4.
"Bank of America Indebtedness" means all Indebtedness of the Company or
Midland under the Bank of America Credit Agreement, or any refinancing or
replacement thereof effected in accordance with Section 6.2.4.
"Business Day" means any day, excluding, however, a Saturday, Sunday
and each legal holiday on which banks are authorized or required to close in New
York, New York or the State of Kansas.
"Capitalized Lease Liability" means, relative to any Person, any
monetary obligation under any leasing or similar arrangement which, in
accordance with GAAP, is classified as a capitalized lease, and, for purposes of
this Agreement and each other Purchase Document, the amount of any such
obligation shall be the capitalized amount thereof determined in accordance with
GAAP, and the stated maturity thereof shall be determined in accordance with
GAAP.
"Capital Stock" means, relative to any Person, any and all shares,
partnership or membership interests, participations, rights or other equivalents
(however designated) of corporate stock, including (w) capital shares of such
Person (whether voting or non-voting), (x) if such Person is a partnership,
capital partnership interests (whether general or limited), (y) any other
indicia of ownership of such Person (z) and all warrants, options, purchase
rights, conversion or exchange rights, voting rights, calls or any claims of any
character with respect thereto.
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"Cash Equivalent Investment" means any investment of the following
nature:
(a) obligations issued or guaranteed by the United States
of America;
(b) certificates of deposit, overnight time deposits,
bankers acceptances and other "money market instruments" issued by any
bank or trust company organized under the laws of the United States of
America or any State thereof and (x) whose deposits are insured by the
Federal Deposit Insurance Corporation or (y) having capital and surplus
in an aggregate amount of not less than $100,000,000;
(c) open market commercial paper bearing the highest credit
rating for such obligations issued by S&P or Xxxxx'x or by another
nationally recognized credit rating firm;
(d) repurchase agreements entered into with any bank or
trust company organized under the laws of the United States of America
or any State thereof and having capital and surplus in an aggregate
amount of not less than $100,000,000 relating to United States of
America government obligations;
(e) shares of "money market funds", each having net assets
of not less than $100,000,000; and
(f) other short-term investments calculated in accordance
with GAAP;
in each (other than clause (f) above) case maturing or being due or payable in
full not more than 180 days after the Company's acquisition thereof.
"Certificate of Incorporation" means the certificate of incorporation
of the Company in the form furnished to the Purchaser prior to the execution and
delivery of this Agreement, together with all amendments thereto as of the
Closing Date.
"Change of Control" means:
(a) the sale, lease or transfer of all or substantially all
the assets of the Company to any Person or group (as such term is
defined in Section 13(d)(3) of the Exchange Act) other than any of the
Significant Stockholders;
(b) the liquidation or dissolution of (or the adoption of a
plan of liquidation by) the Company; or
(c) the acquisition by any Person or affiliated group (other
than any of the Significant Stockholders) of a direct or indirect
majority in interest (more than 50%) of the issued and outstanding
Voting Stock of the Company by way of merger or consolidation or
otherwise.
"Closing" is defined in Section 2.3.
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"Closing Date" is defined in Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Common Share" means a share of common stock, $0.01 par value per
share, of the Company as authorized by the Certificate of Incorporation.
"Company" is defined in the preamble.
"Company's Knowledge" means, at any time and relative to any matter,
knowledge which any Authorized Officer of the Company would have after
reasonable inquiry, under the circumstances, of the current employees of the
Company or any Subsidiary who would reasonably be expected to have knowledge
regarding such matter, whether or not such Authorized Officer actually made
inquiry of such employees.
"Contingent Liability" means, relative to any Person, any agreement,
undertaking or arrangement by which such Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the Indebtedness, obligation or any other liability of any other
Person (other than by endorsements of instruments in the course of collection),
or guarantees the payment of dividends or other distributions upon the shares of
any other Person. The amount of any Person's Contingent Liability shall
(subject, however, to any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount, if larger) of the
Indebtedness, obligation or other liability guaranteed thereby.
"Contractual Undertaking" means, relative to any Person, any provision
of any debt or equity security issued by it or of any Instrument or undertaking
to which it is a party or by which it or any of its property is bound or
subject.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414(b) or 414(c) of the
Code or section 4001(b)(1) of ERISA.
"Default" means any Event of Default or any act, condition or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Disclosure Schedule" means Schedule I hereto.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is covered by ERISA and (x) which is currently
maintained or contributed to by the Company, (y) which was at any time during
the last six years maintained, contributed to or terminated by the Company or
(z) with respect to which there is any potential or outstanding liability of the
Company.
"Environmental Claim" is defined in clause (b) of Section 5.16.
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"Environmental Law" means all present and future Applicable Laws
imposing liability or standards of conduct relating to the environment,
industrial hygiene, land use or the protection of human health and safety,
natural resources, pollution (including Hazardous Materials) or waste
management.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
"Event of Default" is defined in Section 7.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"First Registration Agreement" means that certain registration rights
agreement, dated June 30, 1999, among the Company, and the other parties that
are a party thereto.
"Fiscal Quarter" or "FQ" means any period of three consecutive calendar
months comprising a quarter of a Fiscal Year; references to a Fiscal Quarter
with numbers corresponding to a calendar year and a number corresponding to a
Fiscal Quarter (e.g., "1999 FQ 1") refer to such Fiscal Quarter (i.e., the
first) of such Fiscal Year.
"Fiscal Year" or "FY" means a period of 12 consecutive calendar months
ending on each December 31st; references to a Fiscal Year with a number
corresponding to any calendar year (e.g., "the 1999 Fiscal Year" or "1999 FY")
refer to the Fiscal Year ending on December 31st of such calendar year.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Governmental Authority" means any international, national, federal,
state, provincial, local, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, or any court, in each case
whether of the United States or foreign.
"Hazardous Material" means:
(a) any substances that are defined or listed in, or
otherwise classified pursuant to, any applicable Environmental Laws as
"hazardous substances", "hazardous materials", "hazardous wastes",
"toxic substances", "contaminants", "pollutants" or any other
formulation intended to define, list or classify substances by reason
of adverse effects on the environment or deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive
toxicity or "TLCP" toxicity or "EP" toxicity;
(b) any oil, petroleum or petroleum derived substances,
natural gas, natural gas liquids or synthetic gas and drilling fluids,
produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal
resources;
(c) any flammable substances or explosives or any
radioactive materials; or
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(d) any asbestos in any form or electrical equipment which
contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty parts per million.
"Hedging Liability" means, relative to any Person, all liabilities of
such Person under interest rate and currency swap, cap and collar agreements and
all other Instruments designed to protect such Person against fluctuations in
interest or currency exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Purchase Document refer to this Agreement or such
other Purchase Document, as the case may be, as a whole and not to any
particular Article, Section, paragraph or provision of this Agreement or such
other Purchase Document.
"holder" is defined, relative to a Series No. 1 Note, in Section 4.7.4.
"including" means including without limiting the generality of any
description preceding such term.
"Indebtedness" means, relative to any Person, without duplication:
(a) all obligations of such Person for borrowed money
(including all notes payable and drafts accepted representing
extensions of credit) and all obligations evidenced by bonds,
debentures, notes or other similar instruments on which interest
charges are customarily paid;
(b) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or not drawn, and
bankers' acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities of such Person;
(d) net monetary liabilities of such Person under all
Hedging Liabilities (calculated, at any time, as the aggregate amount
(giving effect to any netting agreements) that such Person would be
required to pay if the agreements giving rise to such Hedging
Liabilities were terminated at such time);
(e) all obligations of such Person to pay the deferred
purchase price of property or services that, in accordance with GAAP,
would be included on the liability side of the balance sheet of such
Person as of the date at which Indebtedness is to be determined;
(f) all indebtedness referred to in clause (a), (b), (c),
(d) or (e) secured by a Lien on property owned or being purchased by
such Person (including indebtedness arising under conditional sales or
other title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse;
provided, however, that in the case of any such Indebtedness which is
by its terms non-recourse to such Person, the amount of such
Indebtedness shall, for the purpose of this clause, be deemed to be the
lesser of (x) the aggregate unpaid principal amount of such
Indebtedness and (y) the fair market value of the property subject to
such Lien, as determined by such Person in good faith; and
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(g) all Contingent Liabilities of such Person in respect of
any Indebtedness of any other Person.
"Indemnified Liabilities" is defined in Section 8.4.
"Indemnified Party" is defined in Section 8.4.
"ING" is defined in the preamble.
"Institutional Holder" means the Purchaser (so long as it or its
nominee shall hold a Series No. 1 Note or other Subject Security) and each other
financial institution which shall hold a Series No. 1 Note or other Subject
Security (excluding, however, any financial institution which is not a
Noteholder and acquired the other Subject Securities held by it in a
distribution to the public or a sale pursuant to Rule 144A under the Securities
Act or as the direct or indirect transferee of other Subject Securities acquired
in such a distribution or sale).
"Instrument" means any contract, agreement, indenture, mortgage,
document or other writing (whether by formal agreement, letter or otherwise)
under which any obligation is evidenced, assumed or undertaken or any Lien (or
right or interest therein) is granted or perfected.
"Intellectual Property" is defined in Section 5.13.
"Investment" means, relative to any Person, all investments by such
Person in any other Person (including Affiliates) in the forms of (v) loans,
advances (excluding, however, commission, travel, indemnity and similar advances
to officers, directors and employees of such Person made in the ordinary course
of business), (w) Contingent Liabilities of such Person incurred with respect to
Indebtedness of any other Person, (x) capital contributions, purchases or other
acquisitions for consideration of Indebtedness, equity interests or other
securities, (y) payments in respect of tax savings or liabilities made by such
Person to or for the benefit of any other Person with whom such Person files a
consolidated tax return which are not reimbursed by such other Person and (z)
any other items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP. The amount of any Investment shall be
the original principal or capital amount thereof less all returns of principal
or equity, or distributions or dividends paid, thereon and shall, if made by the
transfer or exchange of property other than cash, be deemed to have been made in
an original principal or capital amount equal to the fair value of such property
at the time of such Investment.
"Lien" means (x) any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other) or preference,
priority or other security agreement, whether or not filed, recorded or
otherwise perfected under Applicable Law to secure any Indebtedness, (y) any
financing statement filed under the Uniform Commercial Code (or comparable law
of any jurisdiction), other than to perfect the sale or purchase of accounts,
and (z) any option or other agreement to sell or to provide any Instrument or
financing statement of the nature referred to in item (x) or (y).
"Material Contracts" means the agreements and contracts that are
required to be filed by the Company pursuant to Item 601 of Regulation S-K as an
exhibit to any report, registration statement or other filing under the
Securities Act or the Exchange Act.
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"Material Subsidiary" means any Subsidiary of the Company that owns or
otherwise holds tangible assets of $10,000 or more.
"Materially Adverse Effect" means (x) a material adverse effect on the
financial condition, business, assets, operations or properties of the Company
and Subsidiaries, taken as a whole, (y) a material impairment of the ability of
any Obligor to perform its respective payment obligations under the Purchase
Documents to which it is or will be a party or (z) an impairment of the validity
or enforceability of, or a material impairment of the rights, remedies or
benefits available to the Noteholders under, this Agreement or any other
Purchase Document.
"Midland" means Midland Credit Management, Inc.
"Non-U.S. Noteholder" is defined in Section 4.10.
"Noteholder" means at any time each Person (including the Purchaser)
then registered in accordance with Section 2.3, 4.8 or 4.9 as the owner or
holder of a Series No. 1 Note; provided, however, that no Person which is an
Affiliate of the Company (other than Triarc Companies, Inc. or its designee,
excluding the Company and its Subsidiaries) shall be deemed to be a Noteholder
for purposes of Section 8.1 or any other action requiring the consent,
concurrence or other action of each Noteholder.
"Notice of Redemption" is defined in Section 4.7.
"Obligation" means all obligations of the Company with respect to the
repayment or performance of all obligations (monetary or otherwise) of the
Company arising under or in connection with the Series No. 1 Notes or under this
Agreement or any other Purchase Document in respect of the Series No. 1 Notes,
the Indebtedness evidenced thereby or to any Person as the holder of a Series
No. 1 Note.
"Obligor" means the Company or any Subsidiary Guarantor.
"Operating Lease" is defined in Section 6.2.8.
"Optional Redemption Price" means, for any portion of the outstanding
principal amount of any Series No. 1 Note, the outstanding principal amount of
such portion of the Series No. 1 Note.
"or" is not exclusive.
"Organizational Document" means, relative to any Person, each
instrument that (x) defines its corporate existence, including its articles or
certificate of incorporation, as filed or recorded with an applicable
Governmental Authority or (y) governs its internal affairs, including its
by-laws and all shareholder agreements, voting trusts and similar arrangements
to which it is a party applicable to any of its authorized shares of Capital
Stock, in each case as amended, supplemented or restated.
