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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-2
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period from _________ to ____________
Commission File Number 000-22681
FINANTRA CAPITAL, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 13-3571419
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(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
150 South Pine Island Road, Suite 500, Plantation, Florida 33324
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(Address of Principal Executive Offices)
(954) 577-9225
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(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Number of Shares Outstanding
Class on November 12, 1999
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Common Stock, par value $.01 per share 9,275,224 shares
Transitional Small Business Disclosure Format Yes No X
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This Amendment No. 2 to Form 10-QSB for Finantra Capital, Inc., a
Delaware corporation (the "Company"), for the quarterly period ended September
30, 1999 (the "September 1999 Form 10-QSB"), is being filed solely to include
those Exhibits which were not filed originally with the September 1999 Form
10-QSB. These Exhibits were noted originally as "To be filed by Amendment."
ITEM 6. EXHIBITS
No. Description
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3.1 Certificate of Designation, Rights and Preferences relating to
shares of the Company's Series C 6% Convertible Preferred
Stock.
10.1 Loan and Security Agreement, dated September 23, 1999, between
FINOVA and TAC, TLC and Trace, as amended.
10.2 Securities Purchase Agreement, dated as of November 5, 1999,
among the Company, Esquire Trade & Finance Inc., Austinvest
Anstalt Balzers, Nesher Inc., Amro International, S.A., Altra
Trading & Investment, S.A., The Gross Foundation, Libra
Finance, S.A., Talbiya B. Investments Ltd., Ellis Enterprises
and Ronald Nash.
10.3 Form of Preferred Warrant.
10.4 Loan and Security Agreement, dated as of November 5, 1999,
between Acquisition Co. and BHC.
10.5 Form of Travelers Warrant.
10.6 Form of Finantra Warrant.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this Amendment to Quarterly Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FINANTRA CAPITAL, INC.
Dated: March 17, 2000 By: /s/ Robert D. Press
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Robert D. Press, Chairman of the Board,
Chief Executive Officer and
Chief Financial Officer
(Principal Executive and Financial Officer)
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EXHIBIT INDEX
No. Description
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3.1 Certificate of Designation, Rights and Preferences relating to
shares of the Company's Series C 6% Convertible Preferred
Stock.
10.1 Loan and Security Agreement, dated September 23, 1999, between
FINOVA and TAC, TLC and Trace, as amended.
10.2 Securities Purchase Agreement, dated as of November 5, 1999,
among the Company, Esquire Trade & Finance Inc., Austinvest
Anstalt Balzers, Nesher Inc., Amro International, S.A., Altra
Trading & Investment, S.A., The Gross Foundation, Libra
Finance, S.A., Talbiya B. Investments Ltd., Ellis Enterprises
and Ronald Nash.
10.3 Form of Preferred Warrant.
10.4 Loan and Security Agreement, dated as of November 5, 1999,
between Acquisition Co. and BHC.
10.5 Form of Travelers Warrant.
10.6 Form of Finantra Warrant.
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Exhibit 3.1
CERTIFICATE OF DESIGNATION, POWERS,
PREFERENCES AND RIGHTS OF THE SERIES
OF
PREFERRED STOCK
OF
FINANTRA CAPITAL, INC.
TO BE DESIGNATED
6% SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151 (g) of the Delaware General Corporation Law,
we, the undersigned, Robert Press and Maynard Hellman, being respectively the
Vice President and Chairman of the Board of Directors and the Assistant
Secretary of Finantra Capital, Inc. (the "Company"), a Delaware corporation, DO
HEREBY CERTIFY that the following resolution was duly adopted by the Board of
Directors of the Company by unanimous written consent, and that said resolution
has not been rescinded or amended and is in full force and effect at the date
hereof:
RESOLVED, that, pursuant to authority expressly granted to and vested
in the Board of Directors by the provisions of the Certificate of Incorporation,
as amended to date. the Board of Directors hereby creates a series of Preferred
Stock of the Company, par value $.01 per share and having a stated value of
$1,000 per share, to be designated "6% Series C Cumulative Convertible Preferred
Stock" and to consist of Three Thousand Eight Hundred (3,800) shares, and hereby
fixes the powers, designations, preferences and relative, participating,
optional and other rights of the shares of such series, and the qualifications,
limitations, or restrictions thereof (in addition to those provisions set forth
in the Certificate of Incorporation, as amended, which are applicable to the 6%
Series C Cumulative Convertible Preferred Stock), as follows:
Section 1. Designation. Amount. Par Value, Stated Value and Rank. The
series of Preferred stock shall be designated as 6% Series C Cumulative
Convertible Preferred Stock (the "Series C Preferred Stock"), and the number of
shares so designated shall be 3,800 (which shall not be subject to increase
without the consent of the holders of the Series C Preferred Stock ("Holders")).
Each share of Series C Preferred Stock shall have a par value $.01 per share and
a stated value of $1,000 per share (the "Stated Value").
The Series C Preferred Stock shall rank senior to the Junior Securities
(as defined below) and pari passu to the Series A 10% Redeemable Convertible
Preferred Stock of the Company, (except to the extent certain holders thereof
have not consented to and waived the issuance of the Series C Preferred Stock
ranking pari passu to Stock Preferred Stock) and the Series B Convertible
Preferred Stock of the Company issued and outstanding on the Original Issue Date
as to distributions and upon liquidation. dissolution or winding up.
Section 2. Dividends.
(a) Amount of Dividends. The holders of Series C Preferred
Stock shall be entitled to receive, in preference to the holders of Common Stock
or any other Junior Securities, cumulative annual dividends at the annual rate
of 6% of the Stated Value in cash for each share of Series C Preferred Stock
held. Such dividends shall be payable as and when declared by the Board of
Directors out of the assets of the Company legally available for payment
thereof. Dividends shall be paid in cash. Dividends payable to holders of Series
C Preferred Stock. as aforesaid, whether or not declared by the Board of
Directors, shall accumulate from and after the date of original issuance of the
Series C Preferred Stock and shall be paid quarterly in arrears on the first
business day of January, April, July and October in each year (each, a "Dividend
Date"), commencing on January 1, 2000. Dividends will be payable to holders of
record as they appear on the stock books of the Company on the record date,
which will be the December 15, March 15, June 15 or September 15, as the case
may be' before the related Dividend Date.
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(b) Payment of Dividends on Common Stock and Junior Securities. No cash
dividends may be paid, or funds set apart for payment, on shares of any class of
Junior Securities until all accumulated dividends on the Series C Preferred
Stock have been paid in full or declared and funds set apart for payment thereof
in full. Additionally, the Company shall not declare or make any dividend or
distribution with respect to Common Stock, other than regular cash dividends or
dividends payable solely in shares of Common Stock, unless each holder of Series
C Preferred Stock concurrently receives dividends or distributions equal in
amount and in the same kind of property (whether cash, securities or other
property) as such holder would be entitled to receive if all of the outstanding
Series C Preferred Stock were converted into Common Stock as of the record date
of such dividend or distribution with respect to Common Stock. As used herein,
the term "regular cash dividends" shall mean any cash dividend publicly
characterized by the Board of Directors at the time of its declaration as a
regular dividend? whether payable on a quarterly, semi-annual or annual basis.
Section 3. Junior Securities. So long as any Series C Preferred Stock
shall remain outstanding, neither the Company nor any subsidiary thereof shall
redeem. purchase or otherwise acquire otherwise than upon conversion or exchange
directly or indirectly any Junior Securities, nor shall the Company directly or
indirectly pay or declare any dividend or make any distribution (other than a
dividend or distribution described in Section 6) upon, nor shall any
distribution be made in respect of, any Junior Securities, nor shall any monies
be set aside for or applied to the purchase or redemption (through a sinking
fund or otherwise) of any Junior Securities.
Section 4. Voting Rights. The holders of Series C Preferred Stock shall
have no right to vote, except as otherwise required by Delaware law. However, so
long as any shares of Series C Preferred Stock are outstanding, the Company
shall not and shall cause its subsidiaries not to, without the written consent
of the holders of 66 2/3% of the shares of the Series C Preferred Stock then
outstanding, (a) amend, alter or change the preferences or rights of any series
or class of capital stock of the Company (including the Series C Preferred
Stock) or the qualifications, limitations or restrictions thereof if such
amendment, alteration or change adversely affects the powers, preferences or
rights given to the Series C Preferred Stock, (b) alter or amend this
Certificate of Designation, (c) authorize or create any class or series of any
class of capital stock ranking as to distribution of assets upon a Liquidation
(as defined in Section 5) or otherwise senior to the Series C Preferred Stock,
(d) amend its Certificate of Incorporation, bylaws or other organizational
documents so as to affect adversely any rights of any Holders, (e) increase the
authorized number of shares of Series C Preferred Stock, and (f) enter into any
agreement with respect to the foregoing.
Section 5. Liquidation. Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a "Liquidation"), the Holders
shall be entitled to receive out of the assets of the Company, whether such
assets are capital or surplus, for each share of Series C Preferred Stock an
amount equal to the Stated Value before any distribution or payment shall be
made to the holders of any Junior Securities, and if the assets of the Company
shall be insufficient to pay in full such amounts, then the entire assets to be
distributed to the holders of Series C Preferred Stock shall be distributed
among the holders of Series C Preferred Stock and the holders of all securities
ranking pari passu to the Series C Preferred Stock ratably in accordance with
the respective amounts that would be payable on such shares if all amounts
payable thereon were paid in full. A sale, conveyance or disposition of all or
substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which more than
50% of the voting power of the Company is disposed of, or a consolidation or
merger of the Company with or into any other company or companies shall not be
treated as a Liquidation' but instead shall be subject to the provisions of
Section 6(c)(vii). The Company shall mail written notice of any such
Liquidation, not less than 45 days prior to the payment date stated therein, to
each record holder of Series C Preferred Stock.
Section 6. Conversion.
(a) (i) Each share of Series C Preferred Stock shall be
convertible into
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shares of Common Stock (subject to Section 6(a)(ii) and Section 6(a)(iii)) at
the Conversion Ratio (as defined in Section 9) at the option of the Holder in
whole or in part at any time after the Original Issue Date. The Holders shall
effect conversions by surrendering the certificate or certificates representing
the shares of Series C Preferred Stock to be converted to the Company, together
with the form of conversion notice attached hereto as Exhibit A (the "Conversion
Notice"). Each Conversion Notice shall specify the number of shares of Series C
Preferred Stock to be converted. The date on which such conversion is to be
effected shall be the date the Holder delivers such Conversion Notice by
facsimile (the "Conversion Date"). Subject to Sections 6(a)(ii) and 6(b) hereof,
each Conversion Notice, once given, shall be irrevocable. If the Holder is
converting less than all shares of Series C Preferred Stock represented by the
certificate or certificates tendered by the Holder with the Conversion Notice,
or if a conversion hereunder cannot be effected in full for any reason, the
Company shall promptly deliver to such Holder (in the manner and within the time
set forth in Section 6(b)) a certificate for such number of shares as have not
been connverted.
(ii) If on the Conversion Date applicable ~o any conversion,
(A) the Common Stock is then listed or quoted for trading on the Nasdaq National
Market, the New York Stock Exchange, the American Stock Exchance or The Nasdaq
Small Cap Market, (B) the Conversion Price then in effect is such that the
aggregate number of shares of Common Stock that would then be issuable upon
conversion of all outstanding shares of Series C Preferred Stock, together with
any shares of Common Stock previously issued upon conversion of Series C
Preferred Stock, would equal or exceed 20% of the number of shares of Common
Stock outstanding on the Original Issue Date (the "Issuable Maximum"), and (C)
the Company has not previously obtained, if so required (or attempted pursuant
to clause (1) of this subsection to obtain) Shareholder Approval (as defined
below), then the Company shall issue to any Holder so requesting conversion of
Series C Preferred Stock its pro rata portion of the Issuable Maximum in the
same ratio that the number of shares of Series C Preferred Stock held by any
such Holder bears to all shares of Series C Preferred Stock then outstanding
and, with respect to any shares of Common Stock that otherwise would have been
issuable to such Holder in respect of the Conversion Notice at issue in excess
of the Issuable Maximum (the "Remaining Shares"), the Company shall, if so
required, at the Holder's request, (x) as promptly as possible but in no event
later than 45 days after such Conversion Date, convene a meeting of the holders
of the Common Stock and use its best efforts to obtain the Shareholder Approval
or a waiver of such approval from The Nasdaq Stock Market or the appropriate
exchange, and (y)(l) as promptly as possible from time to time, after a written
request by the Holder, issue shares of Common Stock at a Conversion Price equal
to the Per Share Market Value on the Trading Day immediately preceding the date
of such request for all or a portion of the Remaining Shares (plus any and all
accumulated and unpaid dividends) held by such Holder (whether or not subject to
the Conversion Notice specified above) or (2) as promptly as possible, but in
any event within five Trading Days after a request by the Holder, redeem all or
a portion of the Remaining Shares (plus any and all accumulated and unpaid
dividends) to which such Conversion Notice applies. for an amount, paid in cash,
equal to the greater of (A) the Stated Value of such Remaining Shares, plus any
and all accumulated and unpaid dividends, multiplied by 120%, or (B) the
applicable Conversion Ratio as of the Conversion Date multiplied by the average
Per Share Market Value for the five Trading Days immediately preceding the
Conversion Date or the date of payment, whichever is greater. If the Holder has
requested that the Company redeem shares of Series C Preferred Stock pursuant to
this Section and the Company fails for any reason to pay the redemption price,
as calculated pursuant to the immediately preceding sentence, within seven days
after such notice is deemed delivered pursuant to the preceding sentence, the
Company will pay interest on the redemption price at a rate of 15% per annum, in
cash to such Holder, accruing from such seventh day until the redemption price
and any accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). "Shareholder Approval" means the
approval by a majority of the total votes cast on the proposal, in person or by
proxy, at a meeting of the shareholders of the Company held in accordance with
the Company's Certificate of Incorporation and bylaws, of the issuance by the
Company of shares of Common Stock exceeding the Issuable Maximum as a
consequence of the conversion of Series C Preferred Stock into Common Stock at a
price less than the greater of the book or market value on the
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Original Issue Date as and to the extent required pursuant to the rules of the
appropriate exchange or market.
(iii) In no event shall a Holder be permitted to convert any
shares of Series C Preferred Stock in excess of the number of such shares upon
the conversion of which, (x) the number of shares of Common Stock owned by such
Holder (other than shares of Common Stock issuable upon conversion of shares of
Series C Preferred Stock or upon the exercise of Warrants (as defined in the
Purchase Agreement)) plus (y) the number of shares of Common Stock issuable upon
such conversion of such shares of Series C Preferred Stock, would be equal to or
exceed (z) 9.999% of the number of shares of Common Stock then issued and
outstanding, including shares issuable on conversion of the Series C Preferred
Stock held by such Holder after application of this Section 6(a)(iii). As used
herein, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations thereunder. To the
extent that the limitation contained in this Section 6(a)(iii) applies, the
determination of whether shares of Series C Preferred Stock are convertible (in
relation to other securities owned by a Holder) and of which shares of Series C
Preferred Stock are convertible shall be in the sole discretion of such Holder,
and the submission of shares of Series C Preferred Stock for conversion shall be
deemed to be such Holder's determination of whether such shares of Series C
Preferred Stock are convertible (in relation to other securities owned by a
Holder) and of which shares of Series C Preferred Stock are convertible, in each
case subject to such aggregate percentage limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of a Holder to convert
such shares of Series C Preferred Stock at such time as such conversion will not
violate the provisions of this paragraph. The provisions of this Section
6(a)(iii) may be waived by a Holder of Series C Preferred Stock as to itself
(and solely as to itself) upon not less than 75 days prior notice to the
Company, and the provisions of this Section 6(a)(iii) shall continue to apply
until such 75th day (or later, if stated in the notice of waiver). No conversion
in violation of this paragraph but otherwise in accordance with this Certificate
of Designation shall affect the status of the securities issued upon such
conversion as validly issued, fully-paid and nonassessable.
(b) (i) Not later than five (5) Trading Days after any
Conversion Date. the Company will deliver to the applicable Holder by express
courier (A) a certificate or certificates which shall be free of restrictive
legends and trading restrictions (other than those required by Section 3.1(b) of
the Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of shares of Series C Preferred Stock (subject to
reduction pursuant to Section 6(a)(ii) and Section 6(a)(ii )), and (B) one or
more certificates representing the number of shares of Series C Preferred Stock
not converted. If in the case of any Conversion Notice such certificate or
certificates are not delivered to or as directed by the applicable Holder by the
fifth Trading Day after the Conversion Date (the "Delivery Date"), the holder
shall be entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Company shall immediately return the certificates
representing the shares of Series C Preferred Stock tendered for conversion,
whereupon the Company and the Holder shall each be restored to their respective
positions immediately prior to the delivery of such notice of revocation, except
that any amounts described in Sections 6(b)(ii) and (iii) shall be payable
through the date notice of rescission is given to the Company.
(ii) The Company understands that a delay in the delivery of
the shares of Common Stock upon conversion of shares of Series C Preferred Stock
and failure to deliver certificates representing the unconverted shares of
Series C Preferred Stock beyond the Delivery Date could result in economic loss
to the Holder. If the Company fails to deliver to the Holder such certificate or
certificates pursuant to this Section hereunder by the Delivery Date, the
Company shall pay to such Holder, in cash, an amount per Trading Day for each
Trading Day until the earlier of the date such certificates are delivered or the
date the conversion is rescinded pursuant to Section 6(b)(i) above, together
with interest on such amount at a rate of 15% per annum, accruing until such
amount and any accrued interest thereon is paid in full, equal to (i) 1% of the
Stated Value of the shares of Series C Preferred
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Stock requested to be converted for the first five Trading Days after the
Delivery Date and (ii) 2% of the Stated Value of the shares of Series C
Preferred Stock requested to be converted for each Trading Day thereafter (which
amounts shall be paid as liquidated damages and not as a penalty). Nothing
herein shall limit a Holder's right to pursue actual damages for the Company's
failure to deliver certificates representing shares of Common Stock upon
conversion within the period specified herein (including, without limitation,
damages relating to any purchase of shares of Common Stock by such Holder to
make delivery on a sale effected in anticipation of receiving certificates
representing shares of Common Stock upon conversion, as provided in Section
6(b)(iii) below), and such Holder shall have the right to pursue all remedies
available to it at law or in equity (including, without limitation, a decree of
specific performance and/or injunctive relief).
(iii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 6(b)(i) by the Delivery Date and if after the Delivery Date
the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Holder of the
Underlying Shares which the Holder anticipated receiving upon such conversion (a
"Buy-In"), then the Company shall pay in cash to the Holder (in addition to any
remedies available to or elected by the Holder) the amount by which (A) the
Holder's total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (B) the aggregate Stated Value of
the shares of Series C Preferred Stock for which such conversion was not timely
honored, together with interest thereon at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). For example, if the
Holder purchases shares of Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted conversion of $10,000 aggregate
Stated Value of the shares of Series C Preferred Stock, the Company shall be
required to pay the Holder $1,000, plus interest. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In..
(c) (i) Prior to the 180th day following the Original Issue
Date, the conversion price for each share of Series C Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be an amount equal to
the average Per Share Market Value for the three consecutive Trading Days
immediately prior to the Original Issue Date (the "Initial Conversion Price").
On and after the l 80'h day following the Original Issue Date. the Conversion
Price for each share of Series C Preferred Stock in effect on any Conversion
Date shall be the lesser of (A) the Initial Conversion Price and (B) an amount
equal to 80% of the Per Share Market Value for the Trading Day prior to the
Conversion Date, except that if during any period (a "Black-out Period"), a
Holder is unable to trade any Common Stock issued or issuable upon conversion of
Series C Preferred Stock immediately due to the postponement of filing or delay
or suspension of effectiveness of a registration statement or because the
Company has otherwise informed such Holder that an existing prospectus cannot be
used at that time in the sale or transfer of such Common Stock, such Holder
shall have the option but not the obligation on any Conversion Date within ten
Trading Days following the expiration of the Black-out Period of using the
Conversion Price applicable on such Conversion Date or any Conversion Price
selected by such Holder that would have been applicable had such Conversion Date
been at any earlier time during the Black-out Period or within the ten Trading
Days thereafter.
(ii) If the Company, at any time while any shares of Series C
Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise
make a distribution or distributions on shares of its Common Stock or any other
equity security payable in shares of Common Stock. (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine outstanding
shares of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Company, the Initial Conversion Price shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 6(c)(ii) shall
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become effective immediately after the record date for the determination of
shareholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Company, at any time while any shares of Series C
Preferred Stock are outstanding, shall sell or issue additional shares of Common
Stock or rights or warrants to acquire shares of Common Stock at a price per
share less than the Per Share Market Value at the record date mentioned below,
excluding any rights of the holders of Series C Preferred Stock or the holders
of the Warrants issued pursuant to the Purchase Agreement to acquire Common
Stock and shares of Common Stock issuable pursuant to agreements filed by the
Company as exhibits to its reports filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, the Initial
Conversion Price shall be multiplied by a fraction, of which the denominator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such shares, rights or warrants plus
the number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares. if any) outstanding on the date of issuance of
such shares, rights or warrants plus the number of shares which the aggregate
offering price of the total number of shares so offered would purchase at such
Per Share Market Value. Such adjustment shall be made whenever such shares,
rights or warrants are issued, and shall become effective immediately after the
issuance of such shares, rights or warrants or, if such rights or warrants are
issued to shareholders of the Company. the record date for the determination of
shareholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Initial Conversion Price pursuant to this
Section 6(c)(iii). if any such right or warrant shall expire and shall not have
been exercised, the Initial Conversion Price shall immediately upon such
expiration be re-computed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Initial Conversion Price made pursuant to the provisions of
this Section 6 after the issuance of such rights or warrants) had the adjustment
of the Initial Conversion Price made upon the issuance of such rights or
warrants been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
such rights or warrants actually exercised.
(iv) If the Company, at any time while shares of Series C
Preferred Stock are outstanding, shall distribute to all holders of Common Stock
(and not to holders of Series C Preferred Stock) evidences of its indebtedness
or assets or rights or warrants to subscribe for or purchase any security
(excluding those referred to in Sections 6(c)(ii) and (iii) above), then in each
such case the Initial Conversion Price shall be determined by multiplying the
Initial Conversion Price in effect immediately prior to the record date fixed
for determination of shareholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value determined
as of the record date mentioned above, and of which the numerator shall be such
Per Share Market Value on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Board of Directors in good faith; provided, however, that in the event of a
distribution exceeding ten percent of the net assets of the Company, such fair
market value shall be determined by an Independent Appraiser (as defined below)
selected in good faith by the holders of a majority in interest of the shares of
Series C Preferred Stock then outstanding; and provided, further, that the
Company, after receipt of the determination by such Independent Appraiser shall
have the right to select an additional Independent Appraiser, in good faith, in
which case the fair market value shall be equal to the average of the
determinations by each such Independent Appraiser. In either case the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(v) All calculations under this Section 6 shall be made to the
nearest
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cent or the nearest 1/100th of a share. as the case may be.
(vi) Whenever the Initial Conversion Price is adjusted
pursuant to Section 6(c)(ii),(iii) or (iv) (for purposes of this Section
6(c)(vi), each an "adjustment"), the Company shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth. in reasonable
detail, the event requiring the adjustment, the amount of the adjustment. the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder)? and the Initial
Conversion Price after giving effect to such adjustment, and shall cause copies
of such certificate to be delivered to each Holder promptly after each
adjustment. Any dispute between the Company and the Holders with respect to the
matters set forth in such certificate may at the option of the Holders be
submitted to one of the national accounting firms currently known as the "big
five" selected by the holders of a majority in interest of the shares of Series
C Preferred Stock then outstanding, provided that the Company shall have ten
days after receipt of notice from such Holders of their selection of such firm
to object thereto, in which case the holders of a majority in interest of the
shares of Series C Preferred Stock then outstanding shall select another such
firm and the Company shall have no such right of objection. The firm selected by
the holders of a majority in interest of the shares of Series C Preferred Stock
then outstanding as provided in the preceding sentence shall be instructed to
deliver a written opinion as to such matters to the Company and the Holders
within thirty days after submission to it of such dispute. Such opinion shall be
final and binding on the parties hereto. The fees and expenses of such
accounting firm shall be paid by the Company.