"outstanding" means, at any time relative to the Series No. 1 Notes,
any Series No. 1 Notes theretofore issued pursuant to Section 2.3, 4.8 or 4.9
and not surrendered pursuant to Section 4.8 or 4.9 but excluding, however, all
Series No. 1 Notes which are deemed pursuant to Section 4.9 to be not
outstanding.
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"Payment Date" means the 15th day of each January and July, commencing
July 15, 2000 or, if any such day is not a Business Day, the next succeeding
Business Day.
"Payment or Insolvency Default" means a Default pursuant to Section
7.1.1 or 7.1.3.
"Permitted Lien" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(a) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by Section
6.1.7;
(b) statutory Liens of landlords, Liens of carriers,
warehousemen, mechanics, suppliers, materialmen and repairmen and other
like Liens arising in the ordinary course of business for sums not yet
more than 10 days delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (excluding,
however, obligations for the payment of borrowed money);
(d) leases or subleases granted to others not interfering in
any material respect with the ordinary conduct of the business of the
Company or any Subsidiary;
(e) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects, encroachments or irregularities in title
and other similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of the
Company or any Subsidiary;
(f) any (w) interest or title of a lessor or sublessor under
any lease, (x) restriction or encumbrance that the interest or title of
such lessor or sublessor may be subject to, (y) subordination of the
interest of the lessee or sublessee under such lease to any restriction
or encumbrance referred to in item (x) or (z) Liens arising from filing
Uniform Commercial Code financing statements regarding leases;
(g) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods;
(h) Liens (including extensions, renewals and replacements
thereof) upon property acquired (the "acquired property") by the
Company or any Subsidiary after the Closing Date; provided, however,
that (w) any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund,
the cost (including the cost of construction) of the acquired property,
(x) the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of the cost of the acquired property, (y) such Lien
does not extend to or cover any property other than the acquired
property and any improvements on such
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acquired property and (z) the incurrence of the Indebtedness to
purchase the acquired property is permitted by Section 6.2.2;
(i) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements;
(j) Liens arising out of consignment or similar arrangements
for the sale of goods entered into by the Company or any Subsidiary in
the ordinary course of business;
(k) judgment and attachment Liens not giving rise to an Event
of Default; and
(l) additional Liens granted by the Company or any Subsidiary
at any one time outstanding in respect of properties or assets having,
on the date such Lien is granted, an aggregate fair market value not to
exceed $100,000.
"Person" means any natural person, corporation, firm, association,
partnership, limited liability partnership, limited liability company,
government, trust, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
"PIK Notes" is defined in clause (b) of Section 4.4.
"Plan" means (x) a "pension plan," as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer
plan as defined in section 4001(a)(3) of ERISA), and to which the Company or any
corporation, trade or business that is, along with the Company, a member of a
Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA or (y) a "welfare plan," as
such term is defined in section 3(1) of ERISA.
"Purchase Document" means this Agreement, the Series No. 1 Notes, the
Warrant Agreement, the Subsidiary Guaranty and each other Instrument executed
and delivered from time to time by the Company or any Subsidiary to the
Purchaser or any other Noteholder pursuant hereto, whether or not mentioned
herein.
"Purchaser" is defined in the preamble.
"Ratably" means, relative to the Noteholders, ratably according to the
aggregate outstanding principal amount of all Series No. 1 Notes held by each
Noteholder.
"Registration Agreement" means that certain Registration Rights
Agreement, dated as of January 12, 2000, by and between the Company and the
Purchaser.
"Reimbursement Agreement" means the reimbursement agreement, dated as
of January 12, 2000, between the Company and Midland.
"Required Noteholders" means, at any time, Noteholders owning more than
50% of the then outstanding principal amount of the Series No. 1 Notes;
provided, however, that any Series No. 1 Note
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which from time to time is held by any Affiliate of the Company (other than
Triarc Companies, Inc. or any of its designees, excluding the Company and its
Subsidiaries) shall be deemed to be not outstanding for all purposes of (x)
Sections 7.3 and 8.1 and (y) any other determination to be made by, or action to
be taken by or at the direction of, the Required Noteholders.
"Residual Transaction" is defined in clause (e) of Section 6.2.2.
"Restricted Payment" means
(a) relative to any Capital Stock of the Company,
(i) any dividend or other distribution (in cash,
property or obligations), direct or indirect, by the Company
on account of (x) any shares of any class of such Capital
Stock (now or hereafter outstanding) or (y) any warrants,
options or other rights with respect to any shares of any
class of such Capital Stock (now or hereafter outstanding),
excluding, however, in each case, dividends or distributions
payable in such Capital Stock, or warrants to purchase such
Capital Stock, or split-ups or reclassifications of such
Capital Stock into additional or other shares of its Capital
Stock,
(ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value,
direct or indirect, by the Company or any Subsidiary of any
shares of any class of such Capital Stock (now or hereafter
outstanding), and
(iii) any payment by the Company or any Subsidiary
made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any
class of such Capital Stock now or hereafter outstanding;
(b) any payment or prepayment by the Company or any Subsidiary
of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any
Indebtedness subordinated in right of payment to the Obligations; and
(c) any deposit to fund any of the foregoing.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Subsidiary" means any of Midland Receivables 98-1
Corporation, Midland Receivables 99-1 Corporation or Midland Funding 98-A
Corporation or any other bankruptcy-remote Subsidiary created or acquired by the
Company or any Subsidiary for the purpose of securitizing or otherwise selling,
pledging or borrowing against charged-off accounts in the ordinary course of
business.
"Securitization Transaction" means any transaction or series of
transactions by or through a Securitization Subsidiary for the purpose of
securitizing or otherwise selling, pledging or borrowing against charged-off
accounts in the ordinary course of business.
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"Series No. 1 Note" means each 12.0% senior promissory note of the
Company issued on the Closing Date in accordance with Section 2.3, and any PIK
Notes issued pursuant to Section 4.4, in each case substantially in the form of
Exhibit A hereto (as such note may be amended, endorsed or otherwise modified
from time to time) and all other notes accepted from time to time in
substitution, replacement or renewal therefor, including pursuant to Section 4.8
or 4.9.
"Significant Stockholders" means, collectively, Xxxxxx Xxxxx, Xxxxx X.
May, Triarc Companies, Inc., C.P. International Investments Limited, Xxxxx X.X.
Xxxxxx and Xxxxx Xxxxxxxx, or any of their Affiliates.
"Subject Security" means all Series No. 1 Notes and other securities
purchased on the Closing Date pursuant to Section 2.3, together with all other
securities issued in replacement or exchange therefor or as a distribution
thereon.
"Subsidiary" means, relative to any Person, (x) any corporation,
association or other business entity more than 50.0% of the outstanding shares
of Voting Stock of which is owned directly or indirectly by such Person and (y)
any partnership in which such Person is a general partner (but not including any
trust unless the applicable Person owns more than 50% beneficial interest
therein as evidenced by issued certificates). Except as otherwise indicated
herein, references to Subsidiaries refer to Subsidiaries of the Company.
"Subsidiary Guaranty" is defined in Section 6.1.6.
"Subsidiary Guarantor" means each Subsidiary that shall from time to
time after the Closing Date become a party to the Subsidiary Guaranty in
accordance with Section 6.1.6.
"Tax" is defined in Section 4.10.
"Transaction" means collectively:
(a) the issuance by the Company of the Subject Securities in
accordance with this Agreement; and
(b) all of the other transactions contemplated by the parties
hereto (including in accordance with Article III) to occur on the
Closing Date, including the payment of Transaction Costs.
"Transaction Cost" means any reasonably incurred fee, cost or expense
payable by the Company or any Subsidiary in connection with the Transaction.
"Transaction Documents" means the Purchase Documents, the Registration
Agreement and all documents, certificates and Instruments delivered in
connection with any thereof.
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"Voting Stock" means, relative to any Person, Capital Stock of any
class or kind, including any Capital Stock of such Person of any other class or
kind which is then convertible into Capital Stock of such class or kind,
ordinarily having the power to vote (and irrespective of whether at the time
Capital Stock of such Person of any other class or kind shall or might upon the
occurrence of a contingency have voting power) for the election of directors,
managers or other voting members of the governing body of such Person.
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"Warrant" means a warrant issued by the Company substantially in the
form of Attachment 1 to the Warrant Agreement (as such warrant may be amended,
endorsed or otherwise modified from time to time) and all other warrants
accepted from time to time in substitution, replacement or renewal therefor,
including pursuant to Section 2.2 or 2.3 thereof.
"Warrant Agreement" means an agreement between the Company and the
Purchaser substantially in the form of Exhibit E hereto as such agreement may be
amended, waived or otherwise modified from time to time in accordance with its
terms.
"wholly-owned Subsidiary" means, relative to any Person, any Subsidiary
of such Person all of the Capital Stock (and all rights and options to purchase
such Capital Stock) of which, other than directors' qualifying shares, are
owned, beneficially and of record, by such Person or its wholly-owned
Subsidiaries.
"Year 2000 Problem" means, relative to any Person, any significant risk
that computer hardware, software or equipment containing embedded microchips
used in its businesses or operations will not, in the case of dates of time
periods occurring after December 31, 1999, function at least as effectively as
in the case of dates or time periods occurring prior to January 1, 2000.
SECTION 1.2 Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule, each
Series No. 1 Note and any other Purchase Document or any notice or other
communication delivered from time to time in connection with any Purchase
Document.
SECTION 1.3 Cross References. Unless otherwise specified, references
in this Agreement and in each other Purchase Document to any Article or Section
are references to such Article or Section of this Agreement or such other
Purchase Document, as the case may be, and unless otherwise specified,
references in any Article, Section or definition to any item or clause are
references to such item or clause of such Article, Section or definition.
SECTION 1.4 Accounting and Financial Determinations. Unless otherwise
specified, all accounting terms used herein or in any other Purchase Document
shall be interpreted, all accounting determinations and computations hereunder
or thereunder for periods after the Closing Date shall be made and all financial
statements required to be delivered hereunder or thereunder shall be prepared,
in accordance with generally accepted accounting principles ("GAAP") (subject,
however, in the case of financial information as at the close of any period
other than a Fiscal Year, to the absence of footnotes and year-end adjustments)
as in effect at such time and applied consistently with the 1998 Audited
Financial Statements (except as disclosed therein).
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ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1 Purchase Commitment. The Purchaser hereby agrees,
subject, however, to the terms and conditions of this Agreement (including
Article III), to purchase from the Company, and the Company hereby agrees to
sell to the Purchaser, at the Closing the following securities:
(a) $10,000,000 principal amount of Series No. 1 Notes, at
par; and
(b) for consideration of $10.00, a Warrant to purchase 428,571
of the Company's Common Shares, exercisable for a period of five years
at an exercise price of $0.01 per share.
SECTION 2.2 Issue Price. The Company and the Purchaser agree that,
for purposes of section 1271 et seq. of the Code, the issue price of each Series
No. 1 Note and the issue price of the Warrant shall be determined by the Company
in good faith and shall be provided to the Purchaser promptly thereafter but in
no event more than 45 days after the Closing Date.
SECTION 2.3 Closing. The purchase of the Series No. 1 Notes and the
other Subject Securities shall take place at a closing (the "Closing") at the
offices of Xxxxx, Xxxxx & Xxxxx, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00
a.m., local time, on January 12, 2000 or such other Business Day as may be
agreed upon by the Company and the Purchaser (the "Closing Date"). At the
Closing, the Company will deliver to the Purchaser:
(a) a single Series No. 1 Note (or such greater number of
Series No. 1 Notes as the Purchaser may request) in the aggregate
principal amount set forth in clause (a) of Section 2.1, dated the
Closing Date, and registered in the Purchaser's name (or in the name of
one or more nominees of the Purchaser), and
(b) a Warrant (or such greater number of Warrants as the
Purchaser may request) representing in the aggregate the right to
purchase the number of Common Shares set forth in clause (b) of Section
2.1, dated the Closing Date, and registered in the Purchaser's name (or
in the name of one or more nominees of the Purchaser),
each against delivery by the Purchaser to the Company of immediately available
funds in the amount of the purchase price therefor. If, at the Closing, the
Company shall fail to tender to the Purchaser the Subject Securities as provided
in this Section or any of the conditions specified in Article III shall not have
been fulfilled to the Purchaser's reasonable satisfaction, the Purchaser shall,
at its election, be relieved of all further obligations under this Agreement,
without thereby waiving any other rights the Purchaser may have by reason of
such failure or such nonfulfillment.
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ARTICLE III
CONDITIONS TO CLOSING
The Purchaser's obligation to purchase and pay for the Subject
Securities is subject, however, to the fulfillment, to the Purchaser's
satisfaction, prior to, at or concurrently with the Closing, of all of the
following conditions:
SECTION 3.1 Certificate of Incorporation. Each of the following shall
have occurred (and the Purchaser shall have received from the Company a
certificate, dated the Closing Date, of its Secretary or Assistant Secretary
substantially in the form of Exhibit B hereto confirming inter alia that):
(a) the Company shall have adopted and duly filed with the
Secretary of State of Delaware the Certificate of Incorporation; and
(b) no further amendments or modifications thereto shall have
been adopted or filed.
SECTION 3.2 Resolutions, etc. The Purchaser shall have received:
(a) from the Company, a certificate, dated the Closing Date,
in the form of Exhibit C hereto as to:
(i) resolutions of its Board of Directors then in
full force and effect authorizing in the case of the Company,
the issuance of the Subject Securities and the execution,
delivery and performance of this Agreement and each other
Purchase Document to be executed by it, and
(ii) 3.2.0.1.2. the incumbency and signatures of
those of its officers authorized to act with respect to this
Agreement and each other Purchase Document executed by it;
(b) duly executed and delivered counterparts of the
Registration Agreement; and
(c) the balance sheets and financial statements identified in
clauses (a) through (d) of Section 5.4 together with all other
financial information reasonably requested by the Purchaser, who shall
be satisfied with the same in its sole discretion.
SECTION 3.3 Series No. 1 Note. The Company shall have executed and
delivered to the Purchaser a Series No. 1 Note, dated the Closing Date, in the
original principal amount provided in clause (a) of Section 2.1 with interest
payable thereon at the rates determined in accordance with Section 4.4.
SECTION 3.4 Warrants. The Company shall have exchanged duly executed
counterparts of the Warrant Agreement with the Purchaser and shall have issued
pursuant thereto to the Purchaser, a Warrant, dated the Closing Date, for the
number of Common Shares provided in clause (b) of Section 2.1.
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SECTION 3.5 Guaranties. The Purchaser shall have received from each
Subsidiary Guarantor, a duly authorized and executed Subsidiary Guaranty,
together with appropriately completed certificates similar in form and substance
to Exhibits B and C hereto.
SECTION 3.6 Material Contracts. The Purchaser shall have received from
the Company true, correct and completed copies of all Material Contracts
(including but not limited to the Reimbursement Agreement, the First
Registration Agreement, the indenture and servicing agreements for all
Securitization Transactions as of the Closing Date, and the Bank of America
Credit Agreement) as executed by the parties thereto, including all schedules
thereto appropriately completed. The Material Contracts, including the schedules
thereto, shall be in form and substance reasonably acceptable to the Purchaser.
SECTION 3.7 Performance; No Default. At the time of the Closing (and
after giving effect to the Transaction),
(a) the representations and warranties of the Company
contained in this Agreement and those made in writing by or on behalf
of the Company in connection with any other Purchase Document delivered
on the Closing Date shall be true and correct;
(b) the Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to or at the Closing; and
(c) no Default shall have occurred and be continuing.
SECTION 3.8 Absence of Litigation, etc. Except as disclosed by the
Company pursuant to Section 5.8,
(a) no litigation, arbitration or governmental investigation
or proceeding shall be pending or, to the Company's Knowledge,
threatened against the Company or any Subsidiary which (x) affects any
of their respective financial condition, business, assets, operations
or properties and which would, in the opinion of the Purchaser,
reasonably be expected to have a Materially Adverse Effect or (y)
relates to the Transaction; and
(b) no development shall have occurred in any such litigation,
arbitration or governmental investigation or proceeding so disclosed,
which would, in the opinion of the Purchaser, reasonably be expected to
have a Materially Adverse Effect.
SECTION 3.9 Certificate as to Compliance, etc. The Purchaser shall
have received from the Company a certificate, dated the Closing Date, of its
chief executive or financial Authorized Officer as to satisfaction of the
conditions set forth in Sections 3.7 and 3.8 in the form of Exhibit G hereto.
SECTION 3.10 Certificate as to Solvency, etc. The Purchaser shall have
received a certificate, dated the Closing Date, of the chief financial
Authorized Officer of the Company, in the form of Exhibit H hereto.
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SECTION 3.11 Opinion of Counsel. The Purchaser shall have received
opinions, dated the Closing Date, from Squire, Xxxxxxx & Xxxxxxx L.L.P., counsel
to the Company and the Subsidiary Guarantors, substantially in the form of
Exhibit I hereto.
SECTION 3.12 Fees. The Company shall have made payment in full of:
(a) all fees and other amounts due on the Closing Date to the
Purchaser by the Company in connection with the Transaction; and
(b) all fees and expenses of Xxxxx, Xxxxx & Xxxxx which shall
have been invoiced (including reasonable amounts invoiced on account)
to the Company pursuant to Section 8.3.
SECTION 3.13 Wire Instructions. The Purchaser shall have received,
not less than two Business Days prior to the Closing Date, wire instructions
prepared by the Company as to all wire transfers or other payments to be
effected on the Closing Date in connection with the Transactions to be
consummated on the Closing Date pursuant to this Agreement or the other
Transaction Documents, which wire instructions shall identify the payor and
payee of each such wire transfer or payment, shall describe the manner of
transfer or payment and shall otherwise be satisfactory in form and substance to
the Purchasers.
SECTION 3.14 Due Diligence. The Purchaser shall have completed, to its
reasonable satisfaction, an investigation and analysis of the legal affairs and
Contractual Undertakings of the Company and its Subsidiaries.
SECTION 3.15 Legal Investment. On the Closing Date, the Purchaser's
purchase of the Subject Securities shall not be prohibited by any Applicable Law
and shall not subject it to any penalty or, in the Purchaser's reasonable
judgment, other onerous condition under or pursuant to any Applicable Law.
SECTION 3.16 Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Company shall be satisfactory
in form and substance to the Purchaser and its counsel; the Purchaser and its
counsel shall have received all information, and such counterpart originals or
such certified or other copies of all Instruments, as the Purchaser or its
counsel may reasonably request; and all legal matters incident to the
transactions contemplated by this Agreement shall be satisfactory to counsel to
the Purchaser.
SECTION 3.17 Approvals, etc. The Company shall have received (i) all
Approvals, and (ii) any consent of third-parties required under any Contractual
Undertaking of the Company or any Subsidiary have been obtained or given, in
each case in connection with the Transaction.
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ARTICLE IV
PAYMENTS, REGISTRATION, ETC.
SECTION 4.1 Place of Payment. Payments of principal and interest
becoming due and payable on the Series No. 1 Notes and any dividends or other
payments on or in respect of any other Subject Securities shall be made to the
Purchaser's account identified on the signature page hereto at the office of The
Chase Manhattan Bank, 0 Xxxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx.
SECTION 4.2 Home Office Payment. So long as the Purchaser or its
nominee shall be the holder of any Subject Security, and notwithstanding
anything contained in Section 4.1 or in any Subject Security to the contrary,
the Company will pay all sums becoming due for principal of and interest on such
Series No. 1 Note so held and all dividends or other payments on or in respect
of any other Subject Security so held, not later than 12:00 o'clock noon, New
York City time, on the date such payment is due, in immediately available funds,
(a) in accordance with the payment instructions set forth
below the Purchaser's signature hereto with instructions to the payee
identified in such instructions to telephone advice of credit in
accordance with such instructions, or
(b) by such other method or at such other address or bank
account as the Purchaser may designate in writing,
without the presentation or surrender of such Subject Security or the making of
any notation thereon, except that any Series No. 1 Note paid or prepaid (or any
other Subject Security redeemed) in full shall be surrendered to the Company at
its principal office for cancellation. Prior to any sale or other disposition of
any Series No. 1 Note held by the Purchaser, the Purchaser will, at its
election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Series No. 1
Note to the Company in exchange for a new Series No. 1 Note or Series No. 1
Notes, as the case may be, pursuant to Section 4.8. The Company will afford the
benefits of this Section to any Institutional Holder which is the direct or
indirect transferee of any Subject Security purchased by the Purchaser under
this Agreement and which has made the same agreement relating to such Subject
Security as the Purchaser has made in this Section.
SECTION 4.3 Optional Payments. The Company may, at its option, prepay
at any time all or any part (in a minimum amount of $100,000 and integral
multiples of $1,000 thereafter) of the outstanding principal amount of, or of
interest due or to become due on the next Payment Date under, the Series No. 1
Notes. Prepayments of principal shall be in the amount of the applicable
Optional Redemption Price and shall be accompanied by payment in full of all
interest accrued on such principal amount and not yet paid. Each prepayment
shall be subject, however, to the Company having given each Noteholder written
notice of such prepayment not more than 30 days and not less than five days
prior to the date fixed for such prepayment, in each case specifying (w) such
date, (x) the aggregate principal amount, if any, of (and the amount of unpaid
interest accrued on such principal amount), or the amount of unpaid interest
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on, the Series No. 1 Notes to be prepaid on such date, (y) the principal amount,
if any, of (and the amount of unpaid interest accrued on such principal amount),
or the amount of unpaid interest on, each Series No. 1 Note held by such
Noteholder to be prepaid on such date and (z) the Optional Redemption Price
applicable to such prepayment.
SECTION 4.4 Payment of Principal and Interest.
(a) Payment of Maturity. The Company will duly and punctually
pay the principal of and interest on the Series No. 1 Notes, and will
timely pay and perform all of its other Obligations, in accordance with
the terms of such Series No. 1 Notes, this Agreement and the other
Purchase Documents, and, without limitation of the foregoing, the
Company will, on the maturity of all Series No. 1 Notes (whether on
January 15, 2007 or by declaration (pursuant to Section 7.3) or
otherwise), make payment in full to the holders of the Series No. 1
Notes of the unpaid principal balance thereof, to the extent not sooner
paid or prepaid hereunder, together with all unpaid interest and fees
accrued thereon and all expenses, indemnities and other amounts then
due and payable under the terms of the Series No. 1 Notes, this
Agreement or the other Purchase Documents.
(b) Interest. The Series No. 1 Notes will bear interest, prior
to the occurrence of any Default pursuant to Section 7.1.1 relating to
the non-payment of principal of or interest on the Series No. 1 Notes,
at a rate of 12.0% per annum. Interest so accrued will be payable in
arrears on each Payment Date, commencing with July 15, 2000 and at
maturity; provided, that on any Payment Date on or prior to January 15,
2002, the Company may (in lieu of making any required cash payment of
interest on any outstanding Series No. 1 Notes) issue on such date, and
each Person then entitled to payment of interest shall accept, a Series
No. 1 Note (a "PIK Note") in a principal amount equal to the interest
owed to such Person on such Payment Date. All PIK Notes shall have a
maturity date of July 1, 2005. At any time when the Company shall have
defaulted in the payment when due (whether at maturity, or at a date
fixed for payment or prepayment or by declaration or otherwise) of
principal of or interest on the Series No. 1 Notes (and for so long as
such default shall continue), the Series No. 1 Notes will bear
interest, payable semi-annually as aforesaid or at the option of a
Noteholder on demand, at a rate equal to the sum of the foregoing rate
plus an additional 2% per annum on the entire unpaid balance of such
principal amount, on overdue premium, if any, and (to the extent
permitted by applicable law) on overdue interest.
SECTION 4.5 Allocation. Each partial prepayment paid or to be prepaid
of principal of the Series No. 1 Notes and each prepayment of interest paid or
to be prepaid shall be allocated (in integral multiples of $1,000) among all of
the Series No. 1 Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof. In the case of
each voluntary prepayment of principal of or interest on the Series No. 1 Notes,
the principal amount to be prepaid, if any, (together with interest on such
principal amount accrued to such date), or the amount of interest to be prepaid,
as the case may be, shall mature and become due and payable on the date fixed
for such prepayment. From and after the date of any such prepayment of
principal, unless the Company shall fail to pay such principal amount when so
due and payable, together with the interest, as aforesaid, interest on such
principal amount shall cease to accrue. Any Series No. 1 Note paid or prepaid in
full shall be surrendered to the Company and cancelled and shall not be
reissued, and no Series No. 1 Note shall be issued in lieu of any prepaid
principal amount of any Series No. 1 Note.
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SECTION 4.6 Mandatory Offer of Redemption of Series No. 1 Notes. Upon
the earliest to occur of:
(a) any Change of Control,
(b) the Company entering into any written or other arrangement
which will give rise to a Change of Control, or
(c) the Company having notice that any other Person has
entered into a written or other arrangement which will give rise to a
Change of Control,
the Company will promptly give written notice of such transaction or event to
each Noteholder, which notice shall describe such transaction or event in
reasonable detail. Within five (5) Business Days following the occurrence of any
Change of Control, the Company will offer to purchase from each Noteholder all
of the outstanding Series No. 1 Notes held by it at a purchase price, payable in
immediately available funds, equal to the Optional Redemption Price of the
unpaid principal amount thereof together with all unpaid interest accrued
thereon to the date of such purchase.