(vii) In case the Company after the Original Issue Date shall
do any of the following (each, a "Triggering Event") (a) consolidate with or
merge into any other person and the Company shall not be the continuing or
surviving person of such consolidation or merger. or (b) permit any other person
to consolidate with or merge into the Company and the Company shall be the
continuing or surviving person but, in connection with such consolidation or
merger. any capital stock of the Company shall be changed into or exchanged for
securities of any other person or cash or any other property, or (c) transfer
all or substantially all of its properties or assets to any other person, or (d)
effect a capital reorganization or reclassification of its capital stock, the
holders of the Series C Preferred Stock then outstanding shall have the right
thereafter to convert such shares only into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such Triggering Event, and the holders of the Series C
Preferred Stock shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the Company
into which such shares of Series C Preferred Stock could have been converted
immediately prior to such Triggering Event would have been entitled; provided,
however. that each Holder shall have the option to require the Company to
redeem, from funds legally available therefor at the time of such redemption,
shares of Series C Preferred Stock at a price equal to the Stated Value of the
shares of Series C Preferred Stock to be redeemed, plus any and all accumulated
and unpaid dividends thereon. (i) multiplied by the average Per Share Market
Value for the five Trading Days immediately preceding (1) the effective date,
the date of the closing or the date of the announcement, as the case may be, of
the Triggering Event triggering such redemption right or (2) the date of payment
in full by the Company of the redemption price hereunder, whichever is greater,
and (ii) divided by the Conversion Price calculated on the date of the closing
or the effective date, as the case may be, of the Triggering Event triggering
such redemption right, as the case may be. The entire redemption price shall be
paid in cash If the Holder has requested that the Company redeem shares of
Series C Preferred Stock pursuant to this Section 6(c)(vii) and the Company
fails for any reason to pay the redemption price. as calculated pursuant to the
immediately preceding sentence, within five Trading Days after such notice is
deemed delivered pursuant to the preceding sentence, the Company will pay
interest on the redemption price at a rate of 15% per annum, in cash to such
Holder. accruing from such seventh day until the redemption price and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty) The terms of any such Triggering Event
shall include such terms so as to continue to give to the holder of Series C
Preferred Stock the right to receive the securities, cash or property set forth
in this Section
-7-
<PAGE>
6(c)(vii) upon any conversion following such Triggering Event. This provision
shall similarly apply to successive Triggering Events.
(viii) If:
A. the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
C. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital
stock of any class or of any rights; or
D. the approval of any shareholders of the Company
shall be required in connection with any
Triggering Event; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding
up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Series C Preferred Stock, and shall cause to be
mailed to the Holders of Series C Preferred Stock at their last addresses as
they shall appear upon the stock books of the Company, at least 30 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend. distribution, redemption, rights or warrants. or if a record is not to
be taken. the date as of which the holders of Common Stock of record to be
entitled to such dividend. distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification? consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert shares of Series C Preferred
Stock during the 30-day period commencing the date of such notice to the
effective date of the event triggering such notice.
(d) If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are not
adequately covered by the other provisions hereof and which might materially and
adversely affect the rights of the holders of Series C Preferred Stock
(different than or distinguished from the effect generally on rights of holders
of any class of the Company's capital stock) or if at any time any such
conditions are expected to arise by reason of any action contemplated by the
Company, the Company shall mail a written notice briefly describing the action
contemplated and the material adverse effects of such action on the rights of
the holders of Series C Preferred Stock at least 10 calendar days prior to the
effective date of such action, and an Independent Appraiser selected bv the
holders of majority in interest of the Series C Preferred Stock shall give its
opinion as to the adjustment. if any (nor inconsistent with the standards
established in this Section 6), of the Conversion Price (including. if
necessary, any adjustment as to the securities into which shares of Series C
Preferred Stock may thereafter be convertible) and any distribution which is or
would be required to preserve without diluting the rights of the holders of
shares of Series C Preferred Stock. The Board of Directors shall make the
adjustment recommended forthwith upon the receipt of such opinion or opinions or
the taking of any such action contemplated, as the case may be; provided,
however, that no such adjustment of the Conversion Price shall be made which in
the opinion of the Independent Appraiser giving the
-8-
<PAGE>
aforesaid opinion would result in an increase of the Conversion Price to more
than the Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued Common Stock solely for
the purpose of issuance upon conversion of Series C Preferred Stock free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Series C Preferred Stock, not less than such number of
shares of Common Stock as shall (subject to any additional requirements of the
Company as to reservation of such shares set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of Section 6(c))
upon the conversion of all outstanding shares of Series C Preferred Stock. The
Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and freely tradable.
(f) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time. If
the Company elects not, or is unable, to make such a cash payment, the holder of
a share of Series C Preferred Stock shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
(g) The issuance of certificates for shares of Common Stock on
conversion of Series C Preferred Stock shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate.
(h) Shares of Series C Preferred Stock converted into Common
Stock shall be canceled and shall have the status of authorized but unissued
shares of undesignated preferred stock.
(i) Any and all notices or other communications or deliveries
to be provided by the holders of the Series C Preferred Stock hereunder,
including, without limitation, any Conversion Notice, shall be in writing and
delivered personally, by facsimile or sent by a nationally recognized overnight
courier service, addressed to the attention of the President and to the
Secretary of the Company at the facsimile telephone number or address of the
principal place of business of the Company as set forth in the Purchase
Agreement. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to each Holder of Series C Preferred Stock at the facsimile telephone
number or address of such holder appearing on the books of the Company, or if no
such facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 5:00 p.m., New
York City time. (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 5:00 p.m., New York City time, on any date
and earlier than 11:59 p.m., New York City time, on such date, (iii) receipt, if
sent by a nationally recognized overnight courier service, or (iv) actual
receipt by the party to whom such notice is required to be given.
(j) In the event a Holder shall elect to convert any shares of
Series C Preferred Stock as provided herein, the Company cannot refuse
conversion based on any claim that such Holder or any one associated or
affiliated with such Holder has been engaged in any violation of law or for any
other reason, unless an injunction from a court or regulatory body, on notice,
restraining and or adjoining conversion of all or of said shares of Series C
Preferred Stock shall have issued and the Company posts a surety bond for the
benefit of such Holder in the amount of the difference between the Conversion
Price and the Per Share Market Value on the Trading Day preceding the date of
the attempted conversion multiplied by the number of shares of Series C
Preferred Stock sought to be converted, which bond shall remain in effect
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<PAGE>
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Holder in the event it obtains judgment. Any
Holder which becomes subject to an injunction of the type described in the
preceding sentence shall notify the Company of such within one day of becoming
aware of such injunction.
Section 7. Optional Redemption.
(a) Redemption Right. Notwithstanding the foregoing, if upon
receipt by the Company of a Conversion Notice it is determined that the Per
Share Market Value on the Conversion Date is less than $3.00 (the "Floor
Price"), then the Company shall, if written notice pursuant to Section 7(b) had
been previously delivered to the Holder, in lieu of issuing shares of Common
Stock pursuant to Section 6, redeem all of the shares of Series C Preferred
Stock then held by such Holder by paying to the applicable Holder in cash a
redemption price equal to 120% of the Stated Value, together with any and all
accumulated and unpaid dividends thereon through the date of redemption (the
"Redemption Price"), of such Holder's shares of Series C Preferred Stock (the
"Redemption Election").
(b) Floor Price Notice. If at any time, the Conversion Price
is determined to be less than the Floor Price and the Company intends, if it
were to receive Conversion Notice from any Holder, to exercise its Redemption
Election pursuant to Section 7(a), the Company must provide all the Holder's one
(1) day's written notice (the "Floor Price Notice") prior to making such an
election. The Company will not be entitled to exercise its Redemption Election
unless the Floor Price Notice was delivered to all the Holders in a timely
manner.
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Company) that is regularly engaged in the business of
appraising the capital stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Company or any
Holder. The cost of any Independent Appraiser appointed hereunder shall be borne
by the Company.
"Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation preference
to the Series C Preferred Stock.
"NASDAO" means the National Association of Securities Dealers Automated
Quotation System.
"Original Issue Date" shall mean the date of the first issuance of any
shares of the Series C Preferred Stock regardless of the number of transfers of
any particular shares of Series C Preferred Stock and regardless of the number
of certificates which may be issued to evidence such Series C Preferred Stock.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on The Nasdaq Small Cap
Market, the Nasdaq National Market or other registered national stock exchange
on which the Common Stock is then listed or if there is no such price on such
date, then the closing bid price on such exchange or quotation system on the
date nearest preceding such date, or (b) if the Common Stock is not listed then
on The Nasdaq Small Cap Market, the Nasdaq National Market or any registered
national stock exchange, the closing bid price for a share of Common Stock in
the over-the-counter market. as reported by NASDAQ or the National Quotation
Bureau Incorporated or a similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date. or (c) if
the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the holder, or (d) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Independent Appraiser selected in good faith by
the holders of a majority in interest of the shares of the Series C Preferred
Stock; provided, however, that the Company, after receipt of
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<PAGE>
the determination by such Independent Appraiser, shall have the right to select
an additional Independent Appraiser, in which case, the fair market value shall
be equal to the average of the determinations by each such Independent
Appraiser: and provided, further that all determinations of the Per Share Market
Value shall be appropriately adjusted for any stock dividends, stock splits or
other similar transactions during such period. The determination of fair market
value by an Independent Appraiser shall be based upon the fair market value of
the Issuer determined on a going concern basis as between a willing buyer and a
willing seller and taking into account all relevant factors determinative of
value, and shall be final and binding on all parties. In determining the fair
market value of any shares of Common Stock, no consideration shall be given to
any restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or anv
limitations on, voting rights
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Purchase Agreement" means the Securities Purchase Agreement, dated as
of the Original Issue Date, among the Company and the original holders of the
Series C Preferred Stock.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Original Issue Date, by and among the Company and the original
Holders.
"Trading Day" means (a) a day on which the Common Stock is traded on
The Nasdaq Small Cap Market, the Nasdaq National Market or other registered
national stock exchange on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on The Nasdaq Small Cap Market, the Nasdaq National
Market or any registered national stock exchange, a day or which the Common
Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day
on which the Common Stock is quoted in the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, however, that in
the event that the Common Stock is not listed or quoted as set forth in (a), (b)
and (c) hereof then Trading Day shall mean any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other government
action to close.
"Underlying Shares" means the number of shares of Common Stock into
- - -which the Shares are convertible in accordance with the terms hereof and the
Purchase Agreement.
IN WITNESS WHEREOF, we have subscribed this document on the date
indicated below and do hereby affirm, under the penalties of perjury, that the
statements contained therein have been examined by us and are true and correct.
Date: November 5, 1999
------------------------------------------
Name: Robert Press
Title: Chairman of the Board of Directors
and Vice President
------------------------------------------
Name: Maynard Hellman
Title: Assistant Secretary
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<PAGE>
EXHIBIT A
FINANTRA CAPITAL, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designation, Powers, Preferences and
Rights of the Series of Preferred Stock of Finantra Capital, Inc. to be
Designated 6% Series C Cumulative Convertible Preferred Stock (the "Certificate
of Designation"). In accordance with and pursuant to the Certificate of
Designation, the undersigned hereby elects to convert the number of shares of 6%
Series C Cumulative Convertible Preferred Stock, par value $.01 per share and
stated value $1,000 per share (the "Preferred Shares"), of Finantra Capital,
Inc., a Delaware corporation (the "Company"), indicated below into shares of
Common Stock, par value $.01 per share (the "Common Stock"), of the Company, by
tendering the stock certificates(s) representing the share(s) of Preferred
Shares specified below as of the date specified below.
Date of Conversion:
Number of Preferred Shares to be converted:
Stock certificate no(s). of Preferred Shares to be converted:
The Common Stock have been sold pursuant to the Registration Statement
(as defined in the Registration Rights Agreement): YES NO
----- -----
Please confirm the following information:
Conversion Price: $
------------------------
Number of shares of Common Stock to be issued:
------------------------------
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issued to:
---------------------------------------------------------------------
Facsimile Number:
--------------------------------------------------------------
Authorization:
-----------------------------------------------------------------
By:
----------------------------------------------------------------------------
Title:
-------------------------------------------------------------------------
Dated:
-------------------------------------------------------------------------
Account Number:
----------------------------------------------------------------
(if electronic book entry transfer)
Transaction Code Number:
-------------------------------------------------------
(if electronic book entry transfer)
PRICES ATTACHED
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<PAGE>
FINOVA
FINANCIAL INNOVATORS
- - -------------------------------------------------------------------------------
Rediscount Finance
LOAN AND SECURITY AGREEMENT
Co-Borrowers: TRAVELERS ACCEPTANCE CORPORATION
TRAVELERS LEASING CORPORATION
TRACE CREDIT SERVICES, INC.
Address: 2233 FARADAY AVENUE, SUITE K
CARLSBAD, CA 92008
Date: SEPTEMBER 23. 1999
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
FINOVA CAPITAL CORPORATION, a Delaware corporation (nLender9, whose corporate
address is 1850 N. Central, Phoenix, Arizona 85077 and whose Rediscount Finance
Once address is 16833 North Dallas Parkway, Suite 700, Addison, Texas 75001 and
the borrowers named above (collectively referred to herein as the "Borrowers"
and singularly as Borrower, all of whose chief executive offices are located at
the above addresses (collectively referred to herein as "Borrowers' address").
Each Borrower shall be separately defined as set forth in the Schedule (Schedule
Section 1.A-). All representations, warranties, covenants, agreements,
undertaking or other obligations of Borrowers as set forth in this Agreement and
all other Loan Documents are made by each Borrower as if separately set forth
for each Borrower in this Agreement and the other Loan Documents. Al1 financial
covenants and ratios set forth herein shall be applied to the Borrowers in the
aggregate.
1 DEFINITIONS
ACCOUNT DEBTOR. The term Account Debtor shall mean any person or
persons that are an obligor in any contractual arrangement with Borrower or any
co signor in respect of any Receivable.
AGREEMENT. The term Agreement. shall mean this Loan and Security
Agreement between FINOVA and the Borrower and any amendment, modifications or
extension hereof.
BUSINESS DAY. The term "Business Day" shall mean a day, other than a
Saturday or Sunday, on which commercial banks are open for business to the
public in Phoenix, Arizona and New York, New York.
CASH COLLECTION PERCENTAGE - MOTOR VEHICLE. The term "Cash Collection
Percentage - Motor Vehicle" shall mean the percentage determined by dividing the
aggregate cash payments of principal received by Borrower with respect to all
Motor Vehicle Receivables during the month immediately preceding the date of
determination by the average aggregate monthly Gross
<PAGE>
Balance of a Motor Vehicle Receivable, for all Motor Vehicle Receivables, for
the six (6) calendar months immediately preceding the date of determination
CASH COLLECTION PERCENTAGE - NON-AUTO. The term "Cash Collection
Percentage - Non-Auto " shall mean the percentage determined by dividing the
aggregate cash payments of principal and interest received by Borrower with
respect to all Non-Auto Receivables during the month immediately preceding the
date of determination by the average aggregate monthly Gross Balance of a
Non-Auto Receivable, for all Non-Auto Receivables, for the six (6) calendar
months immediately preceding the date of determination
CHARGE OFFS. The term "Charge Offs" shall mean the amount due
(including the principal balance plus all earned fees and charges) pursuant to a
Receivable on the date that Borrower charges off such Receivable as
uncollectible, pursuant to Borrower's policies and/or procedures.
CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
COLLATERAL. The term "Collateral" shall have the meaning set forth in
Section 3.1. hereof
COLLATERAL DELINQUENCY PERCENTAGE. The term "Collateral Delinquency
Percentage" shall mean, on any date of determination, the percentage determined
by the aggregate of all of the outstanding balances for all Receivables that are
sixty (60) days or more past due divided by the aggregate of all of the
outstanding balances for all Receivables.
COLLATERAL RECOVERY RATE - LEASE. The term "Collateral Recovery Rate -
Lease" shall mean, for any period of determination, (i) the total cash collected
from all Lease Receivables (including but not limited to all cash proceeds from
charge off recoveries, with such charge off recoveries calculated at wholesale
value), divided by (ii) the sum of (a) the total cash collected from all Lease
Receivables (excluding all cash proceeds from charge off recoveries) plus (b)
the aggregate of all Charge Offs with respect to Lease Receivables for that
period.
COLLATERAL RECOVERY RATE - NON-AUTO. The term "Collateral Recovery Rate
- - - Non-Auto" shall mean for any period of determination, (i) the total cash
collected from all Non-Auto Receivables (including but not limited to all cash
proceeds from charge off recoveries, with such charge off recoveries calculated
at wholesale value), divided by (ii) the sum of (a) the total cash collected
from all Non-Auto Receivables (excluding all cash proceeds from charge off
recoveries) plus (b) the aggregate of all Charge Offs with respect to Non-Auto
Receivables for that period, plus (c) Included Rebates for that period.
COLLATERAL RECOVERY RATE - MOTOR VEHICLE. The term "Collateral Recovery
Rate - Motor Vehicle" shall mean, for any period of determination, (i) the total
cash principal payments collected from all Motor Vehicle Receivables (including
but not limited to all cash proceeds from charge off recoveries, with such
charge off recoveries calculated at wholesale value), divided by (ii) the sum of
(a) the total cash principal payments collected from all Motor Vehicle
Receivables (excluding all cash proceeds from charge off recoveries) plus (b)
the aggregate of all Charge Offs of principal with respect to Motor Vehicle
Receivables for that period.
COMMONLY CONTROLLED ENTITY. The term "Commonly Controlled Entity" shall
mean
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<PAGE>
an entity, whether or not incorporated, which is under common control with
Borrower within the meaning of Section 414(b) or (c) of the Code.
DEFAULT. The term "Default" shall mean an event which with the passage
of time or notice or both would constitute an Event of Default (as defined in
Section 8.1).
DISTRIBUTIONS. The term "Distributions" shall mean, during the period
of determination, any dividends or other distribution of earnings to Borrower's
shareholders or equity holders, the net increase in the outstanding balance of
all obligations or indebtedness due from the Borrower's shareholders or equity
holders to Borrower and the net decrease in the outstanding balance of all
obligations or indebtedness due from Borrower to Borrower's shareholders or
equity holders.
ELIGIBLE RECEIVABLES. The term "Eligible Receivables" shall mean those
Receivables of Borrower that are acceptable to Lender, in its reasonable
discretion, and, in each case, that meet, at a minimum, all of the following
requirements: (i) arise from the extension of credit, the sale and delivery of
consumer goods, lease of consumer goods or services rendered in the connection
with the sale or lease of such goods in the ordinary course of business of the
dealer or originator of such Receivable from which Borrower acquired such
Receivable; (ii) represent a valid and binding obligation enforceable in
accordance with its terms for the amount outstanding thereof without offset,
counterclaim or defense (whether actual or alleged); (iii) comply in all
respects with all applicable laws and regulations, including, but not limited
to, truth in lending and credit disclosure laws and regulations; (iv) all
amounts and information appearing thereon or furnished to Lender in connection
therewith are true and correct and undisputed by the Account Debtor thereon or
any guarantor thereof; (v) Borrower and the Account Debtor are not engaged in
any litigation regarding nonpayment of the Receivable; (vi) to the best
knowledge of Borrower neither the Account Debtor thereon nor any guarantor
thereof is subject to any receivership, insolvency or bankruptcy proceeding, is
insolvent or has failed to meet its debts as they mature; (vii) Borrower has
good and sufficient right to pledge, assign and deliver the Receivables free
from all liens, claims, encumbrances or security interests whatsoever; (viii)
neither the Account Debtor thereon nor any guarantor thereof is employed by,
related to or affiliated with Borrower; (ix) to the best knowledge of Borrower
no condition exists that materially or adversely affects the value of the
Receivables or jeopardizes any security therefor; (x) if the Receivables arise
from the sale or lease of goods, such goods have been delivered and accepted by
the Account Debtor and are still subject to the lawful possession and control of
the Account Debtor and have not been otherwise returned to or repossessed by
Borrower; (xi) is not a renewal or extension of any Receivable previously
ineligible hereunder; (xii) the outstanding balance thereof does not exceed the
Maximum Amount of an Eligible Receivable (SCHEDULE SECTION 1.B.) and the
remaining term thereof does not exceed the Maximum Term of an Eligible
Receivable (SCHEDULE SECTION 1.C.); (xiii) meets the Eligibility Test and has
been reported to Lender in compliance with the Aging Procedures (SCHEDULE
SECTION 1.D.); (xiv) is not evidenced by a judgment or has not been reduced to
judgment; (xv) is not an open or revolving account; (xvi) is evidenced by a
written payment agreement, with respect to a Non-Auto Receivable and a Motor
Vehicle Receivable such Receivable is bearing interest or containing a time
price differential, which has been executed by the Account Debtor; (xvii) the
Account Debtor thereunder is a legal resident of the United States; (xviii)
payments under the Receivable are to be made in United States dollars; (xix) the
number of days between contractual payment dates of a Receivable does not exceed
thirty-one (31 ) days; and (xx) all legally required recession rights and/or
cancellation periods have expired.
ERISA. The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
GAAP. The term "GAAP" shall mean generally accepted accounting
principles and other standards as promulgated by the American Institute of
Certified Public Accountants.
GROSS BALANCE OF A LEASE RECEIVABLE. The term "Gross Balance of a Lease
Receivable" shall mean the aggregate of lease payments remaining due plus the
residual value with respect to such Lease Receivable.
-3-
<PAGE>
GROSS BALANCE OF A NON-AUTO RECEIVABLE. The term "Gross Balance of a
Non-Auto Receivable" shall mean the outstanding balance of the a Non-Auto
Receivable, on any date of determination, including all unearned interest,
purchase discounts, dealer reserves, hold backs, and insurance commissions
GUARANTOR. The term "Guarantor" shall mean any person or persons who
execute a guaranty agreement in favor of Lender guaranteeing the repayment of
the Borrower's Indebtedness to Lender (SCHEDULE SECTION 1. E.).
GUARANTY AGREEMENT. The term "Guaranty Agreement" shall mean that
certain agreement executed by the Guarantor. in a form and substance approved by
Lender.
GOVERNING RATE. The term "Governing Rate" shall mean the "Prime" rate
publicly announced by Citibank N.A., New York, New York (or such other "money
center" bank as Lender, in its sole discretion, may select from time to time,
but shall not be more than the highest rate of the five largest banks in the
Continental United States as their respective corporate base, reference, prime
or similar benchmark rate), provided however, that such rate may not be the
lowest rate charged to such bank's customers
INCLUDED REBATE PERCENTAGE. The term "Included Rebate Percentage" shall
mean, for any period of determination, the percentage determined by dividing (i)
the aggregate of all Charge Offs with respect to Non-Auto Receivables for that
period, by (ii) the Nonpayment Net Receivable Reductions for that period.
INCLUDED REBATES. The term "Included Rebates" shall mean, for any
period of determination, (i) the aggregate of all rebates of interest for that
period, multiplied by (ii) the Included Rebate Percentage.
INDEBTEDNESS. The term "Indebtedness" shall mean all amounts advanced
hereunder by Lender to Borrower together with all other amounts owing or
becoming owing to Lender by Borrower, direct or indirect, absolute or
contingent, now or hereafter existing, whether pursuant to the terms of this
Agreement or any document or instrument evidencing or securing the transaction
contemplated hereby.
LEASE RECEIVABLE. The term "Lease Receivable" shall mean a Receivable
that evidences a consumer finance lease contact or obligation for the financed
lease of consumer goods, excluding a true lease.
LEVERAGE RATIO. The term "Leverage Ratio" shall mean, at any date of
determination, total liabilities of Borrower, including the outstanding balance
of the Indebtedness, less the outstanding balance due pursuant to all
Subordinated Debt divided by the sum of the amount of Borrower's Tangible Net
Worth plus the outstanding balance due pursuant to all Subordinated Debt
LOAN DOCUMENTS. The term "Loan Documents" shall mean this Agreement,
the Note, the Schedule, the Guaranty, Subordination Agreements, Agency and
Custodian Agreements and all other documents executed in connection with this
Agreement, together with any and all renewals, amendments, restatements or
replacements of such documents.
MAXIMUM RATE. The term "Maximum Rate" shall mean the highest lawful and
nonusurious rate of interest applicable to the Note made and delivered by
Borrower to Lender in connection herewith, that at any time or from time to time
may be contracted for, taken, reserved, charged, or received on the Note and the
Indebtedness under the laws of the United States and the laws of such states as
may be applicable thereto, that are in effect or, to the extent allowed by such
laws, that may be hereafter in effect and that allow a higher maximum
nonusurious and lawful interest rate than would any applicable laws now allow.
MOTOR VEHICLE RECEIVABLES. The term "Motor Vehicle Receivables" shall
mean a consumer Receivable that is secured by a motor vehicle (non-commercial)
and such Receivable evidences a portion of the purchase price paid for such
motor vehicle by the Account Debtor
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NET BALANCE OF A MOTOR VEHICLE RECEIVABLE. The term Net Balance of a
Motor Vehicle Receivable" shall mean the outstanding balance of the a Motor
Vehicle Receivable, on any date of determination, excluding all unearned
interest, purchase discounts, dealer reserves, hold backs, and insurance
commissions.