SECTION 4.7 Assignments by Noteholders. Each Noteholder may assign to
one or more financial institutions that are accredited investors all or a
portion of its rights and obligations under Series No. 1 Notes, this Agreement
and all other agreements executed in connection therewith (pursuant to the terms
and conditions of such agreements); provided, however, that in the case of each
such assignment of a Series No. 1 Note, the principal amount assigned shall be
equal to or greater than $1,000,000 or, if less, such Noteholder's entire amount
of its Series No. 1 Note(s); provided further, however, that such Noteholder
shall give the Company no less than five Business Days written notice of such
prospective assignment, upon the receipt of which the Company shall have three
Business Days to give such Noteholder written notice (the "Notice of
Redemption") stating that the Company shall redeem or prepay the portion of such
Series No. 1 Note(s) or portion to be assigned in accordance with Section 4.3
within ten Business Days after such Noteholder's receipt of the Notice of
Redemption. The parties to each such assignment shall execute and deliver to the
Company, for its recording in the register kept by it pursuant to Section 4.7.4,
an assignment and acceptance agreement (the "Assignment and Acceptance")
substantially in the form of Exhibit F hereto, together with any Series No. 1
Note or Series No. 1 Notes subject to such assignment.
SECTION 4.7.1 Consent to Certain Assignments. The consent of the
Company is not required for a Noteholder to assign all or a portion of the
rights and obligations under this Agreement, provided that (i) all conditions
set forth in Section 4.7 have been satisfied, and (ii) only Noteholders and
Institutional Holders may have any rights under this Agreement.
SECTION 4.7.2 Procedures. Upon any assignment of Series No. 1 Notes,
and the execution and delivery by any Noteholder of an Assignment and Acceptance
to the Company,
(a) the assignee thereunder shall, automatically and without
further action, become a party hereto and, to the extent that rights
and obligations hereunder or under any other Purchase Document have
been assigned to it pursuant to such Assignment and Acceptance, shall
have all rights, obligations and benefits of a Noteholder; and
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(b) the assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released (other
than the final paragraph of Section 6.1.1 which assignor shall continue
to be bound thereto) from its obligations under this Agreement and
under each other Purchase Document (and, in the case of an Assignment
and Acceptance covering all or the remaining portion of an assigning
Noteholder's rights and obligations under this Agreement, such
assigning Noteholder shall cease to be a party hereto; provided that
the obligations of the Company to such assigning Noteholder under
Sections 4.10, 8.3 and 8.4 with respect to events occurring or
obligations arising before such assignment shall survive such
assignment).
SECTION 4.7.3 Terms and Conditions. By executing and delivering an
Assignment and Acceptance, each of the assignor and assignee thereunder confirm
to and agree with each other and the other parties hereto as follows:
(a) other than as provided in such Assignment and Acceptance,
such assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any
other Purchase Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement,
the assigned Series No. 1 Note, any Purchase Document or any other
Instrument furnished pursuant hereto;
(b) such assigning Purchaser makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Company or any Subsidiary or the performance or
observance by any party hereto or thereto of any of its obligations
under this Agreement or any other Purchase Document or any other
Instrument furnished pursuant hereto;
(c) such assignee confirms that it has received a copy of this
Agreement, together with copies of the financial statements referred to
in Sections 5.4 and 6.1.1 (to the extent theretofore delivered) and
such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment
and Acceptance; and
(d) such assignee will, independently and without reliance
upon any Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement.
SECTION 4.7.4 Registration, Transfer, etc. The Company will keep at
its principal office a register in which the Company will provide for the
registration of the Series No. 1 Notes and their transfer. The Company may treat
the Person in whose name any Series No. 1 Note is registered on such register as
the owner thereof for the purpose of receiving payment of the principal of and
interest on such Series No. 1 Note and for all other purposes, whether or not
such Series No. 1 Note shall be overdue, and the Company shall not be affected
by any notice to the contrary from any Person other than the applicable
Noteholder. All references in this Agreement to a "holder" of any Series No. 1
Note shall mean the Person in whose name such Series No. 1 Note is at the time
registered on such register.
SECTION 4.8 Transfer and Exchange. Upon surrender of any Series No. 1
Note for registration of transfer or for exchange to the Company at its
principal office, the Company at its expense will execute and deliver in
exchange therefor a new Series No. 1 Note or Series No. 1 Notes, as the case
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may be, of the same class in denominations of at least $100,000 (except a Series
No. 1 Note may be issued in a lesser principal amount if the unpaid principal
amount of the surrendered Series No. 1 Note is not evenly divisible by, or is
less than, $100,000), as requested by the holder or transferee, which aggregate
the unpaid principal amount of such Series No. 1 Note, registered as such holder
or transferee may request, dated so that there will be no loss of interest on
such surrendered Series No. 1 Note and otherwise of like tenor.
SECTION 4.9 Replacement. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Series No. 1 Note and, in the case of any such loss, theft or destruction of any
Series No. 1 Note, upon delivery of an indemnity bond in such reasonable amount
as the Company may determine (or, in the case of any Series No. 1 Note or Series
No. 1 Notes held by the Purchaser or another Institutional Holder or the
Purchaser's nominee, of an unsecured indemnity agreement from the Purchaser or
such other holder reasonably satisfactory to the Company), or, in the case of
any such mutilation, upon the surrender of such Series No. 1 Note for
cancellation to the Company at its principal office, the Company at its expense
will execute and deliver, in lieu thereof, a new Series No. 1 Note of the same
class and of like tenor, dated so that there will be no loss of interest on (and
registered in the name of the holder of) such lost, stolen, destroyed or
mutilated Series No. 1 Note. Any Series No. 1 Note in lieu of which any such new
Series No. 1 Note has been so executed and delivered by the Company shall be
deemed to be not outstanding for any purpose of this Agreement.
SECTION 4.10 Taxes. Except as otherwise provided in this Section, all
payments by the Company of principal of, and interest on, the Series No. 1
Notes, and all other amounts payable hereunder shall be made free and clear of
and without deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other charges of
any nature whatsoever imposed by any taxing authority, excluding, however,
franchise taxes and taxes imposed on or measured by the Purchaser's or any other
Noteholder's net income or receipts (such non-excluded items being called
"Taxes"). In the event that any withholding or deduction from any payment to be
made by the Company hereunder is required in respect of any Taxes pursuant to
any Applicable Law, then, the Company will:
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Purchaser and each other
Noteholder an official receipt or other documentation satisfactory to
the Purchaser and each other Noteholder evidencing such payment to such
authority; and
(c) except as otherwise provided in this Section, pay to the
Purchaser and each other Noteholder such additional amount or amounts
as is necessary to ensure that the net amount actually received by each
Noteholder will equal the full amount such Noteholder would have
received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Purchaser or any
Noteholder with respect to any payment received by the Purchaser or such
Noteholder hereunder, the Purchaser or such Noteholder may pay such Taxes, and,
except as otherwise provided in this Section, upon receipt of written evidence
of such payment, the Company will promptly pay such additional amount (including
any penalties, interest or expenses) as is necessary in order that the net
amount received by the Purchaser or such Noteholder
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after the payment of such Taxes (including any Taxes on such additional amount)
shall equal the amount the Purchaser or such Noteholder would have received had
no such Taxes been asserted.
If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Purchaser and the other Noteholders
the required receipts or other required documentary evidence, the Company shall
indemnify the Purchaser and the other Noteholders for any incremental Taxes,
interest or penalties that may become payable by the Purchaser or any other
Noteholder as a result of any such failure. For purposes of this Section, a
distribution hereunder by the Purchaser or any other Noteholder to or for the
account of any Noteholder shall be deemed a payment by the Company.
The Purchaser shall provide to the Company on or prior to the due date
of the first payment under the Series No. 1 Notes, two original signed copies of
Internal Revenue Service Form 4224 or Form 1001 or any successor form certifying
to the Purchaser's entitlement to a complete exemption from United States
withholding tax with respect to payments of interest to be made under this
Agreement and under any Series No. 1 Note. Any Noteholder which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) for
U.S. Federal income tax purposes (a "Non-U.S. Noteholder") that becomes a
Noteholder under this Agreement after the Closing shall, upon the date of such
Noteholder becoming a Noteholder hereunder, provide to the Company two original
signed copies of Internal Revenue Service Form 4224 or Form 1001 or any
successor form certifying as to such Noteholder's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Series No. 1 Note;
provided, however, that if such Non-U.S. Noteholder is an Affiliate of the
Purchaser and is organized under the laws of the same jurisdiction as the
Purchaser, such Noteholder will only be required to deliver such forms
certifying as to such Noteholder's entitlement to the same exemption from such
withholding tax to which the Purchaser would be entitled with respect to such
payments as of such date. To the extent legally entitled to do so, on or before
the date any such form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form previously delivered by it
to the Company, and otherwise from time to time upon the reasonable written
request of the Company after the Closing, each Noteholder (including the
Purchaser) that is a Non-U.S. Noteholder will provide to the Company two
original signed copies of Internal Revenue Service Form 4224 or Form 1001 (or
any successor forms) certifying to such Noteholder's entitlement to an exemption
from United States withholding tax with respect to payments of interest to be
made under this Agreement and under any Series No. 1 Note.
Notwithstanding anything to the contrary contained in this Section, the
Company shall be entitled, to the extent it is required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or therein) from interest,
fees or other amounts payable hereunder for the account of any Noteholder that
is a Non-U.S. Noteholder and that has not provided to the Company the forms
required to be provided to the Company pursuant to the preceding paragraph, and
the Company shall have no obligation to pay any additional amount to a Non-U.S.
Noteholder with respect to such withheld amounts or with respect to Taxes
incurred by such Non-U.S. Noteholder to the extent such withholding would not
have been required or such Taxes would not have been incurred if such Non-U.S.
Noteholder would have provided such forms to the Company in the manner required
by the preceding paragraph.
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ARTICLE V
WARRANTIES, ETC.
To induce the Purchaser to enter into this Agreement and to purchase
the Subject Securities hereunder, the Company represents and warrants unto the
Purchaser as follows (and, for all purposes of this Agreement, all of such
representations and warranties shall be understood to be made by the Company on
(and only on) the date of execution and delivery of this Agreement by the
Company and the Closing Date (except to the extent specifically made as of
another date); provided, however, that (x) the representations in Sections 5.4
and 5.20 relative to any financial, other information or projections delivered
from time to time pursuant to this Agreement or any other Purchase Document
shall also be understood to be made with respect thereto on the date of delivery
thereof and (y) the representations in Sections 5.1, 5.2 and 5.3 relative to
each Subsidiary Guarantor shall also be understood to be made on the date when
such Subsidiary Guarantor executes and delivers a Subsidiary Guaranty pursuant
to clause (a) of Section 6.1.6.):
SECTION 5.1 Organization, Power, Authority, etc. Each Obligor is a
corporation duly incorporated and in good standing under the laws of the
jurisdiction of its incorporation and has full power and authority and holds all
requisite Approvals to own and hold its property and to conduct its business
substantially as currently conducted by it. The Company has full power and
authority to enter into and perform its obligations under this Agreement, the
Series No. 1 Notes, the other Subject Securities and each other Purchase
Document to which it is a party and to issue the Subject Securities (and any
Common Shares issuable upon exercise of any thereof), and each Subsidiary
Guarantor has full power and authority to enter into and perform its obligations
under the Subsidiary Guaranty and each other Purchase Document to which it is a
party.
SECTION 5.2 Due Authorization. The execution and delivery by the
Company of this Agreement, the Series No. 1 Notes and other Subject Securities
and each other Purchase Document to which it is a party, the performance by the
Company of its obligations hereunder and thereunder, and the issuance of the
Subject Securities (and the issuance of Common Shares issuable upon exercise of
any thereof) by the Company, and the execution and delivery by each Subsidiary
Guarantor of the Subsidiary Guaranty and each other Purchase Document to which
it is a party and the performance by each Subsidiary Guarantor of its
obligations thereunder, have been duly authorized by all necessary corporate
action, do not require any Approval, do not and will not conflict with, result
in any violation of, or constitute any default under, any provision of any
Organizational Document, any Applicable Law or Material Contract and will not
result in or require the creation or imposition of any Lien on any of its
properties pursuant to the provisions of any Material Contract (excluding,
however, pursuant to any Purchase Document).
SECTION 5.3 Validity, etc. This Agreement constitutes, and the Series
No. 1 Notes and other Subject Securities and each other Purchase Document to
which the Company is a party will on the due execution and delivery thereof
constitute, the legal, valid and binding obligations of the Company enforceable
in accordance with their respective terms, subject, however, as to enforcement
only, to bankruptcy, insolvency, reorganization, moratorium or similar laws at
the time in effect affecting the enforceability of the rights of creditors
generally and general equity principles (regardless of whether enforcement is
sought in a proceeding at law or in equity). The Subsidiary Guaranty and each
other Purchase Document to which each Subsidiary Guarantor is a party will on
the due execution and delivery
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thereof constitute the legal, valid and binding obligation of such Subsidiary
Guarantor enforceable in accordance with their respective terms, subject,
however, as to enforcement only, as aforesaid.
SECTION 5.4 Financial Information. All balance sheets, financial
statements and all other financial information which have been furnished by or
on behalf of the Company to the Purchaser for the purposes of or in connection
with this Agreement or any transaction contemplated hereby, including
(a) the audited consolidated balance sheet at December
31, 1998, and the related consolidated statement of operations, of
shareholders' equity and of cash flow for the fiscal year then ended,
of the Company and its Subsidiaries (the "1998 Audited Financial
Statements"), and
(b) the consolidated balance sheet at September 30, 1999,
and the related consolidated statements of operations, of shareholders'
equity and of cash flow for the three fiscal quarters then ended, of
the Company and its Subsidiaries (the "1999 Interim Financial
Statements"),
have been prepared in accordance with GAAP consistently applied throughout the
periods involved (except as disclosed therein) and present fairly the
consolidated financial condition of the corporations covered thereby as at the
dates thereof and the results of their operations for the periods then ended.
All financial information as to the Company and Subsidiaries which shall
hereafter from time to time be furnished by or on behalf of the Company to the
Purchaser and other Noteholders for the purposes of or in connection with this
Agreement or any transaction contemplated hereby will be prepared in accordance
with GAAP consistently applied throughout the periods involved (except as
disclosed therein) and will present fairly the consolidated financial condition
of the corporations covered thereby as at the dates thereof and the results of
their operations for the periods then ended except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
summary statements or may be condensed (subject, however, in the case of
unaudited interim statements, to normal year-end audit adjustments).
SECTION 5.5 Absence of Material Adverse Change. There have been
no occurrences, events or changed circumstances since December 31, 1998, other
than as disclosed in the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999 (excluding, however, the Transaction) which,
individually, as part of a series or in the aggregate, have had a Materially
Adverse Effect.
SECTION 5.6 Continuing Indebtedness. There is no long-term
Indebtedness of the Company and Subsidiaries on a consolidated basis expected to
be outstanding immediately after giving effect to the Transaction, except as
disclosed in Item 5.6 ("Ongoing Indebtedness") of the Disclosure Schedule.
SECTION 5.7 Contingencies. Neither the Company nor any Subsidiary has
any contingent liability for taxes, long-term leases or unusual forward or
long-term commitments or material unrealized or unanticipated losses from
unfavorable commitments which could reasonably be expected, individually or in
the aggregate, to have a Materially Adverse Effect and which are not reflected
in the financial statements described in clause (a) or (b) of Section 5.4 or in
the notes thereto.
SECTION 5.8 Litigation, etc. There is no pending or, to the Company's
Knowledge, threatened litigation, arbitration or governmental investigation or
proceeding against, or labor controversy affecting
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the Company or any Subsidiary or to which any of the properties, assets or
revenues of any thereof is subject (x) which could reasonably be expected,
individually or in the aggregate, to have a Materially Adverse Effect, except as
disclosed in Item 5.8 ("Litigation, etc.") of the Disclosure Schedule or (y)
which relates to the Transaction.
SECTION 5.9 Capitalization.
(a) On the Closing Date, the authorized Capital Stock of
the Company will be as set forth in Item 3.4 ("Capital Stock") of the
Disclosure Schedule and the number of Common Shares reserved for
issuance upon the exercise of
(i) any and all stock option plans or employee
ownership plans in respect of the Capital Stock of the Company
in existence on the Closing Date,
(ii) any warrants, other than the warrants issued in
connection with this Transaction; and
(iii) the conversion or exchange of all securities
convertible into or exchangeable for Common Shares,
respectively, is as set forth therein.
(b) The Common Shares to be issued to the Purchaser
pursuant to the Warrant will have been duly authorized for issuance
and, when sold and delivered against payment therefor as provided
herein and in the Warrant Agreement, will be validly issued, fully paid
and non-assessable and will be free and clear of all preemptive rights
and Liens except as otherwise provided herein and will be entitled to
the respective voting powers, designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof as are set forth with respect
thereto in the Certificate of Incorporation.
(c) The Company does not have outstanding any Capital Stock or
securities convertible into or exchangeable for any shares of its
Capital Stock, nor does it have outstanding any rights or options to
subscribe for or to purchase any Capital Stock or securities
convertible into or exchangeable for any of its shares of Capital
Stock, except as described in this Section. Except as disclosed in Item
5.9 ("Repurchase, etc. Agreements") of the Disclosure Schedule, the
Company is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its Capital
Stock.
(d) The aggregate amount of Common Shares issuable
pursuant to any warrants, options and other rights held by any
management employee of the Company or any Affiliate thereof for which
the exercise price thereof is equal to or greater than the market price
of such Common Shares on the Closing Date does not exceed 5% of the
aggregate outstanding Common Shares of the Company at the time of
calculation.
(e) Except for the Registration Agreement, the Warrant
Agreement, and the First Registration Agreement, and the registration
of existing stock options and stock options granted
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under the 1999 Stock Option Plan, none of the Company or any Subsidiary
has entered into an agreement to register any of its securities under
the Securities Act.
SECTION 5.10 Margin Regulations. The Company is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock, and less than 25%
of the assets of the Company, individually and on a consolidated basis with all
Subsidiaries, consists of margin stock. Terms for which meanings are provided in
F.R.S. Board Regulation U or any regulations substituted therefor, as from time
to time in effect, are used in this Section with such meanings.
SECTION 5.11 Government Regulation. Neither the Company nor any
Subsidiary is (or shall upon the consummation of the Transaction become) (x) an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or (y) subject to regulation under the Federal Power
Act, the Interstate Commerce Act, the Commodity Exchange Act or any Applicable
Law limiting its ability to incur or assume Indebtedness for borrowed money.
SECTION 5.12 Title to and Condition of Properties; Material Contracts.
Each of the Company and each Subsidiary (x) has good and marketable title to all
of the real property, and valid title to all of the personal properties and
other assets (tangible, intangible or mixed), which it purports to own (except
where failure would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect), free and clear of all Liens
(excluding, however, Liens permitted by Section 6.2.3) and (y) enjoys peaceful
and undisturbed possession under all leases to which it is a party as lessee
(excluding, however, leases the absence of which would not reasonably be
expected, individually or in the aggregate, to have a Materially Adverse
Effect). All Material Contracts to which the Company is a party are valid and
binding and in full force and effect, and no default has occurred or is
continuing thereunder except as disclosed on Item 5.12 ("Defaults") of the
Disclosure Schedule. No consent need be obtained from any Person (which is not
required by Article III to be obtained on or prior to the Closing Date) in
respect of any such Material Contract in connection with the Transaction which,
if not obtained, would reasonably be expected, individually or in the aggregate,
to have a Materially Adverse Effect.
SECTION 5.13 Patents, Trademarks, etc. The Company and Subsidiaries
own, or are licensed under, and have the rights to use, all material patents,
trademarks, trade names, copyrights, technology, recipes, know-how and processes
(collectively, "Intellectual Property") necessary for the conduct of their
businesses as currently conducted, and the consummation of the Transaction does
not alter or impair any such rights. Except as disclosed in Item 5.13 ("Patents,
Trademarks, etc.") of the Disclosure Schedule, there is no (x) claim which has
been asserted by any Person to the use of any Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement related thereto or (y) to the Company's Knowledge, valid basis for any
such claim or any claim that the use of such Intellectual Property by the
Company and Subsidiaries infringes or will infringe on the rights of any Person.
SECTION 5.14 Taxes. The Company and each of its Subsidiaries has
filed all material tax returns and reports required by Applicable Law to have
been filed by it and has paid all taxes and governmental charges thereby shown
to be owing, excluding, however, any such taxes or charges which
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are being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books.
SECTION 5.15 Pension and Welfare Plans. During the 12
consecutive-month period prior to the Closing Date, no steps have been taken to
terminate any Plan, and no contribution failure has occurred with respect to any
Plan sufficient to give rise to a Lien under section 302(f) of ERISA. No
condition exists or event or transaction has occurred with respect to any Plan
which might result in the incurrence by the Company or any member of the
Controlled Group of any material liability, fine or penalty. Except as disclosed
in Item 5.15 ("Employee Benefit Plans") of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries nor any member of the Controlled Group has
any contingent liability with respect to any post-retirement benefit under a
Plan, other than liability for continuation coverage described in Part 6 of
Title I of ERISA.
SECTION 5.16 Environmental Matters. Except as disclosed in Item 5.16
("Environmental Matters") of the Disclosure Schedule,
(a) to the Company's Knowledge all facilities and
property (including underlying groundwater) owned or leased by the
Company or any of its Subsidiaries are owned or leased by it in
material compliance with all Environmental Laws,
(b) there have been no unresolved past, and there are no
pending or, to the Company's Knowledge, threatened claims, complaints,
notices or requests for information received by the Company or any of
its Subsidiaries with respect to any alleged violation of any
Environmental Law, or complaints, notices or inquiries to the Company
or any of its Subsidiaries regarding potential liability under any
Environmental Law (collectively, "Environmental Claims"),
(c) to the Company's Knowledge there have been no
releases of Hazardous Materials at, on or under any property now or
previously owned or leased by the Company or any of its Subsidiaries,
(d) to the Company's Knowledge no property now or
previously owned or leased by the Company or any of its Subsidiaries is
listed or proposed for listing (with respect to owned property only) on
the National Priorities List pursuant to CERCLA, on the CERCLIS or on
any similar state list of sites requiring investigation or clean-up,
(e) none of the Company or any of its Subsidiaries has
received notice that the Company or any of its Subsidiaries is
potentially responsible for clean-up or other corrective action under
any Environmental Law,
(f) to the Company's Knowledge there are no underground
storage tanks, active or abandoned, including petroleum storage tanks,
on or under any property now or previously owned or leased by the
Company or any of its Subsidiaries,
(g) neither the Company nor any of its Subsidiaries has
directly transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or, to the Company's
Knowledge, proposed for listing on the National Priorities List
pursuant to
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CERCLA, on the CERCLIS or on any similar federal, state or provincial
list or which is the subject of federal, state, provincial or local
enforcement actions or other investigations which may lead to material
claims against the Company or any Subsidiary for any remedial work,
damage to natural resources or personal injury, including claims under
CERCLA,
(h) to the Company's Knowledge, there are no polychlorinated
biphenyls or friable asbestos present at any property now or previously
owned or leased by the Company or any of its Subsidiaries, and
(i) to the Company's Knowledge, no conditions exist at, on or
under any property now or previously owned or leased by the Company or
any of its Subsidiaries which, with the passage of time, or the giving
of notice or both, would give rise to liability under any Environmental
Law,
except, in any and all such cases, as would not reasonably be expected,
individually or in the aggregate, to have a Materially Adverse Effect.
SECTION 5.17 Year 2000 Problem. The Company has reviewed its
operations and those of its Subsidiaries with a view to assessing whether it or
its Subsidiaries' respective businesses will, in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
utilization of data, be vulnerable to a Year 2000 Problem. Based on such review,
the Company has no reason to believe that a Materially Adverse Effect will
result from a Year 2000 Problem.
SECTION 5.18 Solvency. The Transaction (including the issuance and
sale of the Series No. 1 Notes hereunder, the incurrence by the Company of the
Indebtedness represented by the Series No. 1 Notes and the application of the
proceeds of the issuance and sale of the Series No. 1 Notes), will not involve
or result in any fraudulent transfer or fraudulent conveyance under the
provisions of any applicable federal or state law respecting fraudulent
transfers or fraudulent conveyances. After giving effect to the Transaction, the
Company and each Subsidiary will be solvent.
SECTION 5.19 Subsidiaries, etc. As of the Closing Date,
(a) the Company will have no Subsidiaries and no other
Investments in any joint venture, partnership or other Person, except
as disclosed in Item 5.19 ("Subsidiaries, etc.") of the Disclosure
Schedule; and
(b) the Company will be the record and beneficial owner, free
of Liens, of 100% of the issued and outstanding Capital Stock of each
Subsidiary.