NET BALANCE OF A NON-AUTO RECEIVABLE. The term Net Balance of a
Non-Auto Receivable" shall mean the outstanding balance of the a Non-Auto
Receivable, on any date of determination, excluding all unearned interest,
purchase discounts, dealer reserves, hold backs, and insurance commissions.
NET INCOME. The term "Net Income" shall mean with respect to any fiscal
period, the net earnings of Borrower (excluding all extraordinary gains or
nonrecurring income) before provision for income taxes for such fiscal period of
Borrower, all as reflected on the financial statements of Borrower supplied to
Lender pursuant to Sections 6.6(A) and 6.6(B) hereof.
NET LEASE RECEIVABLE. The term "Net Lease Receivable" shall mean the
outstanding balance of a Lease Receivable, on any date of determination,
excluding all unearned interest, unearned reserves and deposits.
NON-AUTO RECEIVABLE. The term "Non-Auto Receivable" shall mean a
consumer receivable originated by a third party who has no common ownership,
direct or indirect with that of any Borrower or any Guarantor, from which
Borrower acquired such Receivable and such Receivable is not a Motor Vehicle
Receivable
NONPAYMENT NET RECEIVABLE REDUCTIONS. The term "Nonpayment Net
Receivable Reductions" shall mean, for any period of determination, the sum of
(i)- the aggregate of all Charge Offs with respect to Non-Auto Receivables for
that period, plus (ii) the aggregate of all net refinanced balances of Non-Auto
Receivables for that period.
NOTE. The term "Note" shall mean the promissory note of even date
herewith, and ail renewals, extensions, or modifications executed by Borrower
and payable to the order of Lender.
PLAN. The term "Plan" shall mean any pension plan that is covered by
Title IV of ERISA and with respect to which Borrower or a Commonly Controlled
Entity is an "Employer" as defined in section 3(5) of ERISA.
PRINCIPAL BALANCE OF A MOTOR VEHICLE RECEIVABLE. The term "Principal
Balance of a Motor Vehicle Receivable" shall mean the outstanding balance of the
a Motor Vehicle Receivable, on any date of determination, excluding all unearned
interest.
RECEIVABLES. The term "Receivables" shall mean all accounts of Borrower
and any other right of Borrower to receive payment, including, without
limitation, all loans, extensions of credit or Borrower's right to payment for
goods sold, leased or services rendered by Borrower or the originator of such
Receivable from which Borrower has acquired such Receivable
REQUEST FOR ADVANCE. The term "Request for Advance" shall mean a
written request for an advance in the form of Exhibit "A" attached hereto and
made a part hereof.
SCHEDULE. The term "Schedule" shall mean the schedule executed in
conjunction with this Agreement of even date herewith, as may be amended from
time to time, upon written agreement of Lender and Borrower.
SUBORDINATED DEBT. The term "Subordinated Debt" shall mean the
aggregate amount of any indebtedness of Borrower to persons other than Lender
that by its terms is subordinated in all respects, including, but not limited
to, the right of payment, to the prior payment in full of the Indebtedness. A
subordination and standstill agreement, in a form and substance satisfactory to
Lender, shall be entered into by all holders of Subordinated Debt
TANGIBLE NET WORTH. The term "Tangible Net Worth" shall mean, at any
time of determination, the shareholder's equity of Borrower determined in
accordance with GAAP minus the aggregate amount of all intangible assets and all
assets consisting of obligations due to Borrower from
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shareholders, directors, officers, or any affiliate of Borrower or any Guarantor
hereunder.
2 LOAN
2.1 AMOUNT OF LOAN. Subject to the terms, covenants and conditions
hereinafter set forth, Lender agrees upon the Borrower's request from time to
time, until the Maturity Date, to make advances to Borrower (collectively, the
"Loan"), in an aggregate amount not to exceed at any time outstanding the lesser
of the following: (a) the Amount of Revolving Credit Line (SCHEDULE SECTION
2.1.A.) or (b) the Availability on Eligible Receivables (SCHEDULE SECTION
2.1.B.). Within the limits of this Section 2.1, Borrower may borrow, repay and
reborrow the advances. The Loan shall be evidenced by the Note.
2.2 INTEREST RATE. The outstanding principal balance of Loan shall bear
interest at the Stated Interest RATE (SCHEDULE SECTION 2.2). If Lender is ever
prevented from charging or collecting interest at the rate set forth in Stated
Interest Rate Section (i) because interest at such rate would exceed interest at
the Maximum Rate, then the rate set forth in Stated Interest Rate Section (i)
shall continue to be the Maximum Rate until Lender has charged and collected the
full amount of interest chargeable and collectable had interest at the rate set
forth in Stated Interest Rate Section (i) always been lawfully chargeable and
collectible.
As the Governing Rate changes, the rate set forth in Stated Interest
Rate Section (i) shall be increased or decreased (subject to the Maximum Rate)
on the first day of each calendar month to correspond with the change in the
Governing Rate then in effect and shall remain fixed at such rate until the
first day of the next succeeding calendar month, notwithstanding fluctuations in
the Governing Rate during the month.
If the Stated Interest Rate calculation, as set forth in SCHEDULE
SECTION 2.2 (I), causes a change in the Stated Interest Rate Section (i), such
increased or decreased (subject to the Maximum Rate) shall be determined on the
first (1st) day of each calendar month together with any change in the Governing
Rate, if any, and shall remain in effect and shall remain fixed at such rate
until the first day of the next succeeding calendar month, notwithstanding
fluctuations in the Stated Interest Rate calculation or Governing Rate during
the month. If the Stated Interest Rate calculation is determined based upon the
outstanding balance of the Indebtedness, only for the purpose of determining the
Stated Interest Rate on the first (1st) day of each calendar month, the
outstanding balance of the Indebtedness shall be the average daily outstanding
balance of the Indebtedness for the calendar month immediately preceding the
date of determination.
All changes in the Governing Rate or the Stated Interest Rate shall be
made without notice to Borrower. The monthly interest due on the principal
balance of the Loan outstanding shall be computed for the actual number of days
elapsed during the month in question on the basis of a year consisting of three
hundred sixty (360) days and shall be calculated by determining the average
daily principal balance outstanding for each day of the month in question. The
daily rate shall be equal to 1/360th times the Stated Interest Rate (but shall
not exceed the Maximum Rate).
2.3 PAYMENTS. All payments to Lender made by mail shall be payable at
FINOVA Capital Corporation, File No. 96425, P. O. Box 730495, Dallas, Texas
75373 or payments made by overnight mail shall be payable at FINOVA Capital
Corporation, File No. 96425, Attn. LB No. 730495, 1801 Royal Lane, Suite 600,
Dallas, TX 75229. All payments made by wire transfer or other method of
electronic transfer methods to Lender shall be payable to FINOVA Capital
Corporation, CITIBANK, NEW YORK, NEW York, ABA# 021 000 089, Account Name:
FINOVA CAPITAL CORP., ACCOUNT NUMBER: 4068-0485, REFERENCE: REDISCOUNT FINANCE,
ZQX(CLIENT ACCT. #XXX )ZQX.) Al1 payments received pursuant to this Agreement by
wire transfer or other electronic transfer method, where immediate credit
occurs, shall be applied to Borrower's Indebtedness on the Business Day of
actual receipt of such payment by Lender's depository bank, payments received by
any other method shall be applied to Borrower's Indebtedness three (3) Business
Days after the actual receipt of such payment by Lender's depository bank if
such payment is credited to Lender's account. The Indebtedness shall be due and
payable as follows:
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A. Accrued but unpaid interest for each calendar month during the term
hereof shall be due and payable, in arrears, on or before the fifteenth (15th)
day of the immediately succeeding calendar month.
B. Costs, fees and expenses payable pursuant to this Agreement shall be
due and payable by Borrower to Lender or to such other person(s) designated by
Lender in writing on demand; and
C. Pursuant to Section 2.5 of this Agreement, shall be due and payable
immediately when amount advanced by Lender to Borrower exceeds the maximum
amount of the Loan allowed pursuant to Section 2.1.
D. The entire outstanding balance of the Indebtedness shall be due and
payable, if not prepaid. on the Maturity Date (SCHEDULE SECTION 2.3.).
2.4 PAYMENT DUE ON A NON-BUSINESS DAY. If any payment of the
Indebtedness falls due on a day other than a Business Day, then such due date
shall be extended to the next succeeding Business Day.
2.5 MANDATORY PAYMENTS. Provided that Borrower is not otherwise in
Default hereunder, if at any time the amount advanced by Lender to Borrower
exceeds the maximum amount of the Loan allowed pursuant to Section 2.1, Borrower
shall immediately and without notice, repay to Lender an amount sufficient to
eliminate such excess, or, at Lender's option, assign and deliver additional
Eligible Receivables sufficient for such purpose. In the event Borrower sells,
transfers, assigns or otherwise disposes of all or any portion of its
Receivables, other than in the ordinary course of business, Borrower shall apply
all proceeds of any such sale, transfer, assignment or other disposition to
reduce the outstanding balance of the Indebtedness.
2.6 VOLUNTARY PREPAYMENTS. Borrower may, at its option, voluntarily
prepay the Indebtedness in full at any time and request a termination of
Lender's security interest in the collateral, provided, however, that Borrower
has given Lender ninety (90) days written notice of any such intention to prepay
the Indebtedness in full, Borrower requests Lender to terminate its security
interest in the Collateral and as liquidated damages, not as a penalty, pays to
Lender the amount of liquidated damages ("Liquidated Damages") (SCHEDULE SECTION
2.6). Borrower may not make such prepayment prior to the expiration of such
ninety (90) day period. Upon written notice of prepayment of the Indebtedness in
full, the commitment by Lender to advance funds to Borrower and all the
obligations of Lender shall terminate on the expiration of said ninety (90) day
notice period, and the entire amount of the Indebtedness shall be due and
payable on such date.
2.7 MAXIMUM INTEREST; CONTROLLING AGREEMENT. The contracted for rate of
interest of the Loan without limitation, shall consist of the following: (i) the
Stated Interest Rate, calculated and applied to the principal balance of the
Note in accordance with the provisions of the Note and this Agreement; (ii)
interest after event of default or due date, calculated and applied to the
amounts due under the Note in accordance with the provisions thereof; and (iii)
all Additional Sums (as herein defined), if any. Borrower agrees to pay an
effective contracted for rate of interest which is the sum of the
above-referenced elements.
All fees, charges, goods, things in action or any other sums or things
of value (other than amounts described in the immediately previous paragraph),
paid or payable by Borrower (collectively, the "Additional Sums"), whether
pursuant to the Note, this Agreement or any other documents or instruments in
any way pertaining to this lending transaction, or otherwise with respect to
this lending transaction, that under any applicable law may be deemed to be
interest with respect to this lending transaction, for the purpose of any
applicable law that may limit the maximum amount of interest to be charged with
respect to this lending transaction, shall be payable by Borrower as, and shall
be deemed to be, additional interest and for such purposes only, the agreed upon
and "contracted for rate of interest" of this lending transaction shall be
deemed to be increased by the rate of interest resulting from the inclusion of
the Additional Sums.
It is the intent of the parties to comply with the usury law
("Applicable Usury Law") applicable pursuant to the terms of the preceding
paragraph or such other usury law which is applicable if the law
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chosen by the parties is not applicable. Accordingly, it is agreed that
notwithstanding any provisions to the contrary in the Loan Documents, or in any
of the documents securing payment hereof or otherwise relating hereto, in no
event shall the Loan Documents or such documents require the payment or permit
the collection of interest in excess of the maximum contract rate permitted by
the Applicable Usury Law. In the event (a) any such excess of interest otherwise
would be contracted for, charged or received from Borrower or otherwise in
connection with the loan evidenced hereby, or (b) the maturity of the
indebtedness evidenced by the Loan Documents is accelerated in whole or in part,
or (c) all or part of the principal or interest of the Loan Documents shall be
prepaid, so that under any of such circumstances the amount of interest
contracted for, charged or received in connection with the loan evidenced
hereby, would exceed the maximum contract rate permitted by the Applicable Usury
Law, then in any such event (1 ) the provisions of this paragraph shall govern
and control, (2) neither Borrower nor any other person or entity now or
hereafter liable for the payment hereof will be obligated to pay the amount of
such interest to the extent that it is in excess of the maximum contract rate
permitted by the Applicable Usury Law, (3) any such excess which may have been
collected shall be either applied as a credit against the then unpaid principal
amount hereof or refunded to Borrower. at Lender's option and (4) the effective
rate of interest will be automatically reduced to the maximum amount of interest
permitted by the Applicable Usury Law. It is further agreed, without limiting
the generality of the foregoing, that to the extent permitted by the Applicable
Usury Law; (x) all calculations of interest which are made for the purpose of
determining whether such rate would exceed the maximum contract rate permitted
by the Applicable Usury Law shall be made by amortizing, prorating, allocating
and spreading during the period of the full stated term of the loan evidenced
hereby, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with such loan; and (y) in the event that
the effective rate of interest on the loan should at any time exceed the maximum
contract rate allowed under the Applicable Usury Law, such excess interest that
would otherwise have been collected had there been no ceiling imposed by the
Applicable Usury Law shall be paid to Lender from time to time, if and when the
effective interest rate on the loan otherwise falls below the maximum amount
permitted by the Applicable Usury Law, to the extent that interest paid to the
date of calculation does not exceed the maximum contract rate permitted by the
Applicable Usury Law, until the entire amount of interest which would have
otherwise been collected had there been no ceiling imposed by the Applicable
Usury Law has been paid in full. Borrower further agrees that should the maximum
contract rate permitted by the Applicable Usury Law be increased at any time
hereafter because of a change in the law, then to the extent not prohibited by
the Applicable Usury Law, such increases shall apply to all indebtedness
evidenced hereby regardless of when incurred; but, again to the extent not
prohibited by the Applicable Usury Law, should the maximum contract rate
permitted by the Applicable Usury Law be decreased because of a change in the
law, such decreases shall not apply to the indebtedness evidenced hereby
regardless of when incurred
2.8 INTEREST AFTER DEFAULT. Upon the occurrence and during the
continuation of an Event of Default, Borrower shall pay Lender interest on the
daily outstanding balance of Borrower's loan account at a rate per annum which
is four percent (4%) in excess of the rate which would otherwise be applicable
thereto pursuant to the Schedule (SCHEDULE SECTION 2.2), but not greater than
the Maximum Rate.
2.9 STATEMENT OF ACCOUNT. Lender shall provide Borrower, each month,
with a statement of Borrower's account, prepared from Lender's records, which
shall conclusively be deemed correct and accepted by Borrower, unless Borrower
gives Lender a written statement of exceptions within ten (10) days after
receipt of such statement.
2.10 APPLICATION OF PAYMENTS. The amount of all payments or amounts
received by Lender with respect to the Indebtedness shall be applied to the
extent applicable under this Agreement: (i) first, to accrued interest through
the date of such payment, including any Interest After Default; (ii) then, to
any late fees, overdue risk assessments, examination fees and expenses,
collection fees and expenses and any other fees and expenses due to Lender
hereunder; and (iii) last, the remaining balance, if any, to the unpaid
principal balance of the Indebtedness; provided, however, while a Default exists
under the Loan Documents, each payment
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hereunder shall be applied to amounts owed to Lender by Borrower as Lender it is
sole discretion may determine. In calculating interest and applying payments as
set forth above; (a) interest shall be calculated and collected through the date
a payment is actually applied by Lender under the terms of this Agreement; (b)
interest on the outstanding balance shall be charged during any grace period
permitted hereunder; (c) at the end of each month, all accrued and unpaid
interest and other charges provided for hereunder shall be added to the
principal balance of the Loan; and (d) to the extent that Borrower makes a
payment or Lender receives any payment or proceeds of the Collateral for
Borrower's benefit that is subsequently invalidated, set aside or required to be
repaid to any other person or entity, then, to such extent, the obligations
intended to be satisfied shall be revived and continue as if such payment or
proceeds had not been received by Lender and Lender may adjust the outstanding
balance of the Indebtedness as Lender, in its sole discretion, deems appropriate
under the circumstances.
2.11 CLOSING FEE. Borrower shall pay to Lender a closing fee and on the
terms as set forth in SCHEDULE SECTION 2.11. This closing fee shall be earned
upon the execution of the Loan Documents by Lender and Borrower. If such closing
fee has not been paid in full and Borrower prepays the Indebtedness in full and
terminates Lender's security interest in the Collateral, the outstanding balance
of such closing fee shall be due and payable at the time of such prepayment.
2.12 PRORATION OF PAYMENTS. All payments and collections shall be
deemed to be comprised of a pro rata remittance or payment made by each
Borrower, based upon the proportion that the Eligible Receivables of each
Borrower bears to the aggregate of all Eligible Receivables of the Borrowers, as
of the date on which such remittance or payment is received by Lender. In the
event such remittance or payment shall be made by the Lead Borrower, acting as
agent or trustee for the other Borrowers, each Borrower shall be deemed to have
made their proportionate amount of such remittance or payment to Lender by and
through such agent or trustee.
2.13 ADVANCES TO LEAD BORROWER. Borrower does hereby irrevocably agree
that in the event Lender makes advances to Lead Borrower, as agent or trustee
for each of Borrower, as contemplated in Section 2.14, each such advance shall
be deemed to be made to each Borrower based upon a proportion that each
Borrower's Eligible Receivables bear to the aggregate of all Eligible
Receivables of Borrower, notwithstanding any subsequent disbursement of said
advance by the Lead Borrower, acting as agent or trustee for the Borrowers. In
the event that the actual advances, direct or indirect, received by Lead
Borrower or any other Borrower or the balance due to Lender as shown in the
records of any Borrower shall be disproportionate when compared to the
proportion of the Eligible Receivables of each Borrower, whether by way of
subsequent disbursements by Lead Borrower, acting as agent or trustee, by way of
Lender electing to make advances to each Borrower, as contemplated in Section
2.14 or otherwise, such disproportionalities shall be deemed to have occurred by
virtue of loans made between and among Borrowers.
2.14 APPOINTMENT OF AGENT. Lender agrees that, in the sole discretion
of Lender, Borrower may, by written notice to Lender, designate a Lead Borrower
to receive advances from Lender, make payments to Lender, communicate with
Lender and generally represent the interests of the Borrowers with respect to
the subject matter of this Agreement; notwithstanding the foregoing, Lender may,
at its sole discretion and upon notice to each of the Borrowers, make advances
directly to each of the Borrowers, require that payments due hereunder be made
to Lender by each of the Borrowers, require each of the Borrowers to communicate
directly with Lender, for its own account, and generally deal independently and
separately with each of the Borrowers. Until so notified by Lender, each of the
Borrowers hereby agree that any and all funds advanced by Lender pursuant to the
terms of this Agreement, shall be advanced to the Lead Borrower and may be
deposited or transferred into the general corporate account of Lead Borrower, as
agent and/or trustee for Borrowers. Lead Borrower hereby agrees to keep detailed
and accurate records of all such disbursements made to any other Borrowers. Lead
Borrower hereby agrees to keep detailed and accurate records of all loans and
dealings between or among Lead Borrower and the other Borrowers. Borrowers agree
to furnish copies of such records to Lender upon request. Each Borrower, other
than the Lead Borrower hereby irrevocably
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makes, constitutes, designates and appoints Lead Borrower as its agent and/or
trustee with full power to receive all notices, request all Advances hereunder
and to deal generally with Lender as agent and/or trustee for the Borrowers and
Lead Borrower is hereby granted full power and authority to bind the Borrowers
in respect of any term, condition, covenant or undertaking embraced in this
Agreement. Lender may, without liability or responsibility to the Borrowers rely
upon the instructions or other communication of Lead Borrower on behalf of each
of the Borrowers in connection with any notifications, requests or
communications required or permitted to be given hereunder with the same force
and effect as if actually given by each Borrower; each Borrower hereby agrees to
indemnify and hold Lender harmless from and against any liability, claim, suit,
action, penalty, fine or damage arising out of or incurred in connection with
Lender's reliance upon communications from Lead Borrower on behalf of the
Borrowers. It is specifically understood and agreed that any Advance made
hereunder by Lender to Lead Borrower shall be considered and treated as an
Advance to the Borrowers and each Borrower shall be jointly and severally liable
therefor.
3 SECURITY
3.1 SECURITY INTEREST. To secure the prompt payment to Lender of the
Indebtedness and any and all other obligations now existing or hereinafter
arising owed by Borrower to Lender, Borrower hereby irrevocably grants to Lender
a first and continuing security interest in the following property and interests
in property of Borrower, whether now owned or existing or hereafter acquired or
arising and wheresoever located:
A. All Receivables and all accounts, chattel paper, instruments,
contract rights and general intangibles, all of Borrower's right, remedies,
security, liens, guaranties, or other contracts of suretyship with respect
thereto, all deposits or other security or support for the obligation of any
Account Debtor thereunder and credit and other insurance acquired by Account
Debtor or the Borrower in connection therewith;
B. All Inventory, new or used, including, but not limited to parts and
accessories;
C. All bank accounts of Borrower;
D. All monies, securities and property, now or hereafter held, received
by, or entrusted to, in the possession or under the control of Lender or a
bailee of Lender;
E. All accessions to, substitutions for and ail replacements, products
and proceeds of the foregoing, including, without limitation, proceeds of
insurance policies referenced in Section 3.1.A above (including but not limited
to claims paid and premium refunds); and
F. All books and records (including, without limitation, customer
lists, credit files, tapes, ledger cards, computer software and hardware,
electronic data processing software, computer printouts and other computer
materials and records) of Borrower evidencing or containing information
regarding any of the foregoing.
3.2 FINANCING STATEMENTS AND FURTHER ASSURANCES. Borrower hereby agrees
to execute WCC-1 Financing Statements, in the form and substance of Exhibit "B"
hereto, and any other instruments or documents reasonably necessary to evidence,
preserve or protect Lender's security interest in the Collateral. Borrower
agrees that financing statements shall be filed covering all of Borrower's
locations (SCHEDULE SECTION 3.2.).
Upon Lender's request, Borrower agrees to deliver to Lender, at such
places as Lender may reasonably designate, schedules executed by Borrower,
listing the Receivables and fully and correctly specifying in adequate detail
the aggregate unmatured unpaid face amount of each Receivable and the amount of
the deferred installments thereof falling due each month. These schedules shall
be in form and tenor satisfactory to or supplied by Lender. All schedules
delivered and Collateral pledged to Lender shall be assigned to Lender pursuant
to the "Schedule of Receivables and Assignment" in the form and substance of
Exhibit "E" attached hereto. Borrower further warrants and agrees that in each
case where the terms of any Receivable require the Borrower or the Account
Debtor named in such Receivable to place or carry fire insurance or other
insurance in respect of the merchandise or property to which such Receivable
relates, the Borrower shall or
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shall cause the Account Debtor to maintain such insurance until the full amount
of such Receivable is collected and if not, Lender, at its option, may place and
maintain such insurance, charging the cost thereof to Borrower.
3.3 PLEDGE OF RECEIVABLES. Borrower hereby agrees to pledge all
Receivables and, if so requested by Lender, Borrower shall deliver to Lender all
documents evidencing Receivables of Borrower, no less often than on the
twentieth (20th) day of each calendar month during the term of this Agreement,
together with the Schedule of Receivables and Assignment, as set forth in
Section 3.2 hereof.
3.4 FAILURE TO DELIVER. Failure to deliver physical possession of any
instruments, documents or writings in respect of any Receivable to Lender shall
not invalidate Lender's security interest therein. To the extent that possession
may be required by applicable law for the perfection of Lender's security
interest, the original chattel paper and instruments representing the
Receivables shall be deemed to be held by Lender, although kept by the Borrower
as the custodial agent of Lender.
3.5 NOTICE OF COLLATERAL ASSIGNMENT. Al1 contracts. documents or
instruments representing or evidencing a Receivable shall contain (by way of
stamp or other method satisfactory to Lender) the following language: "Pledged
to FINOVA Capital Corporation as Collateral".
3.6 LOCATION OF RECEIVABLES. Borrower shall, at any reasonable time and
at Borrower's own expense, upon Lender's request, physically deliver to Lender
all Receivables (including any instruments, documents or writings in respect of
any Receivable together with all instruments, documents or writings in respect
of any collateral securing each Receivable) assigned to Lender to any reasonable
place or places designated by Lender. All Receivables shall, regardless of their
location, be deemed to be under Lender's dominion and control (with files so
labeled) and deemed to be in Lender's possession.
3.7 RECORDS AND INSPECTIONS. Borrower shall at all times keep complete
and accurate records pertaining to the Collateral, which records shall be
current on a daily basis and located only at the locations (SCHEDULE SECTION
3.2.). Lender by or through any of its officers, agents, employees, attorneys or
accountants, shall have the right to enter any such locations, at any reasonable
time or times during regular business hours, for so long as Lender may desire,
to inspect the Collateral and to inspect, audit and make extractions or copies
from the books, records, journals, orders, receipts, correspondence or other
data relating to the Collateral or this Agreement.
3.8 ADDITIONAL DOCUMENTS. Borrower hereby agrees to execute any
additional documents or financing statements which Lender deems necessary in its
reasonable discretion in order to evidence Lender's security interest in the
Collateral. Borrower shall not allow any financing statement or notice of
assignment of accounts receivable, other than those executed in connection with
this Agreement, to be on file in any public office covering any Collateral,
proceeds thereof or other matters subject to the security interest granted to
Lender.
3.9 COLLECTION. Borrower agrees at its own expense to promptly and
diligently collect each installment of all Receivables in trust for the
exclusive account of Lender, to hold Lender harmless from any and all loss,
damage, penalty, liability, fine or expense arising from such collection by
Borrower or its agents and to faithfully account therefor to Lender. Upon the
occurrence of a Default, Lender expressly retains the unqualified right at any
time it so elects to take over the collection of the Receivables.
3.10 BLOCKED ACCOUNTS. Upon the occurrence of a Default or an Event of
Default, at Lender's request, any checks, notes, drafts or any other payment
upon and/or proceeds of the Collateral rec ed by Borrower (or any subsidiaries,
divisions, affiliates, proprietorships, shareholders, directors, officers,
employees, agents or those persons acting for or in concert with Borrower),
shall no later than the next Business Day following receipt thereof, be
delivered to Lender, at Lender's address set forth above, for application on
account of the Indebtedness and shall be reflected in the Statement of Account
as provided in Section 2.9 herein, until such time as
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Lender has established a depository account at a bank for the deposit of such
payments, made arrangements for such deposits to be transferred to Lender daily
and thereafter established a lock-box arrangement or otherwise. Borrower shall
(i) deposit or cause all Items, as defined below, to be deposited in the special
account so established by Lender or transfer all Items to Lender for application
on account of the Indebtedness and to be reflected in the Statement of Account
as provided in Section 2.9 herein and (ii) maintain copies of all checks or
other items of payment and deposit slips related thereto, together with a
collection report in a form satisfactory to Lender. All cash payments, checks,
drafts, or similar items of payment upon and/or proceeds of the Receivables
(collectively "Items') by or for the account of Borrower shall be the sole and
exclusive property of Lender immediately upon the earlier of the receipt of such
Items by Lender or the receipt of such Items by Bon-owner; provided, however,
that no such item received by Lender shall constitute payment to Lender and be
applied to reduce the Indebtedness until the later of: (i) three (3) Business
Days from collection of such Item by Lender's depository bank, or (ii) such Item
being actually collected by Lender's depository bank and such collection being
credited to Lender's account. Notwithstanding anything to the contrary herein,
all such items of payment shall be deemed not received if the same is
subsequently dishonored or not duly credited to Lender's depository account for
any reason whatsoever.
3.11 PROTECTION OF RECEIVABLE RECORDS. Borrower hereby agrees to take
the following protective actions to prevent destruction of Borrower's Collateral
and records pertaining to such Collateral: (i) if Borrower maintains its
Collateral records on a manual system such records shall be kept in a fire proof
cabinet or on no less than a monthly basis, a record of all payments on
Receivables and all other matters relating to the Collateral shall be placed in
an off site safety deposit box (and Lender shall have access to such safety
deposit box); or (ii) if the Collateral records are computerized, Borrower
agrees to create a tape or diskette "back-up" of the computerized information
and upon the request of Lender, provide Lender with a tape or diskette copy of
such "backup" information.
3.12 USE OF COLLECTIONS AND MODIFICATION OF RECEIVABLES. Provided that
Lender has not required that Borrower remit all collections or proceeds of
Collateral to Lender, Borrower may use or dispose of the funds received on the
Receivables in the ordinary course of business (including resumed or repossessed
goods), collect or compromise accounts or obligations and accept returned goods
or make repossessions, as Borrower shall determine based upon its reasonable
discretion.
3.13 USE OF PROCEEDS. Borrower shall use the initial advances hereunder
(i) to provide funds to its parent companies, Allar-TIC Financial Services, Inc.
and Travelers Investment Corporation, to partially fund their acquisition by
Travelers Acquisition Corporation, which is a wholly owned subsidiary of
Amer.-Cap Consumer Finance Group, Inc., which is a wholly owned subsidiary of
Finantra Capital, Inc., and (ii) to pay in full the outstanding balance due to
Bank of America from Borrowers. After the initial advances hereunder, proceeds
of the Loan in the ordinary course of business, solely in its operations for
costs incurred in the purchasing or acquiring Receivables, payments otherwise
permitted under the Loan Documents or for payments to Lender hereunder.
3.14 RETURN OF COLLATERAL. Upon the payment in full or renewal of any
Receivable to which the written documents evidencing such Receivable are held by
Lender, Borrower shall submit all requests for the return of such documents
pursuant to the "Request For Return of Collateral" form, a copy of which is
attached hereto as Exhibit "C".
3.15 LENDER'S PAYMENT OF CLAIMS. Lender may, in its sole discretion,
discharge or obtain the release of any security interest, lien, claim or
encumbrance asserted by any person against the Collateral. All sums paid by
Lender in respect thereof shall be payable, on demand, by Borrower to Lender and
shall be a part of the Indebtedness.
3.16 CROSS COLLATERALIZATION. Each Borrower agrees that the Collateral
of each Borrower pledged hereunder shall secure all of the obligations of the
Borrowers to Lender hereunder.
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Upon and after an Event of Default by any Borrower, Lender may pursue all rights
and remedies H may have against all or any part of the Collateral regardless of
the status of legal title to such Collateral. Each Borrower hereby acknowledges
that this Cross Collateralization of their Collateral is in consideration of
Lender's extending the credit hereunder and mutually beneficial to each Borrower
4 CONDITIONS OF CLOSING: SUBSEQUENT ADVANCES
4.1 INITIAL ADVANCE. The obligation of Lender to make the initial
advance hereunder is subject to the fulfillment, to the satisfaction of Lender
and its counsel, of each of the following conditions prior to the initial
advance hereunder:
A. Loan Documents. Lender shall have received each of the following
Loan Documents: (i) this Loan and Security Agreement executed by the respective
parties; (ii) Schedule to Loan and Security Agreement executed by the respective
parties; (iii) the Note executed by Borrower; (iv) Guaranty Agreement and Stock
Pledge Agreements securing such Guaranty Agreement executed by the respective
Guarantor; (v) Agency and Custodial Agreement executed by Borrower, Lender and a
custodian acceptable to both Borrower and Lender; and (vi) such other documents,
instruments and agreements in connection herewith as Lender shall require,
executed, certified and/or acknowledged by such parties as Lender shall
designate;
B. Terminations by Exiting Lender. Borrower's existing lender(s) shall
have executed and delivered UCC termination statements or acceptable pay-off
letter and other documentation evidencing the termination of its liens and
security interests in the Collateral in form and substance satisfactory to
Lender in its sole discretion;
C. Charter Documents. Lender shall have received copies of Borrowers'
and Guarantors' By-laws and Articles or Certificate of Incorporation, as
amended, modified, or supplemented to the Closing Date, certified by the
Secretary of Borrowers and Guarantors, respectively;
D. Good Standing. Lender shall have received a certificate of corporate
status with respect to Borrower and each corporate Guarantor, dated within ten
(10) days of the Closing Date, by the Secretary of State of the state of
incorporation of Borrower and such Guarantor, which certificate shall indicate
that Borrower and such Guarantor are in good standing in such state;
E. Foreign Qualification. Lender shall have received certificates of
corporate status with respect to Borrower and each corporate Guarantor, each
dated within ten (10) days of the Closing Date, issued by the Secretary of State
of each state in which such party's failure to be duly qualified or licensed
would have a material adverse effect on its financial condition or assets,
indicating that such party is in good standing;
F. Authorizing Resolutions and Incumbency. Lender shall have received a
certificate from the Secretary of Borrower and each corporate Guarantor
attesting to (i) the adoption of resolutions of each respective Board of
Directors authorizing the borrowing of money from Lender or the guaranty of the
Indebtedness, as the case may be, and execution and delivery of this Agreement
and the other Loan Documents to which Borrower and Guarantor are a party, and
authorizing specific officers of Borrower and Guarantor to execute same, and
(ii) the authenticity of original specimen signatures of such officers;
G. Initial Availability Report Lender shall have received an initial
Availability Report from Borrowers executed by an authorized corporate officer
of Borrowers;
H. Property Insurance. If applicable, Lender shall have received the
insurance certificates and certified copies of policies required herein, along
with a Lender's Loss Payable Endorsement naming Lender as sole loss payee, all
in form and substance satisfactory to Lender and its counsel;
I. Searches; Certificates of Title. Lender shall have received searches
reflecting the filing of its financing statements and other filings in such
jurisdictions as it shall determine, and shall have received certificates of
title with respect to the
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Collateral which shall have been duly executed in a manner sufficient to perfect
all of the security interests granted to Lender and shall have received other
background reports and information with respect to Borrower and Guarantors,
which is satisfactory to Lender, in Lender's sole discretion;
J. Landlord and Mortgagee Waivers. If applicable, Lender shall have
received landlord and mortgagee waivers from the lessors and mortgagees of all
locations where any Collateral is located;
K. Fees. Borrower shall have paid all fees payable by it on the Closing
Date pursuant to this Agreement;
L. Opinion of Counsel. Lender shall have received an opinion of
Borrower's counsel covering such matters as Lender shall determine in its sole
discretion;
M. Solvency Certificate. If requested by Lender, a signed certificate
of the Borrower's duly elected Chief Financial Officer concerning the solvency
and financial condition of Borrower, on Lender's standard form;
N. Blocked and Pledged Accounts. If applicable, the Blocked Account
and/or Pledged Account referred to in Sections 3.10 hereof shall have been
established to the satisfaction of Lender in its sole discretion; and
O. Acquisition Documents. All agreements and other documents that
evidence to acquisition of Travelers Investment Corporation by Travelers
Acquisition Corporation, a wholly owned subsidiary of Amer.-Cap Consumer Finance
Group, Inc., which is at the time of such acquisition. a wholly owned subsidiary
of Finantra Capital. Inc.
P. Acquisition Financing. Travelers Acquisition Corporation and its
parent company have provided Lender with evidence, to Lender's reasonably
satisfaction, that they have funding necessary to complete the acquisition of
the Borrowers and their respective parent companies.
Q. Other Matters. All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance satisfactory to Lender
and its counsel.
4.2 SUBSEQUENT ADVANCES. The obligation of Lender to make any advance
hereunder (including the initial advance) shall be subject to the further
conditions precedent that, on and as of the date of such advance: (a) the
representations and warranties of Borrower set forth in this Agreement shall be
accurate, before and after giving effect to such advance or issuance and to the
application of any proceeds thereof; (b) no Default or Event of Default has
occurred and is continuing, or would result from such advance or issuance or
from the application of any proceeds thereof; (c) no ~ material adverse change
has occurred in the Borrower's business, operations, financial condition, or
assets or in the prospect of repayment of the Indebtedness; (d) Lender shall
have received such other approvals, opinions or documents as Lender shall
reasonably request; and (e) Borrower shall submit to Lender a completed Request
for Advance Report in the form and substance of Exhibit "A" attached hereto, on
the date such advance is requested or shall have complied with the provisions
concerning oral advances hereunder as set forth in Section 4.3 hereof.
4.3 ORAL REQUEST FOR ADVANCE. All oral requests for advances shall be
made only by an authorized agent of Borrower designated by or acting under the
authority of a resolution of the Board of Directors of Borrower, a duly
certified or executed copy of which shall be furnished to Lender prior to any
oral request. Lender shall be entitled to rely upon such authorization until
written notice to the contrary is received by Lender. Borrower covenants and
agrees to furnish to Lender written confirmation of any such oral request within
two (2) days after such oral request, in a form set forth on Exhibit "A"
attached hereto and incorporated herein, but any such loan or advance shall be
deemed to be made under and entitled to the benefits of this Agreement and any
other documents or instruments executed in connection herewith irrespective of
any failure by Borrower to furnish such written confirmation. Any loan or
advance shall be conclusively presumed to have been made under the terms of this
Agreement, to or for the benefit of Borrower, when made pursuant to the terms of
any
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written agreement executed in connection herewith; or in accordance with such
requests and directions; or when an advance is deposited to the credit of the
account of any person or persons, corporation or corporations comprising
Borrower, regardless of the fact that persons other than those authorized
hereunder may have authority to draw against such account or regardless of the
fact that the advance was not made or deposited for the benefit of all persons
or corporations comprising Borrower.
4.4 ALL ADVANCES TO CONSTITUTE ONE LOAN. All evidences of credit, loans
and advances made by Lender to Borrower under this Agreement and any other
documents or instruments executed in connection herewith shall constitute one
loan, and all indebtedness and obligations of Borrower to Lender under this
Agreement and all other such documents and instruments shall constitute one
general obligation secured by Lender's security interest in all of the
Collateral and by all other security interests, liens, claims and encumbrances
heretofore, now, or at any time or times hereafter granted by Borrower to
Lender. Borrower agrees that all of the rights of Lender set forth in this
Agreement shall apply to any modification of or supplement to this Agreement and
any other such documents and instruments.
4.5 ADVANCES. Lender shall have the right in Lender's discretion,
subject to availability hereunder on behalf of and without notice to Borrower,
to make and use advances to pay Lender for any amounts due to Lender pursuant to
this Agreement or otherwise, to cure any default hereunder, notwithstanding the
expiration of any applicable cure period.
5 REPRESENTATIONS AND WARRANTIES OF BORROWERS AND GUARANTOR.
5.1 REPRESENTATIONS AND WARRANTIES. Borrower and Guarantor hereby
continuously represent and warrant to Lender as follows:
A. Borrower is a corporation duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation, is duly
qualified to do business and is in good standing as a foreign corporation in all
states where such qualification is required, has all necessary corporate power
and authority to enter into this Agreement and each of the documents and
instruments relating hereto and to perform all of its obligations hereunder and
thereunder.
B. Borrower operates its business only under the assumed names
(SCHEDULE SECTION 5.1.) and has not used any other assumed name for the
operation of its business activities for the previous seven (7) years.
C. Borrower has all requisite corporate right and power and is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and all documents and instruments relating hereto and this Agreement
and all documents and instruments relating hereto are the legal, valid and
binding obligations of Borrower and are enforceable against Borrower in
accordance with their terms.
D. Each Guarantor is competent to enter into this Agreement and the
Guaranty and to perform all of Guarantor's obligations thereunder.
E. The execution, delivery and performance by Borrower of this
Agreement does not and shall not (i) violate any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to Borrower; (ii) violate any provision
of its Articles of Incorporation or Bylaws; or (iii) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which Borrower is a party or by which it
or any of its assets or properties may be bound or affected; and Borrower is not
in default of any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, agreement. lease or
instrument.
F. No consent, approval, license, exemption of or filing or
registration with, giving of notice to, or other authorization of or by, any
court, administrative agency or other governmental authority is or shall be
required in connection with the
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execution, delivery or performance by Borrower for the valid consummation of the
transactions contemplated by this Agreement.
G. No event has occurred and is continuing which constitutes a Default
or an Event of Default, as defined in this Agreement. There is no action, suit,
proceeding or investigation pending or threatened against or affecting Borrower
before or by any court, administrative agency or other governmental authority
that brings into question the validity of the transactions contemplated hereby,
or that might result in any material adverse change in the businesses, assets,
properties or financial conditions of Borrower or Guarantor.
H. Borrower and/or Guarantor are not in default in the payment of any
taxes levied or assessed against either of them or any of their assets or
properties, except for taxes being contested in good faith and by appropriate
proceedings.
I. Borrower and Guarantor have good and marketable title to their
assets and properties as reflected in their financial statements furnished to
lender.
J. Each of the financial statements furnished to Lender by the Borrower
and Guarantor was prepared in accordance with GMP and fairly and accurately
reflects their financial condition as of the date thereof; and each hereby
certifies that there have been no material adverse changes in their condition,
financial or otherwise. since the date of such statements, and there are no
contingent liabilities not provided for or disclosed in such statements.
K. Neither this Agreement, any Availability Report or any statement or
document referred to herein or delivered to Lender by Borrower and/or Guarantor
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements made herein or therein not misleading.
L. Borrower has good, indefeasible and merchantable title to and
ownership of the Collateral, free and clear of all liens, claims, security
interests and encumbrances, except those of Lender and except where such liens,
claims, charges, security interests and encumbrances are removed
contemporaneously with the execution of this Agreement or are subordinate to
those of Lender, in a form and substance acceptable to Lender.
M. All books, records and documents relating to the Collateral are and
shall be genuine and in all respects what they purport to be; the original
amount and the unpaid balance of each Receivable shown on the books and records
of Borrower and in the schedules represented as owing by each Account Debtor is
and shall be the correct amount actually owing or to be owing by such Account
Debtor at maturity; each Account Debtor liable upon the Receivables has and
shall have capacity to contract; Borrower has no knowledge of any fact which
would impair the validity or collectibility of any of the Receivables; and the
payments shown to have been made by each Account Debtor on the books and records
of Borrower shall reflect the amounts of and dates on which said payments were
actually made.
N. Borrower has places of business only at the locations (SCHEDULE
SECTION 3.2.). Borrower shall not begin or do business (either directly or
through subsidiaries) at other locations or cease to do business at any of the
above locations or at Borrower's principal place of business without first
notifying Lender.
O. The present value of all benefits vested under all Plans of Borrower
or any Commonly Controlled Entity (based on the assumptions used to fund the
Plans) did not, as of the last annual valuation date (which in case of any Plan
was not earlier than December 31, 1982) exceed the value of the assets of the
Plans applicable to such vested benefits.
P. The liability to which Borrower or any Commonly Controlled Entity
would become subject under Sections 4063 or 4064 of ERISA if Borrower or any
Commonly Controlled Entity were to withdraw from all Multi-employer Plans or if
such Multi- employer Plans were to be terminated as of the valuation date most
closely preceding the date hereof, is not in excess of One Thousand Dollars
($1,000.00);
Q. Borrower is not engaged nor shall it engage, principally or as one
of its important activities, in a business of extending credit for the
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purpose of "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulations G or X of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect. No part of the proceeds of any advances hereunder shall be used for
"purchasing" or "carrying" "margin stock" as so defined or for any purpose which
violates, or which would be inconsistent with, the provisions of the Regulations
of such Board of Governors. If requested by Lender, Borrower shall furnish to
Lender a statement in conformity with the requirement of Federal Reserve Form
G-3 referred to in said Regulation G to the foregoing effect. All of the
outstanding securities of Borrower have been offered, issued, sold and delivered
in compliance with, or are exempt from, all federal and state laws and rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities.
R. Borrower is not an "investment company" or a company "controlled" by
an "investment company," within the meaning of the Investment Company Act of
1940, as amended.
S. Each of the Exhibits and Schedules to this Agreement contain true,
complete and correct information.
T. To the best of Borrower's knowledge, the land and improvements owned
or leased by Borrower for use in its business operations are free of dangerous
levels of contaminates, oils, asbestos, radon, PCB's, hazardous substances or
waste as defined by federal, state or local environmental laws, regulations or
administrative orders or other materials, the removal of which is required or
the maintenance of which is prohibited, regulated or penalized by any federal,
state or local governmental authority.
U. Borrower is solvent, generally able to pay its obligations as they
become due, has sufficient capital to carry on its business and transactions and
all businesses and transactions in which it intends to engage, and the current
value of Borrower's assets, at fair saleable valuation, exceeds the sum of its
liabilities. Borrower shall not be rendered insolvent by the execution and
delivery of the Loan Documents and the consummation of the transactions
contemplated thereby and the capital remaining in Borrower is not now and shall
not foreseeable become unreasonably small to permit Borrower to carry on its
business and transactions and all businesses and transactions in which it is
about to engage. Borrower does not intend to, nor does it reasonably believe it
shall, incur debts beyond its ability to repay the same as they mature.
V. Upon the funding of the initial advance hereunder and the release of
liens held by the secured creditor receiving payment in full from such initial
advance, Lender has a perfected security interest in favor of Lender in all of
Borrower's right, title and interest in the Collateral, prior and superior to
any other security interest or lien, except any statutory or constitutional lien
for taxes not yet due and payable.
W. There are no material actions, suits or proceedings pending, or
threatened against or affecting the assets of Borrower or the consummation of
the transactions contemplated hereby, at law, or in equity, or before or by any
governmental authority or instrumentality or before any arbitrator of any kind.
Neither Borrower nor Guarantor is subject to any judgment, order, writ,
injunction or decree of any court or governmental agency. There is not a
reasonable likelihood of an adverse determination of any pending proceeding
which would, individually or in the aggregate, have a material adverse effect on
the business operations or financial condition of Borrower.
5.2 WARRANTIES AND REPRESENTATIONS AS TO ELIGIBLE RECEIVABLES. With
respect to Eligible Receivables, Borrower and Guarantor continuously warrant and
represent to Lender that during the term of this Agreement and so long as any of
the Indebtedness remains unpaid: (i) in determining which Receivables are
"Eligible Receivables," Lender may rely upon all statements or representations
made by Borrower; and (ii) those Receivables designated as Eligible Receivables
meet each requirement set forth below at the time any request for advance is
Provided to Lender.
A. The Eligible Receivables are
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genuine; are in all respects what they purport to be; and are evidenced by at
least one executed original instrument, agreement, contract or document which
has been or shall be delivered to Lender;
B. The Eligible Receivables represent undisputed, bona fide
transactions completed in accordance with the terms and provisions contained in
any documents related thereto;
C. The amounts of the face value shown on any schedule of Receivables
provided to Lender, and/or all invoices or statements delivered to Lender with
respect to any Eligible Receivables, are actually and absolutely owing to
Borrower and are not contingent for any reason;
D. No set-offs, counterclaims or disputes as to payments or liability
thereon exist or have been asserted with respect thereto and Borrower has not
made any agreement with any Account Debtor thereunder for any deduction
therefrom, except a discount or allowance allowed by Borrower in the ordinary
course of its business for prompt payment, all of which discounts or allowances
are reflected in the calculation of the outstanding amount of the Receivable;
E. No facts, events or occurrences exist that, in any way, impair the
validity or enforcement thereof or tend to reduce the amount payable thereunder
from the amount of the Receivable shown on any schedule, or on all contracts,
invoices or statements delivered to Lender with respect thereto;
F. All Account Debtors in connection with Eligible Receivables: (i) had
the capacity to contract at the time any contract or other document giving rise
to the Receivable was executed; and (ii) generally have the ability to pay their
debts as become due;
G. Within Borrower's knowledge, no proceedings or actions are
threatened or pending against any Account Debtor that might result in any
material adverse change in the Account Debtor's financial condition;
H. The Eligible Receivables have not been assigned or pledged to any
other person or entity;
I. The goods giving rise to the Eligible Receivables are not, and were
not at the time of the sale, rental and/or lease thereof, subject to any lien,
claim, encumbrance or security interest except those of Lender, those removed or
terminated prior to the date hereof or those subordinated to Lender's security
interest, by a subordination and standstill agreement acceptable to Lender;
J. The End of Month Delinquency set forth in Section 12 of the
Availability Report shall be delivered to Lender by Borrower hereunder as
determined pursuant to the Aging Procedures and Eligibility Test (SCHEDULE
SECTION 1.D.
6 COVENANTS AND OTHER AGREEMENTS
6.1 AFFIRMATIVE COVENANTS. During the term of this Agreement and so
long as any of the Indebtedness remains unpaid, Borrower and Guarantor agree and
covenant, jointly and severally, that they shall:
A. Pay or cause to be paid currently all of their expenses, including
all payments on their obligations whenever due, as well as all payments of any
and all taxes of whatever nature when due. This provision shall not apply to
taxes or expenses which are due, but which are challenged in good faith.
B. Maintain, preserve, and protect the Collateral, including, but not
limited to, keeping documents, instruments or other written records otherwise
evidencing the Collateral in a fire proof cabinet;
C. Furnish to Lender written notice as to the occurrence of any Default
or Event of Default hereunder;
D. Furnish to Lender notice of: (i) any development related to the
business, financial condition, properties or assets of Borrower or Guarantor,
that would have or has a materially adverse affect on such business, financial
condition, properties or assets, or ability to perform their obligations under
this Agreement and (ii) any
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material and adverse litigation or investigation to which either of them may be
a party.
E. Carry on and conduct their business in the same manner and in the
same fields of enterprise as they are presently engaged, and Borrower shall
preserve its corporate existence, licenses or qualifications as a domestic
corporation in the jurisdiction of its incorporation and as a foreign
corporation in every jurisdiction in which the character of its assets or
properties or the nature of the business transacted by it at any time makes
qualification as a foreign corporation necessary, and to maintain all other
material corporate rights and franchises, provided, however, nothing herein
shall be construed to prevent Borrower from closing any retail location in the
good faith exercise of its business judgment.