SECTION 5.20 Accuracy of Information. All factual information (and, for
the sake of clarity, not including any projections) heretofore or
contemporaneously furnished by or on behalf of the Company in writing to the
Purchaser for purposes of or in connection with the Transaction, including true
and complete copies thereof furnished to the Purchaser prior to the execution
and delivery of this Agreement, is collectively, and all other such factual
written information hereafter furnished by or on behalf of the Company to the
Purchaser or any Noteholder will be, in light of the circumstances under which
it was made, individually, true and accurate in every material respect taken as
a whole on the date as of which such written information is dated or certified,
and such information is not, or shall not be, as the case may be,
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incomplete on the date as of such information is dated or certified by omitting
to state any material fact necessary to make such information, in light of the
circumstances under which it was made, not misleading. There is, to the
Company's Knowledge, no fact that the Company has not disclosed to the Purchaser
in writing that would, individually or in the aggregate, reasonably be expected
to have a Materially Adverse Effect. All projections heretofore,
contemporaneously and hereafter furnished by or on behalf of the Company in
writing to the Purchaser for purposes of this Agreement or any transaction
contemplated hereby are and will be based on good faith estimates and
assumptions which the Company believes are fair and reasonable in light of the
historical financial performance of the Company and current and reasonably
foreseeable business conditions, and, to the Company's Knowledge, there are or
will be no facts or circumstances existing at the time such projections are
furnished which would, individually or in the aggregate, reasonably be expected
to cause a material change in such projections, it being recognized, however, by
the Purchaser that projections as to future events are not to be viewed as fact
and that actual results during the period or periods covered by any such
projections may differ from the projected results and that the differences may
be material.
SECTION 5.21 Offering of Subject Securities. Neither the Company, any
Subsidiary nor any Person employed to act on behalf of any thereof in connection
with the offer and sale of the Subject Securities has directly or indirectly
offered the Series No. 1 Notes, the Common Shares or any part thereof or any
similar securities for sale to, or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with, anyone
other than the Persons identified in Item 3.4 ("Capital Stock") of the
Disclosure Schedule. Neither the Company, nor anyone acting on behalf of it has
taken or will take any action which would subject the issuance or sale of the
Series No. 1 Notes or Common Shares to the provisions of Section 5 of the
Securities Act or to the registration or qualification requirements of any
securities or blue sky law of any applicable jurisdiction.
ARTICLE VI
COVENANTS
SECTION 6.1 Certain Affirmative Covenants. The Company agrees with:
(a) the Purchaser and each other Noteholder that, until all
Obligations have been paid and performed in full, the Company will
perform all of the covenants contained in Section 6.1;
(b) the Purchaser and each other Institutional Holder that,
for so long as either shall hold any Subject Security (other than a
Series No. 1 Note), the Company will perform the covenants contained in
clause (b) of Section 6.1.1 for the benefit of the Purchaser or such
Institutional Holder as if it were a Noteholder; and
(c) the Purchaser that, if at any time and for so long as (i)
the Purchaser shall hold any Subject Security (other than a Series No.
1 Note) and (ii) the Company is not subject to the reporting
requirements of Section 13 (d) or (g) of the Exchange Act, the Company
will perform the covenants contained in clauses (a) and (b) of Section
6.1.1 for the benefit of the Purchaser as if it were a Noteholder.
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SECTION 6.1.1 Financial Information, etc. The Company will furnish, or
will cause to be furnished, to the Purchaser and each other Noteholder copies of
the following financial statements, reports and information:
(a) promptly when available and in any event within 120 days
after the close of each Fiscal Year, (i) a consolidated balance sheet
as of the end of such Fiscal Year, and consolidated statements of
operations, of shareholders' equity and of cash flow for such Fiscal
Year, of the Company and Subsidiaries, prepared on a comparative basis
with the preceding Fiscal Year and audited by Ernst & Young, L.L.P. (or
other independent public accountants of recognized national standing
selected by the Company) and (ii) credit collection analyses on a
"static pool" basis together with all servicer reports for the last
Fiscal Quarter of such Fiscal Year prepared in connection with any
Securitization Transaction or warehouse financing;
(b) promptly when available and in any event within 60 days
after the close of each of the first three Fiscal Quarters of each
Fiscal Year, and certified by the chief accounting, executive or
financial officer of the Company, (i) consolidated balance sheets at
the close of such Fiscal Quarter, and the related consolidated
statements of operations, of shareholders' equity and of cash flow for
such Fiscal Quarter and for the period commencing at the close of the
previous Fiscal Year and ending with the close of such Fiscal Quarter,
of the Company and Subsidiaries (with comparative information at the
close of and for the corresponding Fiscal Quarter of the prior Fiscal
Year and for the corresponding portion of such prior Fiscal Year), (ii)
management discussion and analysis of such balance sheets and financial
statements and (iii) credit collection analyses on a "static pool"
basis together with all servicer reports for such Fiscal Quarter
prepared in connection with any Securitization Transaction or warehouse
financing;
(c) promptly when available and in any event within 30 days
after the close of each calendar month, and certified by the chief
accounting, executive or financial officer of the Company, (i)
consolidated balance sheets at the close of such calendar month, and
the related consolidated statements of operations, of shareholders'
equity and of cash flow for such calendar month and for the period
commencing at the close of the previous Fiscal Year and ending with the
close of such calendar month, of the Company and Subsidiaries (with
comparative information at the close of and for the corresponding
calendar month of the prior Fiscal Year and for the corresponding
portion of such prior Fiscal Year) and (ii) a copy of all Form 8-Ks
filed by the Company during such month, provided, that if at any time
and for so long as the Company is not subject to the reporting
requirements of Section 13 (d) or (g) of the Exchange Act, then the
Company, in lieu of furnishing such Form 8-Ks, will furnish such
information that would otherwise be required to be reported in such
Form 8-Ks;
(d) together with each set of financial statements delivered
from time to time as at the close of any Fiscal Year or Fiscal Quarter,
a certificate of the chief accounting, executive or financial officer
of the Company stating that to the best of such Officer's Knowledge no
Default had occurred or was continuing at the close of such Fiscal Year
or Fiscal Quarter, as the case may be, or, if a Default had occurred
and was continuing, a description thereof and a statement as to whether
it is continuing and as to what actions are being taken to cure it;
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(e) with ten (10) Business Days after approval thereof by the
Company's Board of Directors, the Company's budget as in effect for
such Fiscal Year substantially in the form approved by the Company's
Board of Directors;
(f) promptly after being made generally available to the
public by the Company, all press releases and statements delivered to
its shareholders concerning developments that are material; and
(g) such other information with respect to the financial
condition, business, property, assets, revenues and operations of the
Company or any Subsidiary as the Purchaser or the Required Noteholders
may from time to time reasonably request (including as to potentially
material environmental conditions to monitor compliance with Section
6.1.8).
For purposes of any financial statements delivered pursuant to clauses (a) and
(b), all Subsidiaries which are either direct Subsidiaries or Subsidiaries of
the same Subsidiary and which are not Subsidiary Guarantors may be treated
collectively on a consolidated basis.
The Purchaser and each other Noteholder and Institutional Holder
acknowledge that certain information provided to such parties pursuant to this
Agreement may consist of material nonpublic information regarding the Company,
and each such party acknowledges and agrees that it is aware (and that any
Person to whom any such information may be disclosed as permitted by this
Agreement has been, or upon receiving such information will be, advised) of the
restrictions imposed by federal and state securities laws on a Person possessing
material nonpublic information regarding an issuer of securities.
Notwithstanding any other provision in this Agreement, this paragraph shall
survive and continue to be binding against Purchaser, each other Noteholder and
Institutional Holder after any sale, conveyance, assignment or transfer by any
such Person of any Subject Security or the Warrants.
SECTION 6.1.2 Notice of Default, etc. The Company will furnish, or
will cause to be furnished, to the Purchaser and each other Noteholder prompt
notice (with a description in reasonable detail) of:
(a) the occurrence, to the Company's Knowledge, of any
Default;
(b) any steps by the Company or any other Person to terminate
any Plan, or the failure to make a required contribution to any Plan if
such failure is sufficient to give rise to a Lien under section 302(f)
of ERISA, or of any action with respect to a Plan which could result in
the requirement that the Company or any Subsidiary furnish a bond or
other security with the PBGC or such Plan, or any event with respect to
any Plan which could result in the incurrence by the Company or any
Subsidiary of any material liability, fine or penalty, or any material
increase in the Contingent Liability of the Company or any Subsidiary
with respect to any post-retirement Plan benefit, notice thereof and
copies of all documentation relating thereto; and
(c) material written claims, complaints, notices or inquiries
relating to compliance with Environmental Laws with respect to the
condition of any facilities and properties of the Company or any
Subsidiary.
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SECTION 6.1.3 Maintenance of Corporate Existence, etc. Except as
allowed under Section 6.2.7, the Company will cause to be done at all times all
things necessary to maintain and preserve the corporate existence of the Company
and each Material Subsidiary.
SECTION 6.1.4 Performance of Purchase Documents. The Company will, and
will cause each Subsidiary to, perform promptly and faithfully all of its
obligations under each Purchase Document.
SECTION 6.1.5 Books and Records. The Company will, and will cause each
Subsidiary to, keep books and records reflecting all of its business affairs and
transactions in accordance with GAAP and permit the Noteholders as a single
group or any representatives of all Noteholders (as appointed by the Required
Noteholders), at reasonable times and intervals and on reasonable prior notice,
to visit all of its offices, to discuss its financial matters with its officers
and independent public accountant (and hereby authorizes such independent public
accountant to discuss its financial matters with the Noteholders as a single
group or their aforementioned representatives whether or not any representative
of the Company is present) and to examine (and, at the reasonable expense of the
Company, photocopy extracts (such extracts to be identified by the Required
Noteholders or their authorized representatives with reasonable particularity)
from) any of its books or other corporate records. For so long as an Event of
Default exists and is continuing, the Company agrees to pay any reasonable fees
and out-of-pocket expenses of a single independent public accounting firm
representing all Noteholders (as appointed by the Required Noteholders)
reasonably incurred in connection with the Noteholders' exercise of their rights
pursuant to this Section.
SECTION 6.1.6 Subsidiary Guarantors. The Company will:
(a) concurrently with any Person (other than any
Securitization Subsidiary) becoming a Material Subsidiary, cause such
Material Subsidiary (x) to execute and deliver to the Purchaser a
guaranty agreement (as amended, supplemented and otherwise modified
from time to time, the "Subsidiary Guaranty") in substantially the form
of Exhibit D hereto and (y) to deliver to the Purchaser appropriately
completed certificates substantially in the form of Exhibits B and C
hereto; and
(b) except as allowed under Section 6.2.7, continue to own and
hold, free of Liens (other than Liens created by the Purchase
Documents), all of the outstanding shares of Capital Stock of each
Subsidiary.
SECTION 6.1.7 Payment of Taxes, etc. The Company will, and will cause
each Subsidiary to, pay and discharge, as the same may become due and payable,
all federal, state and local taxes, assessments, fees and other governmental
charges or levies against it or on any of its property, as well as claims of any
kind which, if unpaid, might become a material Lien upon any of its properties;
provided, however, that the foregoing shall not require the Company or any
Subsidiary to pay or discharge any such tax, assessment, fee, charge, levy or
Lien so long as it shall be diligently and promptly contesting the validity
thereof in good faith by appropriate proceedings and shall have set aside on its
books adequate reserves in accordance with GAAP with respect thereto.
SECTION 6.1.8 Environmental Conduct. The Company will, and will cause
each Subsidiary to, (x) use and operate all of its facilities and properties in
compliance with all Environmental Laws, (y) keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
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environmental matters in effect and remain in compliance therewith and (z)
handle all Hazardous Substances in compliance with all applicable Environmental
Laws; except, in each case, where the failure to comply with the terms of this
Section 6.1.8 could not reasonably be expected, individually or in the
aggregate, to have a Materially Adverse Effect.
SECTION 6.1.9 Use of Proceeds. The Company will lend the proceeds of
the Series No. 1 Notes to Midland. Midland will use such proceeds (a) to
purchase charged-off accounts and (b) for working capital and general corporate
purposes.
SECTION 6.1.10 Insurance. The Company will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained with responsible insurance
companies insurance with respect to its properties and business against such
casualties and contingencies and of such types and in such amounts as is
reasonable and customary in the case of similar businesses.
SECTION 6.1.11 Subsequent Note Issuance. The Company will, promptly
upon the issuance of any Indebtedness allowed under Section 6.2.2(b), amend this
Agreement (and each other Purchase Document to the extent required) to the
extent necessary to ensure that no holder of any such Indebtedness enjoys any
other terms and conditions in the aggregate that are more favorable than those
of any Noteholder hereunder (including interest rates and covenants).