F. Comply, and cause each affiliate to comply, with all statutes,
governmental rules and regulations applicable to them.
G. Permit and authorize Lender, without notifying Borrower or
Guarantor, to make such inquiries through business credit or other credit
reporting services concerning Borrower or Guarantor as Lender shall deem
appropriate.
H. Borrower shall take all action necessary to assure that there will
be no material adverse change to Borrower's business by reason of the advent of
the year 2000, including without limitation that all computer-based systems,
embedded microchips and other processing capabilities effectively recognize and
process dates after December 1, 1999. At Lender's request, Borrower shall
provide to Lender assurance reasonably acceptable to Lender that Borrower's
computer-based systems, embedded microchips and other processing capabilities
are year 2000 compatible.
6.2 NEGATIVE COVENANTS. During the term of this Agreement and until the
Indebtedness secured hereby has been paid in full, Borrower and Guarantor,
excluding Finantra Capital, Inc.. Amer.-Cap Consumer Finance Group, Inc. and
Travelers Acquisition Corporation, covenant and agree that they shall , without
Lender's prior written consent, which covenant shall not be unreasonably
withheld, do any of the following:
A. Incur or permit to exist any mortgage, pledge, the retention lien or
other lien, encumbrance or security interest with respect to the Collateral now
owned or hereafter acquired by Borrower, except liens in favor of Lender.
B. Delegate, transfer or assign any of their obligations or liabilities
under this Agreement, or any part thereof, to any other person or entity.
C. Be a party to or participate in: (i) any merger or consolidation;
(ii) any purchase or other acquisition of all or substantially all of the assets
or properties or shares of any class of, or any partnership or joint venture
interest in, any other corporation or entity; (iii) any sale, transfer,
conveyance or lease of all or substantially all of Borrower's assets or
properties; or (iv) any sale or assignment with or without recourse of any
Receivables.
D. Cause or take any of the following actions with respect to Borrower:
(i) redeem, retire, purchase or otherwise acquire, directly or indirectly, any
of Borrower's outstanding securities; or (ii) purchase or acquire, directly or
indirectly, any shares of capital stock, evidences of indebtedness or other
securities of any person or entity.
E. Amend, supplement or otherwise modify Borrowers Articles of
Incorporation or Bylaws which would have a material adverse affect on the
condition and operations, prospects or financial condition of the Borrower.
F. Incur, assume or suffer to exist any debt (including capitalized
leases) other than (i) the Indebtedness, (ii) accounts payable incurred in the
ordinary course of business, (iii) Subordinated Debt, or (iv) other Debt
consented to in writing by Lender.
G. Directly or indirectly make loans to, invest in, extend credit to,
or guaranty the debt of any person or entity, other than in the ordinary course
of Borrower's business.
H. Amend, modify, or otherwise change in any respect any material
agreement,
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instrument, or arrangement (written or oral) by which Borrower, or any of its
assets, are bound.
I. Allow Borrower to be owned and controlled directly or indirectly by
any person or entity other than the shareholders and senior management that own
and control Borrower as of the date hereof.
6.3 JOINT NEGATIVE COVENANTS. During the term of this Agreement until
the Indebtedness secured hereby has been paid in full, all Borrowers, as defined
in (SCHEDULE SECTION 1.A.) jointly covenant and agree that they shall not, allow
or permit any of the following, which covenants shall be applied in the
aggregate by combining each element of such financial covenants for each
Borrower:
A. Permit the Leverage Ratio to be more than the Leverage Ratio Limit
(SCHEDULE SECTION 6.3.A.).
B. Permit the Net Income to be less than the Minimum Net Income
requirement (SCHEDULE SECTION 6.3.B.).
C. Make or allow Distributions, in the aggregate, to exceed the
distributions limitation (SCHEDULE SECTION 6.3.C.); provided, however, that no
Distribution shall be made if a Default or an Event of Default shall exist.
6.4 REPORTING REQUIREMENTS AND ACCOUNTING PRACTICES. Borrower shall
maintain (i) a modem system of accounting in accordance with GAAP or other
systems of accounting acceptable to Lender and (ii) standard operating
procedures applicable to all of its locations with respect to the handling and
disposition of cash receipts and other proceeds of Collateral on a daily basis,
including the depositing thereof, aging of account receivables, record keeping
and such other matters as Lender may reasonably request. For the purpose of
determining compliance with the covenants and representations in the Loan
Documents, Lender shall have the right to recast any financial statement or
report presented to Lender by or on behalf of Borrower to comply with GAAP.
6.5 ACCOUNT DEBTORS' ADDRESSES. Borrower agrees to furnish to Lender
from time to time, promptly upon request, a list of all Account Debtors' names
and their most current addresses. Borrower agrees that Lender may from time to
time, consistent with standard or generally accepted auditing practices, verify
the validity, amount and any other matters relating to the Receivables by means
of mail, telephone or otherwise, in the name of Borrower and upon the occurrence
of an Event of Default in the name of Lender or such other name as Lender may
choose.
6.6 FINANCIAL REPORTS. Borrower shall furnish to Lender the following
financial statements and reports, in a form satisfactory to Lender:
A. As soon as practicable and in any event mailed within twenty (20)
days after the end of each fiscal month: (i) "Availably Reporting in the form
and substance of Exhibit "D" attached hereto; (ii) Statement of Accounts
Receivable showing the detailed aging of each Receivable according to the
procedures (SCHEDULE SECTION 1.D.); (iii) a monthly Profit and Loss Statement
and Balance Sheet, certified by Borrower's chief financial officer or equivalent
duly elected officer of Borrower; and (iv) Schedule of Receivables and
Assignment in the form and substance of Exhibit "E" attached hereto.
B. Within ninety (90) days after the end of each of Borrower's fiscal
years, annual financial statements, or consolidated statements, as the case may
be, of Borrower prepared in accordance with GAAP, consistently applied and
certified by its chief financial officer or equivalent duly elected officer. The
financial statements shall be prepared by and under the method acceptable to
Lender and shall consist of a balance sheet as of the end of such fiscal year
and comparative statements of earnings, cash flows, and change in stockholders'
equity for such fiscal year (SCHEDULE SECTION 6.6.).
C. With reasonable promptness, such other financial data as Lender may
reasonably request, including but not limited to tax returns, business plans and
reports.
Together with each delivery of financial
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statements required by subsections A, B and C above, Borrower shall deliver to
Lender and shall cause each of its subsidiaries to deliver to Lender, if
requested by Lender, a certificate in form satisfactory to Lender, certifying
that no Default or Event of Default exists under this Agreement as of the date
of such certificate, or if a Default or an Event of Default exists, specifying
the nature and period of existence thereof and what action Borrower proposes to
take with respect thereto.
6.7 FINANCIAL STATEMENTS OF GUARANTORS. Each of the Guarantors
(SCHEDULE SECTION 1.E.) shall furnish to Lender annual personal financial
statements in form reasonably satisfactory to Lender and certified by such
Guarantor and a copy of each Guarantor's personal Federal Income Tax Return
(including all schedules thereto and amendments thereof) filed during the term
hereof, within thirty (30) days of the filing of the same.
6.8 NOTICE OF CHANGES. Borrower shall promptly notify Lender in writing
of any change of its officers, directors or key employees; change of location of
its principal offices, change of location of any of its principal assets; any
acquisition, disposition or reorganization of any corporate subsidiary,
affiliate or parent of Borrower; change of Borrower's name; death or withdrawal
of any partner (if Borrower is a partnership); any sale or purchase out of the
regular course of Borrower's business; litigation of which Borrower or a
Guarantor is a party; and any other material change in the business or financial
affairs of Borrower.
6.9 DELIVERY OF RECEIVABLE DOCUMENTS; REPORTING. Upon Lender's request,
Borrower hereby agrees to deliver all Receivable documentation evidencing such
Receivables (the original contract or agreement that evidences Account Debtor's
primary payment obligation to Borrower ("Payment Agreement") and a certificate
of title or application therefore in the name of Account Debtor, with the
Borrower as the only secured party, of the collateral that secures such payment
obligation to Lender ["Certificate of Title"), no less often than on the
twentieth (20th) day of each calendar month during the term of this Agreement.
If such evidence of title of the collateral securing a pledged Receivable is not
delivered to Lender with the original Receivable documentation, Borrower shall
deliver evidence that such original title has been applied for in the name of
the respective Account Debtor with Borrower as the only secured party ("White
Slip"), in a form and substance satisfactory to Lender, and such evidence of
title shall be delivered to Lender not later than fifteen (15) days after such
evidence of title is received by Borrower. Any Receivable for which Borrower has
not delivered the original Payment Obligation and the Certificate of Title or
White Slip, such Receivables shall not be an Eligible Receivable hereunder.
Borrower will deliver monthly, with the delivery of the documentation evidencing
the Receivables above, a "Vehicle Title Exception Report", in the form and
substance of the Exhibit "F" attached hereto, listing all Certificates of Titles
which have not been received by Lender or are due from the appropriate state
motor vehicle department.
7 EVENTS OF DEFAULT AND REMEDIES
7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
A. If any payment of principal or interest or any other amount due
Lender is not paid within five (5) days after the same shall be due and payable.
B. If Borrower or Guarantor fails or neglects to perform, keep or
observe any of the terms, provisions, conditions or covenants, contained in this
Agreement, any of the other Loan Documents or any other agreement or document
executed in connection with the transactions contemplated by this Agreement or
if any representation, warranty or certification made by Borrower herein or in
any certificate or other writing delivered pursuant hereto shall prove to be
continue in any material respect as of the date upon which the same was made or
at any time thereafter, and the same is not cured to Lender's satisfaction
within ten (10) days after Lender has given written notice to Borrower
identifying such default.
C. If the validity or enforceability of any lien, charge, security
interest, mortgage, pledge or other encumbrance granted to Lender to secure the
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Indebtedness shall be impaired in any respect or to any degree, for any reason,
or if any other lien, charge, security interest, mortgage, pledge or other
encumbrance shall be created or imposed upon the Collateral unless such lien,
charge, security interest, mortgage, pledge or other encumbrance is subordinate
to that of Lender, pursuant to a subordination and standstill agreement in a
form and substance acceptable to Lender.
D. If any judgment against Borrower not covered by insurance in an
amount in excess of Twenty-Five Thousand Dollars ($25,000.00), or any attachment
or other levy against the properties or assets of Borrower with respect to a
claim for any amount in excess of Twenty-Five Thousand Dollars ($25,000.00),
remains unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a
period of thirty (30) days.
E. Default in the payment of any sum due under any instrument of
indebtedness for borrowed money owed by Borrower or any Guarantor to any person,
or any other default under such instrument of indebtedness for borrowed money
that permits such indebtedness for borrowed money to become due prior to its
stated maturity or permits the holders of such indebtedness for borrowed money
to elect a majority of the board of directors or manage the business of Borrower
or any Guarantor.
F. If a court or governmental authority of competent jurisdiction shall
enter an order, judgment or decree appointing, with or without Borrower's or
Guarantor's consent or acquiescence, a receiver, custodian, liquidator, trustee
or other officer with similar powers of Borrower or Guarantor or of the whole or
any substantial part of its properties or assets, or approving a petition filed
against Borrower or Guarantor seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the federal
bankruptcy laws or any other applicable law, and such order, judgment or decree
shall remain unvacated, unstayed or not set aside for an aggregate of thirty
(30) days (whether or not consecutive) from the date of the entry thereof or if
any petition seeking such relief shall be filed against Borrower or Guarantor
and such petition shall not be dismissed within thirty (30) days.
G. An event shall occur which shall have a material adverse affect on
the condition and operations, prospects or financial condition of the Borrower
or Guarantor.
H. If either Borrower or Guarantor shall: (i) tee generally not paying
their respective debts as they become due; (ii) file a petition in bankruptcy or
a petition to take advantage of any insolvency act or other act for the relief
or aid of debtors; (iii) make an assignment for the benefit of their creditors;
(iv) consent to or acquiesce in the appointment of a receiver, custodian,
liquidator, trustee or other officer with similar powers of either of their
properties or assets; (v) file a petition or answer seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the federal bankruptcy laws or any other applicable law; (vi) be
adjudicated insolvent or be liquidated; (vii) admit in writing either of their
inability to pay debts as they become due; (viii) voluntarily suspend
transaction of usual business; or (ix) take any action, corporate or otherwise,
for the purpose of any of the foregoing.
I. Any of the following shall occur: (i) entry of a court order that
enjoins, restrains or in any way prevents Borrower from conducting all or any
material part of its business affairs in the ordinary course of business or (ii)
withdrawal or suspension of any license or authority required for the conduct of
any material part of Borrower's business.
J. If any Guarantor gives notice of termination or terminates his
liability pursuant to the Guaranty Agreement executed in conjunction with this
Agreement.
7.2 ACCELERATION OF THE INDEBTEDNESS. Upon and after an Event of
Default, the outstanding principal balance together with all accrued but unpaid
interest on the Indebtedness and all other sums due and payable by Borrower to
Lender may, at the option of Lender and without demand, presentment, notice of
dishonor, notice of intent to demand or accelerate payment, diligence in
collecting, grace, notice and protest or a legal process of any kind, all of
which are hereby expressly waived, be declared, and immediately shall become due
and payable.
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7.3 LOUISIANA CONFESSION OF JUDGMENT. In the event that Borrower is
domiciled in, or Collateral is located in, Louisiana, and to the extent of such
domicile or location where Louisiana law is applicable to this Agreement:
A. Borrower hereby CONFESSES JUDGMENT, up to the full amount of
principal, interest and attorney's fees and for any sums that Lender may advance
during the life of this Agreement for the payment of premiums of insurance,
taxes and assessments or for the protection and preservation of this Agreement
as authorized elsewhere in this Agreement, and does by these presents, consent,
agree and stipulate that, in the event of any payment of principal or interest
due hereunder not being promptly and fully paid when the same becomes due and
payable, or in the event of failure to comply with any of the obligations set
forth herein, the Indebtedness shall, at the option of Lender become due and
payable, and it shall be lawful for Lender, without making a demand and without
notice or putting in default, the same being hereby expressly waived, to cause
all and singular the Collateral herein secured to be seized and sold by
executory process issued by any competent court or to proceed with enforcement
of its security interest in any other manner provided by law; and
B. Borrower hereby expressly waives: (a) the benefit of appraisement,
as provided in Articles 2332,2336,2723, and 2724, Louisiana Code of Civil
Procedure, and all other laws conferring the same; (b) the demand and three (3)
days delay according by Articles 2639 and 2721, Louisiana Code of Civil
Procedure, and all other laws conferring the same; (c) the notice of seizure
required by Articles 2293 and 2721, Louisiana Code of Civil Procedure, and all
other laws conferring the same; (d) the three (3) days delay provided by
Articles 2331 and 2722, Louisiana Code of Civil Procedure, and all other laws
conferring the same; and (e) the benefit of the other provisions of Articles
2331, 2722 and 2723, Louisiana Code of Civil Procedure, and all other Articles
not specifically mentioned above; and Borrower expressly agrees to the immediate
seizure of the Collateral in the event of suit thereon.
7.4 REMEDIES. Upon and after an Event of Default, Lender shall have the
following rights and remedies, which individual remedies shall be non-exclusive,
cumulative and in addition to each and every other remedy set forth in the Loan
Documents or in this Agreement:
A. All of the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in the State of Arizona, as amended, or other
applicable law.
B. The right, to the fullest extent permissible by law, to: (i) enter
upon the premises of Borrower, or any other place or places where the Collateral
is located and kept, without any obligation to pay rent to Borrower, through
self-help and without judicial process, without first obtaining a final judgment
or giving Borrower notice and opportunity for a hearing on the validity of
Lender's claim, and remove the Collateral therefrom to the premises of Lender or
any agent of Lender, for such time as Lender may desire, in order to effectively
collect and liquidate the Collateral; and/or (ii) require Borrower to assemble
the Collateral and make it available to Lender at a place to be designated by
Lender, in Lender's reasonable discretion.
C. The right to sell or otherwise dispose of any or all Collateral in
its then condition at public or private sale or sales, in lots or in bulk, for
cash or on credit, all as Lender, in its discretion, may deem advisable;
provided that such sales may be adjourned from time to time with or without
notice. The requirement of reasonable notice to Borrower of the time and place
of any public sale of the Collateral or of the time after which any private sale
either by Lender or at its option, a broker, or any other intended disposition
thereof is to be made, shall be met if such notice is mailed, postage prepaid,
to Borrower at the address of Borrower designated herein at least ten (10)
Business Days before the date of any public sale or at least ten (10) Business
Days before the time after which any private sale or other disposition is to be
made unless applicable law requires otherwise.
Lender shall have the right to conduct such sales on Borrower's
premises or elsewhere and shall have the right to use Borrower's premises
without charge for such sales for such time or times as Lender
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may see fit. Lender is hereby granted a license or other right to use, without
charge, Borrower's labels, copyrights, rights of use of any name, trade secrets,
trade names, trademarks and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in advertising for sale and selling
any Collateral and Borrower's rights under ail licenses and all franchise
agreements shall inure to Lender's benefit. Lender agrees to hold Borrower
harmless from any liability arising out of Lender's use of Borrower's premises,
labels, copyrights, rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any property of a similar nature as it
pertains to advertising for sale, marshaling or selling the Collateral.
Lender shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Lender may purchase all or part of the Collateral at public or, if permitted
by law, private sale and, in lieu of actual payment of such purchase price, may
set off the amount of such price against the Indebtedness owing by Borrower to
Lender. The proceeds realized from the sale of any Collateral shall be applied
first to reasonable costs and expenses, attorney's fees, expert witness fees
incurred by Lender for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; second to all payments,
other than principal and interest, due under this Agreement; third to interest
due upon any of the Indebtedness; fourth to the principal balance owing on the
Indebtedness; and fifth the remainder, if any, to Borrower, its successors or
assigns, or to whomsoever may be lawfully entitled to receive the same. If any
deficiency shall arise, Borrower shall remain liable to Lender therefor.
D. In the event that Borrower is domiciled in, or Collateral is located
in, Louisiana, and to the extent of such domicile or location where Louisiana
law is applicable to this Agreement, the right to cause all and singular the
hereinabove described Collateral to be seized and sold under executory process
without appraisement, appraisement being hereby expressly waived, as an entirety
or in parcels, as Lender may determine, to the highest bidder for cash.
E. The right to appoint or seek appointment of a receiver, custodian or
trustee of Borrower or any of its properties or assets pursuant to court order.
F. The right to cease al advances hereunder.
G. All other rights and remedies that Lender may have at law or in
equity.
7.5 NO WAIVER. No delay, failure or omission of Lender to exercise any
right upon the occurrence of any Default or Event of Default shall impair any
such right or shall be construed to be a waiver of any such Default or Event of
Default or an acquiescence therein. Lender may, from time to time, in a writing
waive compliance by the other parties with any of the terms of this Agreement
and its rights and remedies upon any Default or Event of Default, and, Borrower
agrees that no waiver by Lender shall ever be legally effective unless such
waiver shall be acknowledged and agreed in writing by Lender. No waiver of any
Default or Event of Default shall impair any right or remedy of Lender not
specifically waived. No single, partial or full exercise of any right of Lender
shall preclude any other or further exercise thereof. No modification or
amendment of or supplement to this Agreement or any other written agreement
between the parties hereto shall be valid or effective (or serve as a basis of
reliance by way of estoppel) unless the same is in writing and signed by the
party against whom it is sought to be enforced. The acceptance by Lender at any
time and from to time of a partial payment or partial performance of any of
Borrower's obligations set forth herein shall not be deemed a waiver, reduction,
modification or release from any Default or Event of Default then existing. No
waiver by Lender of any Default or Event of Default shall be deemed to be a
waiver of any other existing or any subsequent Default or Event of Default.
7.6 APPLICATION OF PROCEEDS. After an Event of Default shall have
occurred and is continuing, all amounts received by Lender on account of any
Indebtedness and realized by Lender with respect to the Collateral, including
any sums which may be held by Lender, or the proceeds of any thereof, shall be
applied in the same manner as proceeds of Collateral as set forth in Section
7.4.C.
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hereof.
7.7 APPOINTMENT OF LENDER AS ATTORNEY-IN-FACT. Borrower irrevocably
designates, makes, constitutes and appoints Lender (and all persons reasonably
designated by Lender), with full power of substitution, as Borrower's true and
lawful attorney-in-fact (and not agent-in-fact) and Lender, or Lender's agent,
may, without notice to Borrower, and at such time or times thereafter as Lender
or said agent, in its discretion, may determine, in Borrower's or Lender's name,
at no duty or obligation on Lender, do the following:
A. ALL acts and things necessary to fulfill Borrower's administrative
duties pursuant to this Agreement including, but not limited to, the execution
of financing statements;
B. Upon the occurrence of any Default, all acts and things necessary to
fulfill Borrower's obligations under this Agreement and the Loan Documents,
except as set forth in Section 7.7.C below, at the cost and expense of Borrower.
C. In addition to, but not in limitation of the foregoing, at any time
or times upon the occurrence of an Event of Default, Lender shall have the
right: (i) to enter upon Borrower's premises and to receive and open all mail
directed to Borrower and remove all payments to Borrower on the Receivables;
however, Lender shall turn over to Borrower all of such mail not relating to
Receivables; (ii) in the name of Borrower, to notify the Post Office authorities
to change the address for the delivery of mail addressed to Borrower to such
address as Lender may designate (notwithstanding the foregoing, for the purposes
of notice and service of process to or upon Borrower as set forth in this
Agreement, Lender's rights to change the address for the delivery of mail shall
not give Lender the right to change the address for notice and service of
process to or upon Borrower in this Agreement); (iii) demand, collect, receive
for and give renewals, extensions, discharges and releases of any Receivable;
(iv) institute and prosecute legal and equitable proceedings to realize upon the
Receivables; (v) settle, compromise, compound or adjust claims in respect of any
Receivable or any legal proceedings brought in respect thereof; (vi) generally,
sell in whole or in part for cash, credit or property to others or to itself at
any public or private sale, assign, make any agreement with respect to or
otherwise deal with any of the Receivables as fully and completely as though
Lender were the absolute owner thereof for all purposes, except to the extent
limited by any applicable laws and subject to any requirements of notice to
Borrower or other persons under applicable laws; (vii) take possession and
control in any manner and in any place of any cash or non-cash items of payment
or proceeds of Receivables; (viii) endorse the name of Borrower upon any notes,
acceptances, checks, drafts, money orders, chattel paper or other evidences of
payment of Receivables that may come into Lender's possession; and (ix) sign
Borrower's name on any instruments or documents relating to any of the
Collateral, or on drafts against Account Debtors; .
The appointment of Lender as attorney-in-fact for Borrower is coupled
with an interest an is irrevocable.
8 EXPENSES AND INDEMNITIES
8.1 REIMBURSEMENT FOR EXPENSES. Upon the occurrence of a Default, or as
otherwise set forth in the SCHEDULE SECTION 8.1., Borrower agrees to reimburse
Lender, upon demand, for all reasonable out-of-pocket expenses (including costs
of establishing and maintaining accounts or arrangements set forth in Section
3.10, attorney's fees, expert witness fees and legal expenses) incurred in
connection with the evaluation of collateral, preservation of collateral, or
collection of the indebtedness.
8.2 LENDER'S EXPENSES AND ATTORNEY'S FEES. UPON AND AFTER AN EVENT OF
DEFAULT, LENDER SHALL BE ENTITLED TO RECOVER FROM BORROWER AND GUARANTORS ALL OF
LENDER'S ATTORNEY'S FEES AND REASONABLE COSTS AND EXPENSES INCURRED IN THE
EXERCISE OF LENDER'S RIGHTS SET FORTH IN THIS AGREEMENT, AND ALL DAMAGES
SUSTAINED BY LENDER BY REASON OF MISREPRESENTATION, BREACH OF WARRANTY OR BREACH
OF COVENANT OF BORROWER HEREIN, EXPRESSED OR IMPLIED, WHETHER CAUSED BY THE ACTS
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OR DEFAULTS OF BORROWER, ACCOUNT DEBTORS OR OTHERS; INCLUDING WITHOUT
LIMITATION, ALL ATTORNEY'S FEES ARISING FROM SUCH SERVICES, EXPERT WITNESS FEES
AND ANY EXPENSES, COSTS AND CHARGES RELATING THERETO, AND ALL OF THE FOREGOING
SHALL CONSTITUTE PART OF THE INDEBTEDNESS SECURED BY THE COLLATERAL AND SHALL BE
PAYABLE ON DEMAND.
8.3 GENERAL INDEMNIFICATION.. Borrower hereby agrees to indemnify and
hold Lender harmless from and against any and all claims, liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements (collectively "Claim" or "Claims") of any kind or
nature whatsoever, asserted by any party other than Borrower, or with respect to
Borrower only as otherwise provided in this Agreement or pursuant to applicable
law regarding Lender's obligations to Borrower, which may be imposed on,
incurred by or asserted against Lender, or any of its officers, directors,
employees or agents (including accountants, attorneys or other professionals
hired by Lender) in any way relating to or arising out of the Loan Documents or
any action taken or omitted by Lender, or any of its officers, directors,
employees or agents (including accountants, attorneys or other professionals
hired by Lender) under the Loan Documents, except to the extent such indemnified
matters are finally found by a court to be caused by Lender's gross negligence
or wilful misconduct.
9 MISCELLANEOUS
9.1 NOTICES. All notices, demands, billings, requests and other written
communications hereunder shall be deemed to have been properly given: (i) upon
personal delivery; (ii) on the third Business Day following the day sent, if
sent by registered or certified mail; (iii) on the next Business Day following
the day sent, if sent by overnight express courier; or (iv) on the day sent or
if such day is not a Business Day on the next Business Day after the day sent if
sent by telecopy providing the receiving party has acknowledged receipt by
return telecopy, in each case, to Lender, Borrower or Guarantors at its address
and/or telecopy number as set forth in this Agreement or SCHEDULE SECTION 9.1,
or at such other address and/or telecopy number as either party may designate
for such purpose in a written notice given to the other party.
Lender shall have the right, on or after initial funding pursuant to
the terms of this Agreement, to issue a press release or other brochure
announcing the consummation of the Loan Documents and to distribute that
information to third parties in the normal course of Lender's business, at no
cost to Borrower.
9.2 PARTICIPATIONS. Borrower and Guarantors acknowledge and agree that
Lender may from time to time sell or offer to sell interests in the Indebtedness
and the Loan Documents to one or more participants. Borrower and Guarantors
authorize Lender to disseminate any information it has pertaining to the
Indebtedness, including without limitation, complete and current credit
information on Borrower and any of its principals and Guarantors, to any such
participant or prospective participant.
9.3 SURVIVAL OF AGREEMENTS. All of the various representations,
warranties, covenants and agreements of Borrower (including without limitation,
any agreements to pay costs and expenses and to indemnify Lender) in the Loan
Documents shall survive the execution and delivery of the Loan Documents and the
performance under such Loan Documents, and shall further survive until one (1)
year and one (1) month after all of the Indebtedness is paid in full to Lender
and all of Lender's obligations to Borrower under the Loan Documents are
terminated.
9.4 NO OBLIGATION BEYOND MATURITY. Borrower agrees and acknowledges
that upon the Maturity Date, Lender shall have no obligation to renew, extend,
modify or rearrange the Loan and shall have the right to require all amounts due
and owing under the Loan to be paid in full upon such date.
9.5 PRIOR AGREEMENTS SUPERSEDED. This Agreement constitutes the sole
and only agreement of the parties hereto and supersedes any prior understandings
or written or oral agreements between the parties respecting the subject
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matter of this Agreement. No provision of this Agreement or other document or
instrument relating hereto may be modified, waived or terminated except by
instrument in writing executed by the party against whom a modification, waiver
or termination is sought to be enforced.
9.6 PARTIES BOUND. This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns, except as
otherwise expressly provided for herein. Borrower and Guarantor shall not assign
any of their respective rights or obligations pursuant this Agreement.
9.7 NUMBER AND GENDER. Whenever used herein, the singular number shall
include the plural and the plural the singular, and the use of any gender shall
be applicable to all genders. The duties, covenants, obligations and warranties
of Borrower in this Agreement shall be joint and several obligations of Borrower
and of each Borrower if more than one.
9.8 NO THIRD PARTY BENEFICIARY. This Agreement is for the sole benefit
of Lender and Borrower and is not for the benefit of any third party.
9.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original, and
all of which taken together shall constitute but one and the same instrument.
9.10 SEVERABILITY OF PROVISIONS. Any provision which is determined to
be unconscionable, against public policy or any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability with out invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
9.11 HEADINGS. The Article and Section headings used in this Agreement
are for convenience only and shall not affect the construction of this
Agreement.
9.12 SCHEDULES AND EXHIBITS. Any and all exhibits hereto are hereby
expressly incorporated by reference as though fully set forth at that point
verbatim. All terms and provisions as defined or set forth in Article 1 and in
any Schedule are hereby incorporated into and made a part of this Agreement.
Each reference in this Agreement and the Schedule hereto to any information or
definitions contained in Article 1 or the Schedule shall mean and refer to the
information or definitions as set forth in Article 1 and the Schedule unless the
context specifically requires otherwise. Any terms used in Article 1 and in the
Schedule which are not defined shall have the meanings ascribed to such terms,
as of the date of this Agreement, by the Uniform Commercial Code as enacted in
the State of Arizona to the extent the same are defined therein.
9.13 FURTHER INSTRUMENTS. Borrower and Guarantors shall from time to
time execute and deliver, and shall cause each of Borrower's subsidiaries to
execute and deliver, all such amendments, supplements and other modifications
hereto and to the other Loan Documents and all such financing statements or
continuation statements, instruments of further assurance and any other
instruments, and shall take such other actions, as Lender reasonably requests
and deems necessary or advisable in furtherance of the agreements contained
herein.
9.14 GOVERNING LAW. THIS AGREEMENT HAS BEEN EXECUTED AND DELIVERED BY
BORROWER AND GUARANTOR AND ACCEPTED BY LENDER IN MARICOPA COUNTY, ARIZONA AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ARIZONA.
9.15 JURISDICTION AND VENUE. TO INDUCE THE LENDER TO ENTER INTO THIS
AGREEMENT, BORROWER, GUARANTORS AND LENDER IRREVOCABLY
-27-
<PAGE>
AGREE THAT, SUBJECT TO THE LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS IN
ANYWAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT,
THE OTHER LOAN DOCUMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING
SITUS WITHIN THE COUNTY OF MARICOPA, STATE OF ARIZONA. BORROWER, GUARANTORS AND
LENDER HEREBY CONSENT AND SUBMIT TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN SAID COUNTY AND STATE AND WAIVE PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON BORROWER, AND AGREE THAT ALL SUCH SERVICE OF PROCESS
MAY BE MADE BY REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS SET FORTH IN
SCHEDULE SECTION 9.15 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON
ACTUAL RECEIPT THEREOF.
9.16 WAIVER. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT AND TO
THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, BORROWER AND EACH GUARANTOR HEREBY
WAIVES (i) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST,
DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, AND ONE OR MORE
EXTENSIONS OR RENEWALS OF ANY OR ALL ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS,
INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY THE LENDER ON
WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS
WHATEVER THE LENDER MAY DO IN THIS REGARD; (ii) ALL RIGHTS TO NOTICE AND HEARING
PRIOR TO THE LENDER'S TAKING POSSESSION OR CONTROL OF, OR THE LENDER'S REPLEVIN,
ATTACHMENT OR LEVY ON OR OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT
BE REQUIRED BY ANY COURT PRIOR TO ALLOWING THE LENDER TO EXERCISE ANY OF THE
LENDER'S REMEDIES; AND (iii) THE BENEFIT OF ALL VALUATION, APPRAISEMENT OR
EXEMPTION LAWS.
9.17 WAIVER OF RIGHT TO TRIAL BY JURY. LENDER, BORROWER AND GUARANTORS
HEREBY COVENANT AND AGREE THAT IN ANY SUIT, ACTION OR PROCEEDING IN RESPECT OF
ANY MATTER ARISING OUT OF THIS AGREEMENT, THE DOCUMENTS EXECUTED IN CONNECTION
HEREWITH, ANY WRITTEN AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER NOW EXISTING
OR HEREAFTER ARISING OR IN ANY WAY RELATED TO, CONNECTED WITH OR INCIDENTAL TO
THE DEALINGS OF THE PARTIES HERETO OR TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE, TRIAL SHALL BE TO A
COURT OF COMPETENT JURISDICTION AND NOT TO A JURY: LENDER, BORROWER AND EACH
GUARANTOR HEREBY EXPRESSLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY. ANY
PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
9.18 BINDING ARBITRATION (LIMITED). Any controversy or claim arising
hereunder, except for Borrower's or Guarantor's failure or refusal to make any
payment due to Lender pursuant to the Loan Documents or a controversy or claim
involving Lender's security interest in the Collateral or possession of the
Collateral, shall be determined in arbitration under the commercial Arbitration
rules of the American Arbitration Association in Maricopa County, Arizona.
Lender, Borrower and Guarantor shall be bound by any arbitration award and agree
that judgment upon the award rendered may be entered in any court having
jurisdiction thereof for the purpose of entering and forcing any such award.
9.19 ADVICE OF COUNSEL
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<PAGE>
BORROWER AND EACH GUARANTOR ACKNOWLEDGES THAT THEY HAVE BEEN REPRESENTED AND
ADVISED BY INDEPENDENT LEGAL COUNSEL WITH RESPECT TO THE NEGOTIATION, EXECUTION
AND ACCEPTANCE OF THIS AGREEMENT AND THE TRANSACTION GOVERNED BY THIS AGREEMENT
AND SPECIFICALLY WITH RESPECT TO THE PROVISIONS CONTAINED IN SECTIONS 8.3, 9.14,
9.15, 9.16, 917, 9.18 and 9 20 HEREOF AND HAS RELIED UPON THE ADVICE OF ITS
INDEPENDENT LEGAL COUNSEL IN AGREEING TO THE TERMS AND CONDITIONS HEREIN AND IN
EXECUTING AND DELIVERING THIS AGREEMENT, AND THAT THEY HAVE FREELY AND
VOLUNTARILY ENTERED INTO THIS AGREEMENT AS THE PRODUCT OF ARMS' LENGTH
NEGOTIATIONS.
9.20 TIME OF ESSENCE Time is of the essence for the performance the
obligations set forth in this AQreement and the Loan Documents
(Intentionally Left Blank)
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first set forth above.
BORROWER:
Travelers Acceptance Corporation
By: UnsignVersion
----------------------------------------------
(Signature)
Robert D. Press, Vice President
-29-
<PAGE>
FINOVA
FINANCIAL INNOVATORS
- - --------------------------------------------------------------------------------
Rediscount Finance
FIRST AMENDED -AND RESTATED
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
Co-Borrowers: TRAVELERS ACCEPTANCE CORPORATION
TRAVELERS LEASING CORPORATION
TRACE CREDIT SERVICES, INC.
Address: 2701 LOKER AVENUE WEST, SUITE 100
CARLSBAD. CA 92008
Date: FEBRUARY 1, 2000
This First Amended and Restated Schedule ("First Amended Schedule") is
executed in conjunction with a certain Loan and Security Agreement
("Agreement"), dated September 23, 1999, and as an amendment to and restatement
of that certain ScheduletoLoanandSecurityAgreement,datedSeptember23,
1999("Schedule"),by and between FINOVA Capital Corporation, as Lender, and the
above Borrowers, as Borrowers. All references to Section numbers herein refer to
Sections in the Agreement. The terms and provisions of this First Amended
Schedule shall supersede all the terms and provisions contained in the Schedule.
===============================================================================
1A. BORROWERS
Travelers Acceptance Corporation "TAC" or "Lead Borrower"
Travelers Leasing Corporation "TLC"
Trace Credit Services. Inc. "TCS"
===============================================================================
1.B. MAXIMUM AMOUNT OF AN ELIGIBLE RECEIVABLE (SECTION 1 - ELIGIBLE
RECEIVABLE).
The term "Maximum Amount of an Eligible Receivable" shall mean the
following:
(i) with respect to a Motor Vehicle Receivable, the sum of Fifteen
Thousand Dollars ($15,000.00) Principal Balance of a Motor
Vehicle Receivable remaining due thereon, at any date of
determination, provided, however, that up to an aggregate
outstanding amount of the Principal Balance of a Motor Vehicle
Receivable of all eligible Motor Vehicle Receivables equal to
two percent (2%) of aggregate Principal Balance of a Motor
Vehicle Receivable of all eligible Motor Vehicle Receivables
may exceed the FifteenThousand Dollars ($15,000.00) maximum
Principal Balance of a Motor Vehicle Receivable, provided such
Principal Balance of a Motor Vehicle Receivable does not
exceed Twenty Five Thousand Dollars ($25,000.00);
<PAGE>
(ii) with respect to a Non-Auto Receivable, the sum of Fifteen
Thousand Dollars ($ 15,000.00) Gross Balance of a Non-Auto
Receivable remaining due thereon, at any date of
determination: provided, however, that up to an aggregate
outstanding amount of the Gross Balance of a Non-Auto
Receivable of all eligible Non-Auto Receivables equal to two
percent (2%) of aggregate Gross Balance of a Non-Auto
Receivable of all eligible Non-Auto Receivables may exceed the
Fifteen Thousand Dollars ($15,000.00) maximum Gross Balance of
a Non-Auto Receivable, provided such Gross Balance of a
Non-Auto Receivable does not exceed Fifty Thousand Dollars
($50,000.00); and
(iii) with respect to a Lease Receivable, no maximum amount shall be
applicable.
===============================================================================
1.C. MAXIMUM TERM OF AN ELIGIBLE RECEIVABLE (SECTION 1 - ELIGIBLE
RECEIVABLE).
The term "Maximum Term of an Eligible Receivable" shall mean the
following:
(i) with respect to a Motor Vehicle Receivable, the term of
forty-two (42) months remaining until the due date of such
Eligible Receivable, on any date of determination, provided,
however that up to an aggregate outstanding amount of the
Principal Balance of a MotorVehicle Receivable of all eligible
Motor Vehicle Receivables equal to five percent (5%) of
aggregate Principal Balance of a Motor Vehicle Receivable of
all eligible Motor Vehicle Receivables may exceed a forty-two
(42) month remaining term, provided such term does not exceed
sixty (60) months.
(ii) with respect to a Non-Auto Receivable, the term of forty-two
(42) months remaining until the due date of such Eligible
Receivable, on any date of determination, provided, however
that up to an aggregate outstanding amount of the Net Balance
of a Non-Auto Receivable of all eligible Non-Auto Receivables
equal to five percent (5%) of aggregate Net Balance of a
Non-Auto Receivable of all eligible Non-Auto Receivables may
exceed a forty-two (42) month remaining term, provided such
term does not exceed sixty (60) months.
(iii) with respect to a Lease Receivable, the term of thirty-six
(36) months remaining until the due date of such Eligible
Receivable, on any date of determination.
1.D. AGING PROCEDURES AND ELIGIBILITY TEST (SECTION 1 - ELIGIBLE
RECEIVABLE).
AGING PROCEDURES FOR A CONTRACTUAL AGING - NON-AUTO RECEIVABLE AND LEASE
RECEIVABLE:
1 No payment missed or due = Current.
2. l to 30 days past due = "30 day Account".
3. 31 to 60 days past due = "60 day Account".
4. 61 to 90 days past due = "90 day Account".
5. 91 or more days past due = "90 + day Account"
unmatured and unpaid Principal Balance of a Motor \/ehicle Receivable
of all Motor Vehicle Receivables that are Eligible Receivables; plus
(ii) an amount equal to the lesser of: (a) sixty percent (60%) of
the aggregate unmatured and unpaid Gross Balance of a Non-Auto
Receivable of all Non-Auto Receivables that are Eligible
Receivables, (b) eighty-five percent (85%) of the aggregate
unmatured and unpaid Net Balance of a Non-Auto Receivable of
all Non-Auto Receivables that are Eligible Receivables and (c)
the percentage equal to the Collateral Recovery Rate -
Non-Auto, for the twelve (12) calendar months immediately
preceding the date of determination, less fifteen hundredths
(.15), multiplied by the aggregate unmatured and unpaid Gross
Balance of a Non-Auto Receivable of all Non-Auto Receivables
that are Eligible Receivables: plus
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<PAGE>
(ii) an amount equal to the lesser of: (a) sixty percent (60%) of the
aggregate unmatured and unpaid Gross Balance of a Lease Receivable of all Lease
Receivables that are Eligible Receivables, and (b) eighty-five percent (85%) of
the aggregate unmatured and unpaid Net Balance of a Lease Receivable of all
Lease Receivables that are Eligible Receivables, and (c) the percentage equal to
the Collateral Recovery Rate - Lease, forth twelve (12) calendar months
immediately preceding the date of determination, less fifteen hundredths (.15),
multiplied by the aggregate unmatured and unpaid Gross Balance of a Lease
Receivable of all Lease Receivables that are Eligible Receivables:
Notwithstanding any provision contained in the Loan Documents to the
contrary, if upon the occurrence of any of the following events, Lender in its
sole and absolute discretion, may modify the Availability on Eligible advance
percentages set forth above:
(A) the Cash Collection Percentage - MotorVehicle is less than three
and eight-tenths percent (3.8%);
(B) the Cash Collection Percentage - Non-Auto is less than five and
six-tenths percent (5.6%); or
(C) the Collateral Delinquency Percentage, on any date of
determination, is more than seven percent (7%);.
===============================================================================
2.2. STATED INTEREST RATE (SECTION 2.2).
The lesser of (i) the Governing Rate plus Two percent (2.00%) per
annum; or (ii) the Maximum Rate.
===============================================================================
2.3. MATURITY DATE (SECTION 2.3.C).
The primary term of this Agreement shall expire on September 30, 2004.
Notwithstanding the foregoing, the Borrower's obligation pursuant to
this Agreement shall remain in full force and effect until the
Indebtedness due and owing to Lender has been paid in full.
===============================================================================
2.6. LIQUIDATED DAMAGES (SECTION 2.6).
The amount of "Liquidated Damages" shall be as follows:
(i) if prior to October 1, 2002, Borrower pays the
balance of the Indebtedness in full and Borrower
requests Lender to terminate Lender's security
interest in the Collateral, an amount equal to two
percent (2.00%) of the Amount of the Revolving Credit
Line; and
(ii) if prior to September 30, 2004, but after September
30, 2002, Borrower pays the balance of the
Indebtedness in full and Borrower requests Lender to
terminate Lender's security interest in the
Collateral, an amount equal to one percent (1.00%) of
the Amount of the Revolving Credit Line.
===============================================================================
2.11 CLOSING FEE (SECTION 2.11)
The amount of the closing fee shall be One Hundred Sixty Two
Thousand Five Hundred Dollars ($162,500.00), which shall be
due and payable in eight (8) consecutive monthly payments of
Twenty Thousand Three Hundred Twelve and 50/100 Dollars
($20,312.50) each, with the first payment due on October
15,1999. and continuing on the fifteenth (15th) day of each
month thereafter until paid in full.
===============================================================================
3.2. BUSINESS LOCATIONS OF BORROWER (SECTIONS 3.2, 3.6 AND 5.1.N.).
All locations are as follows:
-3-
<PAGE>
5.1. BORROWER'S TRADENAMES (WHETHER ONE OR MORE)(SECTION 5.1.B.)
None
===============================================================================
6.3.A. LEVERAGE RATIO LIMIT (SECTION 6.3.A.).
The term "Leverage Ratio Limit" shall mean four to one ratio (4:1)
===============================================================================
6.3.B. MINIMUM NET INCOME (SECTION 6.3.B.).
The Minimum Net Income shall be One Dollar ($1.00) for each of
the fiscal years ending prior to December 31, 2001, and for
each fiscal year ending thereafter, One Million Dollars
($1,000,000.00) for each fiscal year.
===============================================================================
6.3.C. DISTRIBUTIONS LIMITATION (SECTION 6.3.C.).
The Maximum Distributions shall not exceed seventy-five
percent (75%) of Net Income of the fiscal year in which such
Distributions are made.
===============================================================================
6.6. ANNUAL FINANCIAL STATEMENTS (SECTION 6.6.B ).
Annual financial statements shall be audited by independent
certified public accountants, acceptable to Lender.
8.1. REIMBURSEMENT OF EXPENSES (SECTION 8.1).
Borrower's shall reimburse Lender for all legal costs and
expenses incurred in the preparation, negotiation, revision,
closing and Post closing of the Loan Documents.
9.1. NOTICES (SECTION 9.1).
Lender: FINOVA Capital Corporation
(copy each office below with all notices)
Rnrrr~wPr
Guarantor:
CORPORATE FINANCE OFFICE:
FINOVA Capital Corporation
355 South Grand Avenue, Suite 2400
Los Angeles, CA 90071
Attn: John J. Bonano, Senior Vice
President
Telephone: (213) 253-1600
Telecopy No.: (213) 625-0268
CORPORATE OFFICE:
FINOVA Capital Corporation
-4-
<PAGE>
4800 N. Scottsdale Rd.
Scottsdale, AZ 85251-7623
Attn: Joseph R. D'Amore, Senior Counsel
Telephone: (480) 636-4932
Telecopy No.: (480) 636-4937
REDISCOUNT FINANCE OFFICE:
FINOVA Capital Corporation
16633 North Dallas Parkway
Suite 700
Addison, TX 75001
Attn: J.T. Cook, 111 (Account Executive)
Telephone: (972) 764-1100
Telecopy No.: (972) 764-1113
Travelers Acceptance Corporation
Travelers Leasing Corporation
Trace Credit Services, Inc.
2701 Loker Avenue West
Carlsbad, CA 92008
Telephone: 7~(Degree) ~ 73l-c'7~o
Telecopy No.: 76C ~ q 4/-5q7O
Finantra Capital, Inc.
Ameri-Cap Consumer Finance Group, Inc.
Travelers Acquisition Corporation
Travelers Investment Corporation
Allar-TIC Financial Services, Inc.
150 S. Pine Island Road, 5'h Floor
Plantation, FL 33324
Telephone: 79Si 5~ 7 S ZZ f
Telecopy No.: q ~y- 5 ~ 7- ~ 2 Z 8
9.16. AGENT FOR SERVICE OF PROCESS (SECTION 9.16).
Robert D. Press , whose address is 150 S. Pine Island Road, 5th Floor,
- - ---------------- Plantation, FL 33324
(Aaent)
IN WITNESS WHEREOF, the parties have executed this Schedule on the dav and vear
first set forth ahove
LENDER:
FINOVA CAPITAL CORPORATION, a Delaware corporation
By: /~= // _~1/
(Sianatu'r
Matthew W. Hall, Vice President --7l /1 /
------------------------------- ---------
(Printed Name and Title) (sat)
BORROWER:
Travelers Acceptance Corpor
~tinn
By: 47/ / ~/o=4OO
-5-
<PAGE>
Robert D. Press, Vice President
Traveler.s I
~asinq CorDorati
(Date)
By: /~/ f /; >/~/ -
-------- ------
Robert D. Press. Vice President
(Date)
Trace C~Services,~7
By: ~?74-- /~?G
Robert D. Press, Vice President
GUARANTORS
(Date)
Finantra Capital, Inc.
By:~ G:7:f 9: 2/8/o~
Robert D. Press, Vice President (Date)
Ameri-CaD Consumer Fina~
Group, Inc.