SECTION 6.2 Certain Negative Covenants. The Company agrees with
(a) the Purchaser and each other Noteholder that, until all
Obligations have been paid and performed in full, the Company will
perform all of the covenants contained in this Section 6.2; and
(b) the Purchaser and each other Institutional Holder that,
for so long as either shall hold any Subject Security (other than a
Series No. 1 Note), the Company will perform the covenants contained in
Section 6.2.1, 6.2.7, and 6.2.11 for their benefit as if they were
Noteholders.
SECTION 6.2.1 Business Activities. The Company will not, and will not
permit any Subsidiary to, engage in any business activity, excluding, however,
its consummation of the Transaction, its performance from time to time of its
obligations under the Transaction Documents and its engaging in activities in
which the Company or its Subsidiaries are engaged on the Closing Date (which the
Purchaser acknowledges is the purchase, sale and servicing of charged-off
accounts, including, without limitation, Securitization Transactions and
Residual Transactions in connection therewith), and, in each case, activities or
lines of business incidental and related thereto and (ii) Investments permitted
pursuant to clause (f) of Section 6.2.6.
SECTION 6.2.2 Indebtedness. The Company will not, and will not permit
any Subsidiary to, create, incur, assume or suffer to exist or otherwise become
or be liable in respect of any Indebtedness other than:
(a) Indebtedness in respect of the Series No. 1 Notes and
other Obligations;
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(b) future Indebtedness of the Company in an aggregate
principal amount not to exceed $40,000,000 which Indebtedness is
incurred on terms and conditions substantially similar to those of this
Agreement; provided, that all proceeds of any such Indebtedness in
excess of $25,000,000 shall be used to permanently reduce the Bank of
America Indebtedness to the extent outstanding and, to the extent not
outstanding, to permanently reduce the availability of borrowings under
the Bank of America Credit Agreement;
(c) the Bank of America Indebtedness;
(d) other future non-recourse Indebtedness of the Company
or any Securitization Subsidiary, the proceeds of which are used for
the purpose of acquiring, financing or refinancing charged-off
accounts, and that is incurred by the Company or such Securitization
Subsidiary on terms and conditions customary to such Securitization
Transactions; provided, however, that the aggregate original principal
amount of such Indebtedness shall not, when incurred, exceed (i) in the
case of charged-off accounts that have not been subject to a prior
Securitization Transaction, 100% of the acquisition cost of the
accounts being financed or sold in connection with such Indebtedness
less 50% of the actual collections against such accounts, and (ii) in
the case of charged-off accounts that have been subject to a prior
Securitization Transaction, the aggregate outstanding principal balance
of the Indebtedness in such Securitization Transaction at the time such
charged-off accounts are released therefrom;
(e) other future Indebtedness of the Company or any Subsidiary
that is incurred by the Company or such Subsidiary (i) by releveraging
charged-off accounts owned by any Securitization Subsidiary or (ii) on
the basis of the Company's or such Subsidiary's equity interest in any
Securitization Subsidiary or residual or subordinate interest in any
Securitization Transaction (each a "Residual Transaction"); provided,
however, that no such Indebtedness shall be incurred unless the net
cash proceeds (taking into account payment of applicable Taxes) of such
Indebtedness are applied in accordance with Section 4.3;
(f) other future Indebtedness of the Company or any Subsidiary
that consists of warehouse financing of charged-off accounts; provided,
however, that the aggregate original principal amount of such
Indebtedness shall not, when incurred, exceed 100% of the acquisition
cost of the accounts being financed in connection with such
Indebtedness;
(g) Capitalized Lease Liabilities (i) incurred to finance the
acquisition of new assets, not to exceed $6,000,000 at any one time,
and (ii) incurred for any other purpose, not to exceed $300,000 at any
one time; and
(h) without duplication, Indebtedness disclosed on Item 5.6
("Ongoing Indebtedness") of the Disclosure Schedule;
provided, however, that, no Indebtedness otherwise permitted pursuant to any of
the foregoing clauses (excluding, however, clauses (a) and (b)) shall be
permitted if such Indebtedness is owing by the Company to a Subsidiary unless
such Indebtedness is expressly subordinated to the prior payment in full in cash
of all Obligations and is incurred on such terms and conditions consented to by
the Required Noteholders in their discretion.
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SECTION 6.2.3 Liens. The Company will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of its
property, revenues or assets, whether now owned or hereafter acquired, except:
(a) Liens securing the Obligations;
(b) Liens granted by the Company prior to the Closing Date to
secure the Bank of America Indebtedness as in effect on the Closing
Date;
(c) Liens granted by the Company to secure its obligations
under the Reimbursement Agreement;
(d) Liens granted by a Securitization Subsidiary to secure
Indebtedness allowed under clause (d) of Section 6.2.2; provided,
however, that no such Lien shall be granted except to create a security
interest in the specific charged-off accounts financed or purchased by
the beneficiary of such Lien;
(e) Liens granted by the Company or a Subsidiary to secure
Indebtedness allowed under clause (e) of Section 6.2.2; provided,
however, that no such Lien shall be granted except to create a security
interest in the equity interest in any Securitization Subsidiary or
residual interest in any Securitization Transaction;
(f) Liens granted by the Company or a Subsidiary to secure
Indebtedness allowed under clause (f) of Section 6.2.2; provided,
however, that no such Lien shall be granted except to create a security
interest in the specific charged-off accounts financed, refinanced or
purchased in connection with such warehouse financing; and
(g) Permitted Liens.
SECTION 6.2.4 Bank of America Credit Agreement. The Company will not,
and will not permit any Subsidiary to, materially amend, modify or consent to
any such material amendment or modification of, the Bank of America Credit
Agreement, without the prior written consent of the Required Noteholders which
shall not be unreasonably withheld, it being understood and agreed that, without
the consent of the Required Noteholders, the Bank of America Credit Agreement
may be extended or amended and restated without material departure from the
terms and conditions contained therein as of the Closing Date other than market
related changes in the interest rate.
SECTION 6.2.5 Restricted Payments, etc. On or after the Closing Date,
the Company will not, and will not permit any Subsidiary to, declare, pay, make,
apply any of its funds, property or assets to making or making any deposit to
fund any Restricted Payment.
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SECTION 6.2.6 Investments. The Company will not, and will not permit
any Subsidiary, other than a Securitization Subsidiary in a Securitization
Transaction, to, make any Investments, except:
(a) Investments of the Company in any Subsidiary Guarantor
that is a wholly-owned Subsidiary;
(b) Cash Equivalent Investments, excluding, however,
Investments described in clause (f) of the definition of Cash
Equivalent Investments.
(c) Investments made by way of the Company or any
wholly-owned Subsidiary of the Company acquiring not less than 51% of
the outstanding Capital Stock of any Person, if after giving effect
thereto, (x) no Default has occurred and is continuing and (y) such
Person becomes a Subsidiary Guarantor in accordance with Section 6.1.6;
(d) capital contributions to a Securitization Subsidiary
in connection with (i) the initial closing of any Securitization
Transaction, or (ii) any equity or reserve account funding required in
connection with the purchase of new charged-off accounts under any
warehouse financing;
(e) Investments made in connection with any Securitization
Transaction in an amount not greater than 15% of the original principal
balance of the Indebtedness incurred under such Securitization
Transaction; and
(f) additional Investments not to exceed an amount equal to
the product of (x) $500,000 multiplied by (y) a fraction, the numerator
of which equals $10,000,000 plus any Indebtedness incurred pursuant to
clause (b) of Section 6.2.2, and the denominator of which equals
$10,000,000.
SECTION 6.2.7 Consolidation, Merger, etc. The Company will
not, and will not permit any Subsidiary to,
(a) liquidate or dissolve, consolidate with, or merge into or
with, any other corporation or purchase or otherwise acquire all or
substantially all of the assets of any Person (or of any division
thereof); or
(b) sell, transfer, convey or otherwise dispose of all or any
substantial part of its assets, other than the sale of charged-off
accounts sold or otherwise disposed of by a Securitization Subsidiary
in connection with a Securitization Transaction;
provided, however, that
(c) any Subsidiary may liquidate or dissolve voluntarily into,
and may merge with and into, the Company or any other Subsidiary;
(d) so long as no Payment or Insolvency Default or Event of
Default has occurred and is continuing or would occur after giving
effect thereto, the Company or any Subsidiary may
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purchase or acquire all of the outstanding shares of Capital Stock of,
or substantially all of the assets of, any Person (or any division
thereof) and such purchase or acquisition complies with clause (c) of
Section 6.2.6; and
(e) any Subsidiary may merge with any other corporation permitted to be
acquired pursuant to clause (d) and may be created and capitalized for
such purposes.
SECTION 6.2.8 Rental Obligations. The Company will not, and will not
permit any Subsidiary to, enter into at any time after the Closing Date any
lease, except any lease (an "Operating Lease") which is not treated as a capital
lease in accordance with GAAP which, together with all other Operating Leases
then in effect, will not require the payment of an aggregate amount of rentals
by the Company and Subsidiaries in excess of $3,000,000 for any Fiscal Year.
SECTION 6.2.9 Take or Pay Contracts. Except in the ordinary course of
business and consistent with past practices, the Company will not, and will not
permit any Subsidiary to, enter into or be a party to any arrangement for the
purchase of materials, supplies, other property or services if such arrangement
by its express terms requires that payment be made by the Company or such
Subsidiary regardless of whether such materials, supplies, other property or
services are delivered or furnished to it.
SECTION 6.2.10 Negative Pledges, Upstream Restrictions, etc. The
Company will not, and will not permit any Subsidiary to, enter into any
agreement (excluding, however, this Agreement, the other Purchase Documents and
any agreement under which Indebtedness allowed under clause (b) of Section 6.2.2
is incurred) which expressly prohibits or restricts
(a) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter acquired
(excluding, however, (w) any agreement governing any Indebtedness
permitted by clauses (d), (e) or (f) of Section 6.2.2 as to the assets
financed with the proceeds of such Indebtedness, (x) customary
non-assignment provisions in operating leases entered into in the
ordinary course as to the leasehold interest created thereby, (y)
customary non-assignment provisions in contracts, to the extent such
provisions prohibit Liens on the rights under such contracts and (z)
Liens granted by Securitization Subsidiaries in connection with a
Securitization Transaction);
(b) the ability of the Company or any Subsidiary to amend or
otherwise modify, or to perform obligations under, this Agreement or
any other Purchase Document; or
(c) except as a part of a Residual Transaction, the ability of
any Subsidiary to make any payments, directly or indirectly, to the
Company by way of dividends, advances, repayments of loans or advances,
reimbursements of management and other intercompany charges, expenses
and accruals or other returns on Investments, or any other agreement or
arrangement which restricts the ability of any such Subsidiary to make
any payment, directly or indirectly, to the Company.
SECTION 6.2.11 Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, enter into, or cause, suffer or permit to
exist:
(a) any arrangement or contract with any of its other
Affiliates of a nature customarily entered into by Persons which are
Affiliates of each other (including management or
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similar contracts or arrangements relating to the allocation of
revenues, taxes and expenses or otherwise) requiring any payments to be
made by the Company or any Subsidiary to any Affiliate unless such
arrangement is fair and equitable to the Company or such Subsidiary; or
(b) any other transaction, arrangement or contract with any of
its other Affiliates which would not be entered into by a prudent
Person in the position of the Company or such Subsidiary with, or which
is on terms which are less favorable than are obtainable from, any
Person which is not one of its Affiliates;
provided, however, that this Section shall not be construed to restrict or
prohibit (i) execution and delivery of the Registration Agreement (ii) customary
provisions in Securitization Transactions and Residual Transactions (iii)
extensions, refinancings or renewals of the Bank of America Indebtedness, and
(iv) the purchase of any interest in the Series No. 1 Notes by any Affiliate of
the Company.
SECTION 6.2.12 Asset Dispositions, etc. The Company will not, and will
not permit any Subsidiary to, sell (including as part of a sale-leaseback
transaction), transfer, lease, contribute or otherwise convey, or grant options,
warrants or other rights with respect to, all or any substantial part of its
assets (including accounts receivable and capital stock of Subsidiaries) to any
Person, unless:
(a) such sale, transfer, lease, contribution or conveyance is
in the ordinary course of its business (including the disposition of
obsolete equipment and the sale of receivables); or
(b) the net book value of all assets sold, transferred,
leased, contributed or conveyed other than in the ordinary course of
business by the Company and the Subsidiaries during the same Fiscal
Year either (i) does not exceed $500,000 or (ii) the net proceeds above
such amount from such sale, transfer, lease, contribution or conveyance
are applied in accordance with Section 4.3; or
(c) such sale, transfer, lease, contribution or conveyance
consists of a sale or transfer of charged-off accounts by any
Subsidiary as in connection with any Securitization Transaction or the
incurrence of Indebtedness allowed under clause (d) of Section 6.2.2.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 Events of Default. The term "Event of Default" means any
of the following events:
SECTION 7.1.1 Non-Payment of Obligations. The Company shall default in
the payment or prepayment when due of any principal of any Series No. 1 Note,
or, within three (3) Business Days of the due date thereof, the Company shall
default in the payment of interest on any Series No. 1 Note or any other
Obligation.