By: ~4f.~ zl~go~
----------------------------
Robert D. Press, Vice President (Date)
Traveler's Acquisition Group, Ins7
By ~( 7~7~/
~2l9/
Robert D. Press. Vice President
(Date)
Travelers Investment Corporation
By: /~e~7
~lt /C27
Robert D. Press, Vice President
(Date)
Allar-TIC Financial S>vic,,~7
By: /~
~Z/~(/~
Robert D. Press, Vice President (Date)
-6-
<PAGE>
================================================================================
SECURITIES PURCHASE AGREEMENT
Among
FINANTRA CAPITAL, INC.,
ESQUIRE TRADE & FINANCE INC.,
AUSTINVEST ANSTALT BALZERS,
NESHER INC.,
AMRO INTERNATIONAL, S.A.,
ALTRA TRADING & INVESTMENT, S.A.,
THE GROSS FOUNDATION,
LIBRA FINANCE, S.A.,
TALBIYA B. INVESTMENTS LTD.,
ELLIS ENTERPRISES
And
A. L. SCHWARTZ
Dated as of November 5. 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I PURCHASE AND SALE OF SHARES AND ISSUANCE OF WARRANTS ........................................................1
1.1 Purchase and Sale ........................................................................................1
1.2 Purchase Price............................................................................................2
1.3 The Closing...............................................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES.....................................................................3
2.1 Representations, Warranties and Agreements of the Company.................................................3
2.2 Representations and Warranties of the Purchasers........................................................ 10
ARTICLE III OTHER AGREEMENTS OF THE PARTIES..................................................................11
3.1 Transfer Restrictions....................................................................................11
3.2 Stop Transfer Instruction............................................................................... 12
3.3 Furnishing of Information................................................................................13
3.4 Blue Sky Laws........................................................................................... 13
3.5 Integration..............................................................................................13
3.6 Certain Agreements...................................................................................... 13
3.7 Reservation of Underlying Shares and Warrant Shares; Compliance with Law.................................14
3.8 Notice of Breaches.......................................................................................14
3.9 Conversion Obligations of the Company................................................................... 15
3.10 Use of Proceeds........................................................................................ 15
3.11 Indemnification........................................................................................ 15
3.12 Sales of Preferred Stock................................................................................16
3.13 Subsequent Sales and Registrations .....................................................................16
3.14 Incorporation of Certificate of Designation By Reference............................................... 17
3.15 Performance Payments................................................................................... 17
3.16 Exclusivity.............................................................................................17
3.17 Certain Transactions................................................................................... 17
ARTICLE IV CONDITIONS........................................................................................18
4.1 Conditions Precedent to Sale of the Shares and Issuance of the Warrants..................................18
ARTICLE V MISCELLANEOUS......................................................................................20
5.1 Fees and Expenses .......................................................................................20
5.2 Entire Agreement; Amendments............................................................................ 21
5.3 Notices..................................................................................................21
5.4 Amendments; Waivers..................................................................................... 21
5.5 Headings.................................................................................................22
5.6 Successors and Assigns...................................................................................22
5.7 No Third Party Beneficiaries.............................................................................22
5.8 Governing Law............................................................................................22
5.9 Survival.................................................................................................22
5.10 Execution...............................................................................................22
5.11 Publicity...............................................................................................22
5.12 Consent to Jurisdiction: Attorneys' Fees................................................................23
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
5.13 Waiver of Jury Trial....................................................................................23
5.14 Severability............................................................................................24
5.15 Remedies............................................................................................... 24
5.16 Independent Nature of Purchasers' Obligations and Rights................................................24
</TABLE>
Schedules and Exhibits
Schedule 1 - Investors
Schedule 2.1(a) - Organization and Qualification; Subsidiaries
Schedule 2.1(c) - Capitalization; Rights to Acquire Capital Stock
Schedule 2.1(f) - Consents and Approvals
Schedule 2.1(g) - Litigation; Proceedings
Schedule 2.1(n) - Certain Fees
Schedule 2.1(t) - Registration Rights; Rights of Participation
Schedule 2.1(u) - Title
Schedule 2.1(z) - Year 2000 Compliance
Exhibit A - Certificate of Designation
Exhibit B - Warrants
Exhibit C - Escrow Agreement
Exhibit D - Registration Rights Agreement
Exhibit E - Legal Opinion of Quarles & Brady LLP
Exhibit F - Transfer Agent Instructions
-ii-
<PAGE>
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (THIS "Agreement"), dated as of November
5, 1999, among Finantra Capital. Inc., a Delaware corporation (the "Company")
and Esquire Trade & Finance Inc. ("Esquire"), Austinvest Anstalt Balzers
("Austinvest"), Nesher Inc. ("Nesher"), Amro International, S.A. ("Amro"), Altra
Trading & Investment, S. A. ("Altra"), the Gross Foundation ("Gross"), Libra
Finance, S.A. ("Libra"), Talbiya B. Investments Ltd. ( "Talbival'), Ellis
Enterprises ("Ellis") and A. L. Schwartz ("Schwartz"). Esquire, Austinvest,
Nesher, Amro, Altra, Talbiya, Gross and Ellis are collectively referred to
herein as the "Share Investors," and Libra, Talbiya, Ellis, Amro and Altra are
collectively referred to herein as the "Warrant Investors." The Share Investors,
the Warrant Investors and Schwartz are collectively referred to herein as the
"Investors."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to (i) issue and sell to the Share Investors, and
the Share Investors desire to acquire from the Company, shares of the Company's
Series C Convertible Preferred Stock. par value $.01 per share and stated value
of $1,000 per share (the "Preferred Stock"), (ii) issue to certain Investors, as
commission in connection herewith, and such Investors desire to receive from the
Company, 280 shares of Preferred Stock (the "Placement Agent Shares") and (iii)
issue to the Warrant Investors, and the Warrant Investors wish to receive from
the Company, warrants to purchase shares of common stock, par value $.01 per
share, of the Company (the "Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants contained m
thls Agreement, the Company and each Investor agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND ISSUANCE OF WARRANTS
1.1 Purchase and Sale.
(a) Subject to the terms and conditions set forth herein, the
Company shall (i) issue and sell to the Share Investors, and the Share
Investors, severally and not jointly, shall purchase from the Company
3,500 shares of Preferred Stock, (ii) issue to certain Investors, and
such Investors shall receive from the Company, the Placement Agent
Shares (the shares described in clauses (i) and (ii) are collectively
referred to herein as the "Shares") and (iii) issue to the Warrant
Investors, and the Warrant Investors shall receive from the Company,
warrants to purchase an aggregate of 700,000 shares of Common Stock
(each, a "Warrant" and, collectively, the "Warrants"). Notwithstanding
anything to the contrary set forth in this Agreement, the aggregate
number of Shares to be sold hereunder shall not exceed 3,500.
<PAGE>
(b) The Preferred Stock shall have the respective rights,
preferences and privileges set forth in the Certificate of Designation
of the Company (the "Certificate of Designation") the form of which is
annexed hereto as Exhibit A, which shall be approved by the Share
Investors, Libra and Schwartz and the Company's Board of Directors (the
"Board of Directors") and filed and accepted for filing on or prior to
the Closing Date (as defined below) by the Company with the Secretary
of State of the State of Delaware. The Warrants shall be in the form of
Exhibit B annexed hereto.
For purposes of this Agreement, "Trading Day," "Per Share Market
Value." "Initial Conversion Price." "Conversion Notice" and "Original Issue
Date" shall have the meanings set forth in the Certificate of Designation.
1.2 Purchase Price. The purchase price per Share shall be $ 1,000.
1.3 The Closing.
(i) The closing of the purchase by the Share Investors of
3.500 Shares and the issuance of the Placement Agent Shares and the
Warrants (the "Closing") shall take place at the offices of Stroock &
Stroock & Lavan LLP. 180 Maiden Lane, New York, New York 10038-4982,
immediately following the execution hereof or such later date or
different location as the parties shall agree in writing, but not prior
to the date that the conditions set forth in Section 4.1 have been
satisfied or waived by the appropriate party. The date of the Closing
is hereinafter referred to as the "Closing Date." At the Closing, the
Company shall sell and issue to the Share Investors, and the Share
Investors shall, severally and not jointly, purchase from the Company,
3,500 Shares for an aggregate purchase price of $3,500,000 (the
"Purchase Price"). In addition, the Company shall issue the Warrants to
the Warrant Investors and issue the Placement Agent Shares to certain
Investors.
(ii) At the Closing (a) the Company shall deliver to: (1)
Stroock & Stroock & Lavan LLP, as Escrow Agent (the "Escrow Agent"), on
behalf of each Investor, to be held by the Escrow Agent subject to the
terms and conditions of the Escrow Agreement dated the date hereof by
and among the Company, the Investors and the Escrow Agent, in the form
of Exhibit C hereto (the "Escrow Agreement"), (A) stock certificates
representing the Shares purchased by each Share Investor and the
Placement Agent Shares, as set forth next to such Investor's name on
Schedule 1 attached hereto. each registered in the name of such
Investor and (B) the Warrants issued to each Warrant Investor as set
forth next to such Investor's name on Schedule 1 attached hereto,
registered in the name of such Investor, and (2) the Investors, all
other documents, instruments and writings required to have been
delivered at or prior to the Closing by the Company pursuant to this
Agreement and the Registration Rights Agreement dated the date hereof
by and among the Company and the Investors, in the
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form of Exhibit D annexed hereto (the "Registration Rights Agreement"),
(b) each Share Investor shall deliver to the Escrow Agent, on behalf of
the Company. to be held by the Escrow Agent subject to the terms and
conditions of the Escrow Agreement, the portion of the Purchase Price
set forth next to its name on Schedule l, in United States dollars in
immediately available funds by wire transfer to an account designated
in writing by the Escrow Agent for such purpose on or prior to the
Closing Date, and (c) each Investor shall deliver to the Company, all
documents. instruments and writings required to have been delivered at
or prior to the Closing by such Investor pursuant to this Agreement and
the Registration Rights Agreement. All Shares, Warrants and amounts
delivered to and held by the Escrow Agent shall be distributed to the
Investors and the Company at the times and upon the terms and
conditions set forth in the Escrow Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations Warranties and Agreements of the Company. Unless
otherwise specified, the Company hereby makes the following representations and
warranties to the Investors as of the date hereof and as of the Closing Date if
the Closing does not occur on the date hereof:
(a) Organization and Qualification; Subsidiaries. The Company
is a corporation, duly organized, validly existing and in good standing
under the laws of the State of Delaware, with the requisite corporate
power and authority to own and use its properties and assets and to
carry on its business as currently conducted. The Company has no
subsidiaries other than as set forth in Schedule 2.1 (a) (collectively,
the "Subsidiaries"). Each of the Subsidiaries is a corporation, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the full corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted. Each of
the Company and the Subsidiaries is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in
which the nature of the business conducted or property owned by it
makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not,
individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of the Preferred Stock or any of the
Transaction Documents (as defined below), (y) have or result in a
material adverse effect on the results of operations, assets, prospects
or financial condition of the Company and the Subsidiaries, taken as a
whole or (z) adversely impair the Company's ability to perform fully on
a timely basis its obligations under any Transaction Document,
including, without limitation, the Company's covenant under Section 3.7
hereof (any of (x), (y) or (z), being a "Material Adverse Effect").
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(b) Authorization. Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement and the other Transaction
Documents, and otherwise to carry out its obligations hereunder and
thereunder. This Agreement, the Registration Rights Agreement, the
Certificate of Designation the Warrants and the Escrow Agreement are
collectively referred to as the "Transaction Documents." The execution
and delivery of each of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part
of the Company and no further action is required by the Company. Each
of the Transaction Documents has been duly executed by the Company and
when delivered in accordance with the terms hereof will constitute the
legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy. insolvency reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither the Company
nor any Subsidiary is in violation of any of the provisions of its
respective certificate of incorporation, bylaws or other organizational
documents. Prior to the Closing Date the Certificate of Designation has
been filed with the Secretary of State of the State of Delaware and
will be in full force and effect, enforceable against the Company in
accordance with the terms thereof.
(c) Capitalization: Rights to Acquire Capital Stock. The
authorized, issued and outstanding capital stock of the Company is set
forth in Schedule 2.1 (c). All issued and outstanding shares of capital
stock of the Company and each Subsidiary have been duly authorized and
validly issued and are fully paid and non-assessable. No shares of the
capital stock of the Company are entitled to preemptive or similar
rights, nor is any holder of the capital stock of the Company entitled
to preemptive or similar rights arising out of any agreement or
understanding with the Company by virtue of any of the Transaction
Documents. Except as disclosed in Schedule 2. 1 (c), there are no
outstanding options, warrants, script rights to subscribe to, calls,
written commitments or, to the knowledge of the Company, oral
commitments relating to, or, except as a result of the purchase by and
sale to the Share Investors of 3,500 Shares and the issuance of the
Placement Agent Shares and the Warrants, securities, rights or
obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings, written arrangements or, to the
knowledge of the Company, oral arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares
of Common Stock. Except as set forth on Schedule 2.1 (c), and, to the
best knowledge of the Company, no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the
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Securities Exchange Act of 1934. as amended (the "Exchange Act")) or
has the right to acquire by agreement with or by obligation binding
upon the Company beneficial ownership of in excess of 5% of the Common
Stock. A "Person" means an individual or corporation, partnership.
trust. incorporated or unincorporated association, joint venture,
limited liability company. joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind. The Common
Stock is quoted for trading on the OTC Bulletin Board. The Company has
received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such quotation, and the
Company has maintained all requirements for the continuation of such
quotation.
(d) Issuance of Shares and Warrants. The Shares and Warrants
are duly authorized, and when issued and paid for in accordance with
the terms hereof, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances, and rights of
first refusal of any kind (collectively, "Liens"). The Shares and
Warrants. upon issuance, will not subject the holders thereof to
personal liability by reason of being such holders. The Company has,
and at all times while the Shares and the Warrants are outstanding will
maintain an adequate reserve of, duly authorized shares of Common Stock
to enable it to perform its obligations under this Agreement, the
Warrants and the Certificate of Designation with respect to the number
of Shares and Warrants issued and outstanding at the Closing Date and
in no circumstances shall such reserved and available shares of Common
Stock be less than 200% of the maximum number of shares of Common Stock
which would be issuable upon conversion of the Shares and upon exercise
of the Warrants issued pursuant to the terms hereof with respect to the
number of Shares and Warrants issued and outstanding at the Closing
Date were such conversion or exercise, as the case may be, effected on
the Closing Date. The shares of Common Stock issuable upon conversion
of the Shares are referred to herein as the "Underlying Shares." When
issued in accordance with the Certificate of Designation, the
Underlying Shares will be duly authorized, validly issued, fully paid
and nonassessable, free and clear of all Liens. The shares of Common
Stock issuable upon exercise of the Warrants are referred to herein as
the "Warrant Shares." When issued and paid for in accordance with the
Warrant, the Warrant Shares will be duly authorized, validly issued,
fully paid and nonassessable, free and clear of all Liens. The Shares,
the Warrants, the Underlying Shares and the Warrant Shares are referred
to herein as the "Securities."
(e) No Conflicts. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Company and
the consummation by the Company of the transactions contemplated hereby
and thereby do not and will not (i) conflict with or violate any
provision of its certificate of incorporation, bylaws or other
organizational documents (each as amended through the date hereof) or
(ii) subject to obtaining the consents referred to in Section 2.1(f),
conflict with, or constitute a default (or an event which with notice
or lapse of time or
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both would become a default) under. or give to others any rights of
termination, amendment, acceleration or cancellation of. any agreement,
indenture or instrument (evidencing a Company debt or otherwise) to
which the Company is a party or by which any property or asset of the
Company is bound or affected, (iii) result in a violation of any law,
rule? regulation, order. judgment, injunction. decree or other
restriction of any court or governmental authority to which the Company
is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company is bound
or affected, or (iv) result in the creation or imposition of a Lien
upon any of the Securities or any of the assets of the Company, or any
of its "Affiliates" (as such term is defined under Rule 405 promulgated
under the Securities Act), except in the case of each of clauses (ii)
and (iii), such conflicts, defaults. terminations, amendments,
accelerations, cancellations and violations as would not, individually
or in the aggregate, have or result in a Material Adverse Effect. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of otherwise in compliance with the conditions
of Regulation D. The offer by the Company of the Warrants to the
Warrant Investors and the Placement Agent Shares to certain Investors,
and the offer and sale by the Company to the Investors of 3,500 Shares
and the Underlying Shares and the Warrant Shares into which the Shares
and the Warrants are convertible or exercisable, as the case may be, is
exempt from the registration requirements of the Securities Act.
(f) SEC Documents: Financial Statements: No Adverse Chanoe.
The Company has filed all reports required to be filed by it under the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
since December 27, 1997 (the foregoing materials being collectively
referred to herein as the "SEC Documents") on a timely basis or has
received a valid extension of such time of filing and has filed any
such SEC Documents prior to the expiration of any such extension. As of
their respective dates. the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder. and none of the
SEC Documents, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading.
All material agreements to which the Company is a party or to which the
property or assets of the Company are subject have been filed as
exhibits to the SEC Documents as required; neither the Company nor any
of the Subsidiaries is in breach of any agreement where such breach
would reasonably be expected to, individually or in the aggregate, have
a Material Adverse Effect. The financial statements of the Company
included in the SEC Documents comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent
basis during the periods involved. except as may be otherwise specified
in such financial statements or the notes thereto, and fairly present
in all material
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respects the financial position of the Company as of and for the dates
thereof and the results of operations and cash flows for the periods
then ended. subject, in the case of unaudited statements. to normal
year-end audit adjustments. Since the date of the financial statements
included in the Company's last filed Quarterly Report on Form 10-QSB
for the period ended June 30, 1999, there has been no event, occurrence
or development that has had, or would reasonably be expected to have. a
Material Adverse Effect which has not been specifically disclosed to
the Investors by the Company. The Company last filed audited financial
statements with the Commission on March 6, 1999, and has not received
any comments from the Commission in respect thereof.
(g) Seniority. Except to the extent certain holders of the
Company's Series A 10% Convertible Preferred Stock have not consented
to and waived the issuance of the Preferred Stock ranking pari passu to
such Series A 10% Convertible Preferred Stock. no class of equity
securities of the Company is senior to the Preferred Stock in right of
payment, whether upon liquidation, dissolution or otherwise.
(h) Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate of, an
"investment company" within the meaning of the Investment Company Act
of 1940. as amended.
(i) Certain Fees. Except as specifically set forth in Schedule
2.1(n!, no fees or commissions will be payable by the Company to any
broker, financial advisor, finder. investment banker, or bank with
respect to the transactions contemplated by this Agreement. The
Investors shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of
a type contemplated in this Section 2.1(n) that may be due in
connection with the transactions contemplated by this Agreement. The
Company shall indemnify and hold harmless each of the Investors, its
employees, officers, directors, agents, and partners, and their
respective Affiliates, from and against all claims, losses, damages.
costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees
arising from the action or inaction of the Company.
(j) Solicitation Materials. The Company has not distributed
any offering materials in connection with the offering and sale of the
Securities which are the subject of this Agreement. The Company
confirms that it has not provided the Investors or their agents or
counsel with any information that constitutes or might constitute
material nonpublic information. The Company understands and confirms
that the Investors shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
(k) Employment Matters. Each of the Company and each
Subsidiary is in
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compliance in all material respects with all presently applicable
provisions of the Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has
occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company or any Subsidiary would have any liability; neither
the Company nor any Subsidiary has incurred and expects to incur
liability under (i) Title IV of ERISA with respect to termination of,
or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
each "pension plan" for which the Company or any Subsidiary would have
any liability that is intended to be qualified under Section 401 (a) of
the Code is so qualified in all material respects and nothing has
occurred. whether by action or by failure to act. which would cause the
loss of such qualification.
(l) Form S-3 Eligibility. The Company is, and at the Closing
Date will be. eligible to register securities (including the Underlying
Shares and the Warrant Shares) for resale with the Commission under
Form S-3 promulgated under the Securities Act.
(m) Patents and Trademarks. The Company has, or has rights to
use. all patents, patent applications, trademarks, trademark
applications, service marks. trade names, copyrights, licenses and
rights (collectively, the "Intellectual Property Rights") which are
necessary for use in connection with its business, as currently
conducted and as described in the SEC Documents, and which the failure
to so have would have a Material Adverse Effect.
(n) Acknowledgment of Dilution. The Company acknowledges that
the issuance of (i) the Underlying Shares upon conversion of the Shares
in accordance with the Certificate of Designation and (ii) the Warrant
Shares upon exercise of the Warrants may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that
its obligation to issue (i) the Underlying Shares upon conversion of
the Shares in accordance with the Certificate of Designation and (ii)
the Warrant Shares upon exercise of the Warrants is unconditional and
absolute regardless of the effect of any such dilution.
(o) Registration Rights; Rights of Participation. (A) Except
as disclosed in Schedule 2.1 (t), the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been
satisfied and (B) no Person, including, but not limited to, current or
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former shareholders of the Company, underwriters, brokers or agents,
has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by this Agreement or any other Transaction Document.
(p) Title. Except as disclosed in Schedule 2.1 (u), the
Company and the Subsidiaries have good and marketable title to, or the
right to use, all personal property owned or leased by them which is
material to the business of the Company and the Subsidiaries, in each
case free and clear of all Liens, except for liens. claims or
encumbrances as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries. Neither the Company nor
any of its Subsidiaries owns any real property. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company
and the Subsidiaries.
(q) Regulatory Permits. The Company and the Subsidiaries
possess all franchises, certificates, licenses, authorizations and
permits or similar authority issued by the appropriate federal, state
or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents except where the failure
to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("Material Permits"), and neither the
Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(r) Insurance. The Company and each Subsidiary maintains
property and casualty, general liability, workers' compensation,
environmental hazard, personal injury and other similar types of
insurance with financially sound and reputable insurers that is
adequate, consistent with industry standards. Neither the Company nor
any Subsidiary has received notice from, and has any knowledge of any
threat by, any insurer (that has issued any insurance policy to the
Company or any Subsidiary) that such insurer intends to deny coverage
under or cancel. discontinue or not renew any insurance policy
presently in full force.
(s) Taxes. All applicable tax returns required to be filed by
the Company and each of the Subsidiaries have been filed, or if not yet
filed have been granted extensions of the filing dates which extensions
have not expired, and all taxes, assessments. fees and other
governmental charges upon the Company, the Subsidiaries or upon any of
their respective properties, income or franchises, shown in such
returns and on assessments received by the Company or the Subsidiaries
to
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be due and payable have been paid. or adequate reserves therefor have
been set up if any of such taxes are being contested in good faith; or
if any of such tax returns have not been filed or if any such taxes
have not been paid or so reserved for, the failure to so file or to pay
would not in the aggregate or individually have a Material Adverse
Effect.
(t) No Integrated Offering. Neither the Company, nor any of
its Affiliates. nor any Person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or
solicited any offers to buy any securities under circumstances that
would require registration of any such securities under the Securities
Act or cause the offering of the Securities pursuant to this Agreement
to be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable shareholder approval provisions.
(u) Year 2000 Compliance. The Company has initiated a review
and assessment of all areas within its and each Subsidiary's business
and operations that could be adversely affected by the "Year 2000
Problem" (that is. the risk that computer applications used by the
Company or any of the Subsidiaries may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior
to and any date after December 31, 1999). Based on the foregoing,
except as set forth on Schedule 2.1 (z), the Company believes that the
computer applications that are currently material to its or any
Subsidiary's business and operations are reasonably expected to be able
to perform properly date-sensitive functions for all dates before and
after January 1, 2000, except to the extent that a failure to do so
would not reasonably be expected to have a Material Adverse Effect.
(v) Full Disclosure. The representations and warranties of the
Company set forth in this Agreement do not contain any untrue statement
of a material fact of omit any material fact necessary to make the
statements contained herein, in the light of the circumstances under
which they were made, not misleading.
2.2 Representations and Warranties of the Investors. Each of the
Investors, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Investment Intent. Such Investor is acquiring the
Securities for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any
part thereof or interest therein. without prejudice, however, to such
Investor's right, subject to the provisions of this Agreement and the
Registration Rights Agreement, at all times to sell or otherwise
dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act and in compliance with
applicable State securities laws or under an exemption from such
registration.
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(b) Investor Status. At the time such Investor was offered the
Securities. and at the Closing Date, (i) it was and will be, an
"accredited investor" (as defined in Regulation D), or (ii) such
Investor either alone or together with its representatives. had and
will have such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and had and will
have so evaluated the merits and risks of such investment. Such
Investor has the authority and is duly and legally qualified to
purchase and own the Securities.
(c) Ability of Investor to Bear Risk of Investment. Such
Investor is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss
of such investment.
(d) Reliance. Each Investor understands and acknowledges that
(i) the Securities are being offered and sold to the Investor without
registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under
Section 4(2) of the Securities Act or Regulation D promulgated
thereunder and (ii) the availability of such exemption, depends in part
on, and the Company will rely upon the accuracy and truthfulness of,
the foregoing representations and such Investor hereby consents to such
reliance.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions.
(a) If any Investor should decide to dispose of any Shares
(and upon conversion thereof any of the Underlying Shares) or Warrants
(and upon exercise thereof any of the Warrant Shares) held by it, each
Investor understands and agrees that it may do so only pursuant to an
effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from the registration
requirements of the Securities Act. In connection with any transfer of
any Securities other than pursuant to an effective registration
statement or to the Company, the Company may require the transferor
thereof to provide to the Company a written opinion of counsel, the
form and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require
registration of such transferred securities under the Securities Act,
which opinion shall be delivered by counsel for the Company or. at the
Investor's option, another counsel reasonably acceptable to the
Company. Notwithstanding the foregoing, the Company hereby consents to
and agrees to register (i) any transfer of
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Securities by one Investor to another Investor, and agrees that no
documentation other than executed transfer documents shall be required
for any such transfer, and (ii) any transfer by any Investor to an
Affiliate of such Investor or to an Affiliate of another Investor, or
any transfer among any such Affiliates, provided that transferee
certifies in writing to the Company that it is an "accredited investor"
(as defined in Regulation D). Any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the
rights of an Investor under this Agreement and the Registration Rights
Agreement.
(b) Each Investor agrees to the imprinting, so long as is
required by this Section 3.1 (b), of the following legend on the
Securities:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND. ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
The Underlying Shares issuable upon conversion of the Shares and the
Warrant Shares issuable upon exercise of the Warrants shall not contain the
legend set forth above if such conversion or exercise occurs at any time while
the Registration Statement is effective under the Securities Act and upon the
sale of the Underlying Shares or the Warrant Shares by the Investors or in the
event there is not an effective Registration Statement at such time, if in the
written opinion of counsel to the Company (such opinion to be furnished at the
sole expense of the Company at the request of an Investor) such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company agrees that it will provide each Investor, upon request. with a
certificate or certificates representing Underlying Shares and/or Warrant
Shares. tree from such legend at such time as such legend is no longer required
hereunder.