SECTION 7.1.2 Default on Other Indebtedness. Any default shall occur
under the terms applicable to any recourse Indebtedness (excluding, however, any
Obligation) outstanding in a principal amount exceeding $500,000 of the Company
or any Subsidiary, in each case representing any borrowing
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or financing or arising under any other Material Contract, and such default (x)
shall consist of the failure to make any payment of principal or interest on, or
any redemption (or to make any required offer to redeem) of, such Indebtedness
when due (subject, however, to any applicable notice or grace period or if no
notice or grace period is provided, then the continuance of such failure for
five (5) Business Days after written notice of such failure is given by the
holder of such Indebtedness) in accordance with the terms thereof, or (y) shall
allow some or all of the holders of such Indebtedness to cause any or all of
such Indebtedness to become, or shall have resulted in any or all of such
Indebtedness having become, due and payable in accordance with its terms prior
to its stated maturity, whether by declaration or otherwise.
SECTION 7.1.3 Bankruptcy, Insolvency, etc. The Company or any
Subsidiary shall:
(a) become insolvent or generally fail to pay, or admit in
writing its inability to pay, debts as they become due;
(b) apply for, consent to or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for the Company or
any Subsidiary or any property of any thereof or make a general
assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Company or any
Subsidiary or for a substantial part of the property of any thereof,
and such trustee, receiver, sequestrator or other custodian shall not
be discharged within 60 days;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Company or any
Subsidiary, and, if such case or proceeding is not commenced by the
Company or such Subsidiary, such case or proceeding shall be consented
to or acquiesced in by the Company or such Subsidiary or shall result
in the entry of an order for relief or shall remain for 60 days
undismissed; or
(e) take any corporate action authorizing, or in furtherance
of, any of the foregoing.
SECTION 7.1.4 Breach of Warranty. Any warranty of the Company
hereunder or in any other Purchase Document or any other writing furnished by or
on behalf of the Company to the Purchaser or any other Noteholder for the
purposes of or in connection with this Agreement or any such Purchase Document
is or shall be incorrect when made in any material respect.
SECTION 7.1.5 Non-Performance of Certain Undertakings. The Company
shall default in the due performance and observation of any agreement contained
in Section 6.2.4, 6.2.5, 6.2.7, 6.2.9, 6.2.10, 6.2.11 or 6.2.12.
SECTION 7.1.6 Non-Performance of Other Undertakings.
(a) Any Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other
Purchase Document, and such default shall continue unremedied for a
period of 30 days after notice thereof shall have been given to the
Company by the Purchaser or the Required Noteholders.
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(b) The Company shall be removed as servicer in connection
with any securitization financing during the continuance of any event
of default thereunder.
SECTION 7.1.7 Judgments. A final judgment, to the extent not fully
covered by insurance, shall be rendered against the Company or any Subsidiary
and such judgment shall remain in force, undischarged, unsatisfied and unstayed
for more than 60 days, whether or not consecutive, and such judgment, together
with all other such outstanding final judgments against the Company and
Subsidiaries, exceeds (to the extent of all such uninsured portions) an
aggregate of $500,000.
SECTION 7.1.8 Pension Plans. Any of the following events shall occur
with respect to any Plan:
(a) the institution of any steps by the Company, any member of
its Controlled Group or any other Person to terminate a Plan if, as a
result of such termination, the Company or any such member could be
required to make a contribution to such Plan, or could reasonably
expect to incur a liability or obligation to such Plan, in excess of
$500,000; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.
SECTION 7.1.9 Clean Audit. The auditor's report that accompanies the
audited financial statements provided pursuant to clause (a) of Section 6.1.1
for any Fiscal Year other than Fiscal Year 2005 contains a "going concern"
qualification, unless such qualification is caused solely by reason of the
maturity of the Bank of America Indebtedness or the maturity of the Series No. 1
Notes, or (ii) reports an inability to opine on such financial statements.
SECTION 7.2 Action if Bankruptcy. If any Event of Default described
in clauses (a) through (d) of Section 7.1.3 shall occur, the outstanding
principal amount of all outstanding Series No. 1 Notes and all other Obligations
shall automatically be and become immediately due and payable, without notice or
demand.
SECTION 7.3 Action if Other Event of Default. If any Event of Default
(excluding, however, any Event of Default described in clauses (a) through (d)
of Section 7.1.3) shall occur for any reason, whether voluntary or involuntary,
and be continuing, the Required Noteholders may, upon notice or demand, declare
all or any portion of the outstanding principal amount of the Series No. 1 Notes
to be due and payable and any or all other Obligations to be due and payable,
whereupon the full unpaid amount of such Series No. 1 Notes and any and all
other Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment.
SECTION 7.4 Suits for Enforcement. If any Event of Default shall have
occurred and be continuing, the Required Noteholders may proceed to protect and
enforce the rights of the holders of such Series No. 1 Notes, either by suit in
equity or by action at law, or both, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the exercise of
any power granted in this Agreement, and may proceed to enforce the payment of
all sums due upon such Series No. 1 Notes, and such further amounts as shall be
sufficient to cover the costs and expenses of
48
collection (including reasonable counsel fees and disbursements), or to enforce
any other legal or equitable right of the holder of such Series No. 1 Notes.
SECTION 7.5 Remedies Cumulative. No remedy conferred in this Agreement
or in the other Purchase Documents upon the Noteholders is intended to be
exclusive of any other remedy and each and every such remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or otherwise.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Waivers, Amendments, etc. The provisions of this Agreement
and of each Purchase Document may from time to time be amended, waived or
otherwise modified, if such amendment, waiver or modification is in writing and
consented to by the Company and the Required Noteholders; provided, however,
that no such amendment, waiver or modification:
(a) which would modify any requirement hereunder that any
particular action be taken by each Noteholder or by the Required
Noteholders shall be effective unless consented to by each Noteholder
or the Required Noteholders, as the case may be; or
(b) which would modify this Section or change the definition
of "Required Noteholders" or which would extend the due date for, or
reduce the amount of, any payment or prepayment of principal of or
interest on any Series No. 1 Note (or reduce the rate of interest on
any Series No. 1 Note) shall be made without the consent of each
Noteholder.
No failure or delay on the part of the Purchaser or any other Noteholder in
exercising any power or right under this Agreement or any other Purchase
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
the Company in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Purchaser or any other
Noteholder under this Agreement or any other Purchase Document shall, except as
may be otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 8.2 Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Purchase Document shall be in
writing and addressed or delivered to it at its address set forth below its
signature hereto or at such other address as may be designated by such party in
a notice to the other parties. Any notice, if sent by mail or courier and
properly addressed and prepaid, shall be deemed given when received; any notice,
if transmitted by facsimile, shall be deemed given when transmitted and
electronically confirmed.
SECTION 8.3 Costs and Expenses. The Company agrees to pay all
reasonable out-of-pocket expenses of the Purchaser for the negotiation,
preparation, execution and delivery of this Agreement and each other Purchase
Document, including Schedules and Exhibits, and any amendments, waivers,
49
consents, supplements or other modifications to this Agreement, any other
Purchase Document, any Subject Security or the Registration Agreement as may
from time to time hereafter be required (including the reasonable fees and
expenses of counsel for the Purchaser from time to time incurred in connection
therewith), whether or not the Transaction is consummated, and to pay all
reasonable out-of-pocket expenses of the Purchaser (including reasonable fees
and expenses of counsel to the Purchaser) incurred in connection with the
preparation and review of the form of any Instrument relevant to this Agreement,
any other Purchase Document, any Subject Security or the Registration Agreement
and the consideration of legal questions relevant hereto and thereto or to any
enforcement or preservation of rights as to, or restructuring or "work-out" of,
any Obligations or the rights and preferences of any Subject Security. The
Company also agrees to reimburse the Noteholders upon demand for all reasonable
out-of-pocket expenses (including reasonable attorneys' fees and legal expenses
of a single law firm representing all Noteholders) incurred by the Noteholders
to enforce or to preserve rights as to, or to restructure or "work out", any
Obligations.
SECTION 8.4 Indemnification. In consideration of the execution and
delivery of this Agreement by the Purchaser, the Company hereby indemnifies,
exonerates and holds the Purchaser and each other Noteholder and each of their
respective officers, directors, employees, trustees and agents (the "Indemnified
Parties") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages and expenses actually
incurred in connection therewith (irrespective of whether such Indemnified Party
is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to:
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Series No. 1
Note,
(b) the entering into and performance of this Agreement and
any other Purchase Document by any of the Indemnified Parties
(including any action brought by or on behalf of the Company as the
result of any determination by the Purchaser pursuant to Article III to
not purchase the Subject Securities), or
(c) any investigation, litigation or proceeding related to the
Transaction,
excluding, however, any such Indemnified Liabilities arising for the account of
a particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct. If, and to the extent that, the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under Applicable Law.
SECTION 8.5 Survival. The obligations of the Company under clauses (b)
and (c) of Section 6.1 and clause (b) of Section 6.2 shall survive the payment
in full of all Obligations and the termination of any other provisions of this
Agreement or any other Purchase Document and shall continue for the benefit of
the Purchaser for so long as it shall hold any Subject Securities. The
obligations of the Company under Section 8.4 shall remain in full force and
effect, regardless of any investigation made by or on behalf of any Indemnified
Party, and the obligations of the Company under Sections 8.3 and 8.4 shall
survive the payment or prepayment of the Subject Securities, at maturity, upon
redemption or otherwise, any transfer of the Subject Securities by the
Purchaser, and any termination of this Agreement and the other Purchase
50
Documents. The representations and warranties made by the Company in this
Agreement and in each other Purchase Document shall survive the execution and
delivery of this Agreement and each such other Purchase Document.
SECTION 8.6 Severability. Any provision of this Agreement or any other
Purchase Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of this
Agreement or such Purchase Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 8.7 Headings. The various headings of this Agreement and of
each other Purchase Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such Purchase Document
or any provisions hereof or thereof.
SECTION 8.8 Counterparts. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be executed by the
Company and the Purchaser and be deemed to be an original and all of which shall
constitute together but one and the same agreement.
SECTION 8.9 Governing Law. This Agreement, the Series No. 1 Notes, the
Subsidiary Guaranty and each other Purchase Document shall each be deemed to be
a contract made under and governed by the internal laws of the State of New
York.
SECTION 8.10 JURISDICTION. FOR PURPOSE OF ANY ACTION OR PROCEEDING
INVOLVING THIS AGREEMENT OR ANY OTHER PURCHASE DOCUMENT, THE COMPANY HEREBY
EXPRESSLY SUBMITS TO THE JURISDICTION OF ALL FEDERAL AND STATE COURTS LOCATED IN
XXX XXXX XX XXX XXXX, XXXXX XX XXX XXXX AND CONSENTS THAT IT MAY BE SERVED WITH
ANY PROCESS OR PAPER BY REGISTERED MAIL OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF NEW YORK, PROVIDED A REASONABLE TIME FOR APPEARANCE IS ALLOWED.
SECTION 8.11 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) the Company may not assign or transfer its rights or
obligations hereunder without the prior written consent of all
Noteholders; and
(b) the rights of sale, assignment, and transfer of the Series
No. 1 Notes are subject to Section 4.7.
SECTION 8.12 WAIVER OF JURY TRIAL. THE PURCHASER AND THE COMPANY
HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER PURCHASE DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF THE PURCHASER OR THE COMPANY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PURCHASER ENTERING INTO THIS AGREEMENT.
[signature pages follow]
51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
MCM CAPITAL GROUP, INC.
By: /s/ Xxxxxx X. Xxx
---------------------------------
Name: Xxxxxx X. Xxx
Title: President
Address: 0000 Xxxx Xxxxxxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
Copy to: Xxxxxxx X. Xxxxx, Esq.
Squire, Xxxxxxx & Xxxxxxx LLP
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
ING (U.S.) CAPITAL LLC
By: /s/ Xxxxx Xxxxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: Vice President
Address: 00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxxx
Xxx Xxxxxxxxxx
Copy to: Xxxxx X. Xxxxxx, Esq.
Xxxxx, Xxxxx & Xxxxx
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Payments to: The Chase Manhattan Bank
(ABA No. 000000000)
Account No. 930 103 5763
S-1
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Confirmation to: Xxxxx X. Xxxxxxxxxx/Xxx Xxxxxxxxxx
2