3.2 Stop Transfer Orders; Suspension of Qualification. The Company may
not make any notation on its records or give instructions to any transfer agent
of the Company which enlarge the restrictions of transfer set forth in Section
3.1. The Company will advise the Investors, promptly after it receives notice of
issuance by the Commission. any state securities . commission or any other
regulatory authority of any stop order or of any order preventing or suspending
the use of any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.
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3.3 Furnishing of Information. As long as any Investor owns Securities.
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act and to promptly furnish the Investors with true and complete copies
of all such filings. As long as any Investor owns Securities, if the Company is
not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange
Act, it will prepare and furnish to the Investors and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any holder of Shares or Warrants may reasonably request, all
to the extent required from time to time to enable such Person to sell
Underlying Shares and/or Warrant Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in Section 3.1. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares and the Warrant
Shares under the securities or Blue Sky laws of such jurisdictions as the
Investors may request and shall continue such qualification at all times through
the third anniversary of the Closing Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of any or all of such securities to any Investor.
3.6 Certain Agreements. As long as any Investor owns Securities, the
Company shall not and shall cause the Subsidiaries not to, without the consent
of the holders of all of the Shares then outstanding, (i) amend its certificate
of incorporation, bylaws or other charter documents so as to adversely affect
any rights of any Investor; (ii) declare, authorize, set aside or pay any
dividend or other distribution with respect to the Common Stock except as
permitted under the Certificate of Designation and as would not adversely affect
the rights of any Investor hereunder or under the Certificate of Designation;
(iii) repay, repurchase or offer to repay, repurchase or otherwise acquire
shares of its Common Stock in any manner; (iv) issue any series of preferred
stock or other securities with rights senior (in respect of
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liquidations, dividends, preferences and similar rights) to those of the Shares;
or (v) enter into any agreement with respect to any of the
3.7 Reservation of Underlying Shares and Warrant Shares: Compliance
with Law.
(a) The Company shall (i) take all steps necessary to cause
the Underlying Shares and the Warrant Shares to approved for quotation
on the OTC Bulletin Board as soon as possible thereafter, and (ii)
provide to the Investors evidence of such quotation and the Company
shall maintain the quotation of its Common Stock on such market. As
used herein, "Business Day" means any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking
institutions in the State of New York generally are authorized or
required by law or other government actions to close.
(b) The Company at all times shall have authorized and
reserved for issuance upon conversion of the Shares pursuant to the
terms of the Certificate of Designation and upon exercise of the
Warrants pursuant to the Warrant not less than 200% of the maximum
number of shares of Common Stock required to provide for the conversion
of the Shares and the exercise of the Warrants.
(c) Until at least two (2) years after the last of the Shares
has been converted into Underlying Shares or the last of the Warrants
has been exercised for the Warrant Shares, (i) the Company will cause
its Common Stock to continue to be registered under Sections 12(b) or
12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under such Exchange Act, will comply
with all requirements related to any registration statement filed
pursuant to this Agreement or the Registration Rights Agreement and
will not take any action or file any document (whether or not permitted
by the Securities Act or the Exchange Act or the rules and regulations
thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under the Securities
Act and Exchange Act, except as permitted herein and (ii) the Company
will take all action within is power to continue the trading of its
Common Stock on the OTC Bulletin Board and will comply in all respects
with the Company's reporting, filing and other obligations under the
bylaws or rules of the NASD and the OTC Bulletin Board.
3.8 Notice of Breaches.
(a) Each of the Company and each Investor shall give prompt
written notice to the other of any breach of any representation,
warranty or other agreement contained in this Agreement, the
Certificate of Designation, the Warrants or the Registration Rights
Agreement, as well as any events or occurrences arising after the
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date hereof and prior to the Closing Date, which would reasonably be
likely to cause any representation or warranty or other agreement of
such party, as the case may be, contained herein to be incorrect or
breached as of the Closing Date. However, no disclosure by any party
pursuant to this Section 3.8 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.8(a), the
Company shall promptly notify each Investor of any notice or claim
(written or oral) that it receives from any lender of the Company to
the effect that the consummation of the transactions contemplated
hereby, by the Certificate of Designation, by the Warrants and by the
Registration Rights Agreement violates or would violate any written
agreement or understanding between such lender and the Company, and the
Company shall promptly furnish by facsimile to each Investor a copy of
any written statement in support of or relating to such claim or
notice.
(c) The default by any Investor of any of its obligations,
representations or warranties under any Transaction Document shall not
be imputed to, and shall have no effect upon, any other Investor or
affect the Company's obligations under the Transaction Documents to any
non-defaulting Investor or to the defaulting Investor with respect to
any outstanding Shares, Warrants, Underlying Shares or Warrant Shares.
3.9 Conversion Obligations of the Company. The Company covenants to
convert Shares and to deliver the Underlying Shares in accordance with the terms
and conditions and within the time period set forth in the Certificate of
Designation.
3.10 Use of Proceeds. The Company shall use all of the proceeds from
the sale of the Shares to fund the acquisition of Travelers Investment
Corporation (the "Acquisition") and not for any other purpose.
3.11 Indemnification. The Company also will indemnify and hold the
Investors harmless against any and all losses, claims, damages or liabilities to
any such Person (including. without limitation, in connection with any action,
proceeding or investigation brought by or against any such Person, including by
shareholders of the Company) in connection with or as a result of any matter
referred to in the Transaction Documents, including, without limitation, for any
misrepresentation by the Company, for breaches of representations and warranties
contained in any of the Transaction Documents, and for any breach,
non-compliance or nonfulfillment by the Company of any covenant, agreement or
undertaking to be complied with or performed by it contained in or pursuant to
the Transaction Documents, except to the extent that it is finally judicially
determined that such losses, claims, damages or liabilities resulted solely from
the gross negligence or bad faith
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of the Investors. If for any reason the foregoing indemnification is unavailable
to such Investor or is insufficient to hold such Person harmless, then the
Company shall contribute to the amount paid or payable by such Investor as a
result of such loss. claim. damage or liability in such proportion as is
appropriate to reflect the relative economic interests of the Company and its
shareholders on the one hand and the Investors on the other hand in the matters
contemplated by the Transaction Documents as well as the relative fault of the
Company and the Investors with respect to such loss, claim, damage or liability
and any other relevant equitable considerations. The reimbursement, indemnity
and contribution obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliate of the Investors and the
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Investors and any such affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company. the Investors. any such affiliate and any such
Person. The Company also agrees that neither the Investors nor any of such
affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of any matter referred
to in this Agreement except to the extent that it is finally judicially
determined that any losses, claims, damages, liabilities or expenses incurred by
the Company result solely from the gross negligence or bad faith of, or knowing
breach of this Agreement by, the Investors. Promptly after receipt by the
Investors or any affiliate, partners, directors, agents, employees or
controlling persons, as the case may be, of notice of any claim or other
commencement of any action in respect of which indemnity may be sought, such
party will notify the Company in writing of the receipt or commencement thereof
and the Company shall have the right to assume the defense of such claim or
action (including the employment of counsel reasonably satisfactory to the
indemnified parties and the payment of fees and expenses of such counsel). The
indemnified party shall cooperate with the Company and the Company's counsel in
the defense of such claim or action. The Investors understand that the Company
shall not in connection with any one such claim or action or separate but
substantially similar related claims or actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for all
of the indemnified parties unless the defense of one indemnified party is unique
or separate from that of another indemnified party or one or more legal defenses
are available to an indemnified party but not to other indemnified parties
subject to the same claim or action. In the event the Company does not promptly
assume the defense of a claim or action, the indemnified parties shall have the
right to employ counsel reasonably satisfactory to the Company, at the Company's
expense, to defend such claim or action. The indemnified party shall not admit
any liability with respect to the claim or action or settle, compromise, pay or
discharge the same without the prior written consent of the Company so long as
the Company is reasonably contesting or defending the same in good faith. The
Company shall not compromise, settle or discharge any claim or action without
the Investors' consent. as applicable, which consent will not be
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unreasonably withheld, unless there is no finding or admission of any violation
of any law against the indemnified party and the sole relief is monetary damages
paid in full by the Company. Any right to trial by jury with respect to any
action or proceeding arising in connection with or as a result of either our
engagement or any matter referred to in this Agreement is hereby waived by the
parties hereto. The provisions of this Section 3.1 1 shall survive any
termination or completion of the Transaction Documents.
3.12 Sales of Preferred Stock. The Company shall not sell any shares of
Preferred Stock other than the Shares.
3.13 Subsequent Sales and Registrations. (a) Until such time as all of
the Shares have been converted into Common Stock, or have been redeemed pursuant
to the Certificate of Designations, the Company shall not, directly or
indirectly, without the prior written consent of the Investors, offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant of any option to purchase or other disposition) any of its or its
Affiliates' equity or equity-equivalent securities (including convertible debt)
or any instrument that permits the holder thereof to acquire Common Stock at a
price that is less than $3.00 per share or' in the event that such security or
instrument contains a conversion feature, at a conversion price that is less
than $3.00 per share, except (i) the granting of options or warrants to
employees, officers and directors, and the issuance of shares upon exercise of
options granted, under any stock option plan heretofore or hereinafter duly
adopted by the Company, (ii) shares issued upon exercise of any currently
outstanding warrants and upon conversion of any currently outstanding
convertible preferred stock in each case disclosed in Schedule 2.1 (c), and
(iii) shares of Common Stock issued upon conversion of Shares or upon exercise
of the Warrants.
(b) Other than Underlying Shares, Warrant Shares and other
"Registrable Securities" (as defined in the Registration Rights
Agreement) to be registered in accordance with the Registration Rights
Agreement, the Company shall not, for a period of not less than 90
Trading Days after the dates that any registration statement relating
to the Securities is declared effective by the Commission, without the
prior written consent of the Investors, (i) register for resale any
securities of the Company, or (ii) issue or sell any of its or any of
its Affiliates' equity or equity equivalent securities except for (A)
securities issued upon the exercise or conversion of the securities set
forth on Schedule 2.1 (c) or (B) securities sold pursuant to the
Company's employee benefit plans. Any days that any Investor is unable
to sell Underlying Shares or Warrant Shares under the Registration
Statement shall be added to such 90 Trading Day period for the purposes
of (i) and (ii) above.
3.14 Incorporation of Certificate of Designation Bv Reference. The
Certificate of Designation is hereby incorporated herein by reference and made a
part hereof.
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3.15 Performance Payments. The parties hereto agree that if the Per
Share Market Value is not at least twice the Initial Conversion Price for each
of the ten (10) consecutive Trading Days prior to the end of the 180-day period
following the Closing, then on the 1815' day following the Closing, the Company
shall issue to the Share Investors, Libra and Schwartz, on a pro rata basis in
accordance with each such holder's participation set forth on Schedule 1, an
aggregate of 125,000 shares of the Company's unregistered Common Stock. In
addition, the Company shall use its best efforts to register such additional
shares of Common Stock under the same terms and conditions as the Warrant Shares
and the Underlying Shares are being registered.
3.16 Exclusivity. The Company shall not issue and sell the Preferred
Stock to any Person other than the Share Investors, Libra and Schwartz pursuant
to this Agreement. except as set forth in Section 5.1 (b).
3.17 Certain Transactions. At any time when the Per Share Market Value
of the Common Stock is less than or equal to $3.00, no Investor shall engage in
any short selling transaction in which the number of shares of Common Stock
shorted exceeds (i) the number of shares of Common Stock held by such Investor
plus (ii) with respect to the shares of Common Stock into which the shares of
Preferred Stock held by such Investor are then convertible, that number of
shares for which a Conversion Notice has been provided to the Company. The
Company acknowledges and agrees that the Investors may enter into such
transactions during any such time as the Per Share Market Value of the Common
Stock exceeds $3.00 per share.
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ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to Sale of the Shares and Issuance of the
Warrants.
(a) Conditions Precedent to the Obligation of the Company to
Sell the Shares and Issue the Warrants. The obligation of the Company
to sell 3,500 Shares to the Share Investors and to issue the Placement
Agent Shares and the Warrants hereunder is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the
following conditions:
(i) Accuracy of the Investors' Representations and Warranties.
The representations and warranties of each Investor shall be true and
correct in all material respects as of the date when made and as of the
Closing Date, as though made on and as of such date;
(ii) Performance by the Investors. Each Investor shall have
performed. satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Investor at or prior to
the Closing;
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights
Agreement; and
(iv) Delivery of Purchase Price. Each Share Investor shall
have delivered to the Escrow Agent, on behalf of the Company. the
portion of the Purchase Price set forth next to such Investor's name on
Schedule 1 to the Purchase Agreement, in immediately available funds.
(b) Conditions Precedent to the Obligation of the Investors to
Purchase the Shares. The obligation of each Share Investor hereunder to
acquire and pay for the Shares is subject to the satisfaction or waiver
by such Investor, at or before the Closing, of each of the following
conditions:
(i) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company set forth in this
Agreement and in the Registration Rights Agreement shall be true and
correct in all material respects as
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of the date when made and as of the Closing Date as though made on and
as of such date;
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied with in all material respects all
covenants. agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Closing;
(iii) No Injunction. No statute, rule, regulation, executive
order, decree. ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement. the Certificate of
Designation, the Warrants or the Registration Rights Agreement:
(iv) Adverse Chances. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-QSB
last filed prior to the date of this Agreement, no event which had a
Material Adverse Effect and no material adverse change in the financial
condition of the Company shall have occurred (for purposes hereof
changes in the market price of the Common Stock may be considered as a
factor in determining whether there has occurred an event which has had
a Material Adverse Effect or whether a material adverse change has
occurred);
(v) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on
the OTC Bulletin Board, which suspension remains in effect;
(vi) Legal Opinion. The Company shall have delivered to the
Investors the opinion of Quarles & Brady LLP, outside counsel to the
Company, in substantially the forms annexed hereto as Exhibit E;
(vii) Required Approvals. All Required Approvals shall have
been obtained;
(viii) Shares of Common Stock. On or prior to the Closing
Date, the Company shall have duly reserved the number of Underlying
Shares and Warrant Shares required by the Transaction Documents to be
reserved for issuance upon conversion of the Shares and upon exercise
of the Warrants and a sufficient number of shares of Common Stock to
satisfy its obligations under Section 3.15, if any;
(ix) Delivery of Stock Certificates and Warrant Certificates.
The Company shall have delivered to the Escrow Agent, on behalf of each
Investor or such Investor's designee, (i) the stock certificate(s)
representing the Shares, registered in the name of each Share Investor,
Libra and Schwartz, each in form satisfactory to
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such Investor and (ii) warrant certificate(s) representing the
Warrants, registered in the name of each Warrant Investor, in form
satisfactory to the Warrant Investors;
(x) Registration Rights Agreement. The Company shall have
executed and delivered the Registration Rights Agreement;
(xi) Certificate of Designation. The Certificate of
Designation shall have been duly approved by the Board of Directors and
filed with and accepted by the Secretary of State of the State of
Delaware, and the Company shall have delivered a copy thereof to each
Share Investor, Libra and Schwartz certified as filed by the of filed
of the Secretary of State of the State of Delaware;
(xii) Transfer Agent Instructions. The Irrevocable Transfer
Agent Instructions, in the form of Exhibit F annexed hereto. shall have
been delivered to and acknowledged in writing by the Company's transfer
agent;
(xiii) Officer's Certificate. On the Closing Date the Company
shall deliver to the Investors an Officer's Certificate dated the
Closing Date and signed by an executive officer of the Company
confirming the accuracy of the Company's representations, warranties
and covenants as of the Closing Date and confirming the compliance by
the Company with the conditions precedent set forth in this Section 4.1
as of the Closing Date; and
(xiv) Waivers and Consents of Series A and Series B Preferred
Stockholders. On the Closing Date the Company shall deliver to the
Investors Waivers and Consents of not less than 85.5% of the holders of
the Company's Series A 10% Convertible Preferred Stock and of all of
the holders of the Company's Series B Preferred Stock, consenting to
the issuance by the Company of the Shares, and waiving certain
provisions of the certificate of designation relating to such holder's
preferred stock.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. (a) The Company shall pay the reasonable legal
fees and expenses of Stroock & Stroock & Lavan LLP, counsel for the Investors,
incident to the negotiation, preparation, execution. delivery and performance of
this Agreement and the other Transaction Documents, in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
Transaction Documents. The Company shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by the Company incident to the negotiation, preparation, execution'
delivery and performance of this Agreement and the other Transaction Documents.
The
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Company shall pay all stamp and other taxes and duties levied in connection with
the issuance of the Securities pursuant to the Transaction Documents.
(b) At the Closing, the Company shall pay to Libra, Talbiya, Ellis,
Amro and Schwartz, as a commission in connection herewith, an aggregate amount
equal to 8% of the Purchase Price. which amount shall be payable in the
Placement Agent Shares.
5.2 Entire Agreement: Amendments. This Agreement, together with the
Exhibits and Schedules hereto and the other Transaction Documents, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York City time, on any
date and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to each Investor at its address set forth under its name on
Schedule 1 attached hereto, or with respect to the Company, addressed to:
Finantra Capital, Inc.
150 South Pine Island Road, 5th Floor
Plantation, Florida 33324
Telephone No.: (954) 577-9225
Facsimile No.: (954) 577-9228
Attn: Robert Press, Chairman of the Board of Directors
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to any Investor shall be sent to Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York New York 10038-4982, Attention:
James R. Tanenbaum, Esq., Facsimile No.: (212) 806-6006.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and the Investors; or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing
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waiver in the future or a waiver of any other provision. condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. Notwithstanding the foregoing, no such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Shares and Warrants outstanding. The Company shall not offer or pay any
consideration to an Investor for consenting to such an amendment or waiver
unless the same consideration is offered to each Investor and the same
consideration is paid to each Investor which consents to such amendment or
waiver.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Investors. Each Investor may
assign this Agreement or any rights or obligations hereunder (i) to its
affiliates or to another Investor without the prior written consent of the
Company and (ii) to any other Person with the prior written consent of the
Company, such consent not to be unreasonably withheld, except that any assignee
must make the representations and warranties set forth in Section 2.2 and
otherwise comply with the terms of this Agreement otherwise applicable to its
assignor. This provision shall not limit an Investor's right to transfer
securities or transfer or assign rights under the Registration Rights Agreement.
5.7 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
regard to the principles of conflicts of law thereof.
5.9 Survival. The agreements, covenants, representations, warranties
and provisions contained in this Agreement shall survive the delivery of the
Shares and Warrants pursuant to this Agreement and the Closing hereunder and any
conversion of the Shares or exercise of the Warrants.
5.10 Execution. This Agreement may be executed in two or more
counterparts. all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original
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thereof.
5.11 Publicity. The Company and each Investor shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other Party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Investors
without each such Investor's prior written consent unless otherwise required by
law. in which case the Company shall inform such Investor of such disclosure in
writing prior to making such disclosure.
5.12 Consent to Jurisdiction: Attorneys' Fees (a) The Company
(including, but not limited to, its affiliates, subsidiaries, officers,
directors and controlling persons) and each Investor hereby (i) irrevocably
submits to the exclusive jurisdiction of any New York State court or Federal
court sitting in the Borough of Manhattan, The City of New York in any action
related to. connected with or arising out of, in whole or in part, the
Transaction Documents, including, but not limited to, transactions in the
securities of the Company subsequent to the purchase by such Investor or Persons
claimed to be affiliated with such Investor, (ii) agrees that all claims in such
action shall be decided in such court, (iii) waives, to the fullest extent it
may effectively do so. the defense of inconvenient forum and (iv) consents to
the service of process by certified mail, return receipt requested. Nothing
herein shall affect the right of any party to serve legal process in any manner
permitted by law or affect its right to bring any action in any other court.
(b) In connection with any dispute between the Company and any
Investor, related to, connected with or arising out of, in whole or in
part, the Transaction Documents including, but not limited to,
transactions in the securities of the Company subsequent to the
purchase, by an Investor or Persons claimed to be affiliated to an
Investor, the prevailing party shall be awarded all reasonable
attorneys' fees and expenses incurred by it. In that connection fees
and expenses actually paid by a party in connection with the litigation
of any dispute shall be deemed presumably reasonable.
(c) In the event that any Investor or any Person claimed to be
affiliated or associated with such Investor becomes involved in any
capacity in any action, proceeding or investigation brought by or
against any Person, including shareholders of the Company, in
connection with or as a result of any matter referred to in the
Transaction Documents, the Company will reimburse such Investor and/or
those claimed to be affiliated or associated with such Investor for its
legal fees and expenses and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith, as
those fees and expenses are incurred; provided, however, that if at the
conclusion of such action, proceeding or investigation it shall be
finally
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judicially determined by a court of competent jurisdiction that
indemnity for such fees and expenses is contrary to law, or that such
Investor is not the prevailing party then in that event, such Investor
and/or any other Person having received such advances of fees and
expenses shall reimburse the Company in full for the sums advanced.
(d) The provisions of this Section 5.12 shall survive any
termination or completion of the Transaction Documents.
5.13 Waiver of Jury Trial (a) The parties hereto each waive their
respective rights to a trial by jury of any claim or cause of action based upon
or arising out of or related to the Transaction Documents, or the transactions
contemplated by the Transaction Documents. in any action, proceeding or other
litigation of any type brought by any of the parties against any other party or
parties, whether with respect to contract claims, tort claims, or otherwise. The
parties hereto each agree that any such claim or cause of action shall be tried
by a court trial without a jury. Without limiting the foregoing, the parties
further agree that their respective right to a trial by jury is waived by
operation of this Section 5.13 as to any action, counterclaim or other
proceeding which seeks, in whole or in part, to challenge the validity or
enforceability of any of the Transaction Documents or any provision hereof or
thereof. The waiver shall apply to any subsequent amendments, renewals,
supplements or modifications to any of the Transaction Documents.
(b) The provisions of this Section 5.13 shall survive any
termination or completion of the Transaction Documents.
5.14 Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Investors
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents and injunctive relief. Each of the Company and the
Investors (severally and not jointly) agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation or injunctive relief
the defense that a remedy at law would be adequate.
-25-
<PAGE>
5.16 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor hereunder is several and not joint with the
obligations of the other Investors hereunder, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor hereunder. Nothing contained herein or in any other agreement or
document delivered at the Closing, and no action taken by any Investor pursuant
hereto or thereto. shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each
Investor shall be entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Investor to
be joined as an additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-26-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
ESQUIRE TRADE & FINANCE INC.
By:
------------------------------------------
Name: Roland R. Winiger
Title: Director
AUSTINVEST ANSTALT BALZERS
By:
------------------------------------------
Name:
Title:
NESHER INC.
By:
------------------------------------------
Name:
Title:
AMRO INTERNATIONAL, S.A.
By:
------------------------------------------
Name:
Title:
ALTRA TRADING & INVESTMENT, S.A.
By:
------------------------------------------
-27-
<PAGE>
Name:
Title:
THE GROSS FOUNDATION
By:
------------------------------------------
Name:
Title:
LIBRA FINANCE, S.A.
By:
------------------------------------------
Name:
Title:
TALBIYA B. INVESTMENTS LTD.
By:
------------------------------------------
Name:
Title:
ELLIS ENTERPRISES
By:
------------------------------------------
Name:
Title:
-28-
<PAGE>
-------------------------------------
A. L. Schwartz
FINANTRA CAPITAL, INC.
BY:
------------------------------------------
Name: Robert Press
Title: Vice President and
Chairman of the Board of
Directors
-29-
<PAGE>
Exhibit B
---------
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
FINANTRA CAPITAL, INC.
Expires November 5, 2004
No. W-l
New York, New York
November s 1999
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth,
the undersigned, FINANTRA CAPITAL, INC., a Delaware corporation (together with
its successors and assigns, the "Issuer"), hereby certifies that
[Purchaser]
or its registered assigns is entitled to subscribe for and purchase, during the
period specified in this Warrant, up to 440,000 shares (subject to adjustment as
hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable Common Stock of the Issuer, at an exercise price per share equal
to the Warrant Price then in effect, subject, however, to the provisions and
upon the terms and conditions hereinafter set forth. Capitalized terms used in
this Warrant and not otherwise defined herein shall have the respective meanings
specified in Section 7 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant
Stock represented hereby shall commence on the date of issuance of this Warrant
and shall expire at 5:00 p.m., New York City time, on November 5, 2004 (such
period being the "Term").
2. Method of Exercise Payment: Issuance of New Warrant: Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this
Warrant may be exercised in whole or in part at any time and from time to time
during the Term.
(b) Method of Exercise. The Holder hereof may exercise this
Warrant, in whole or
<PAGE>
in part, by the surrender of this Warrant (with the exercise form attached
hereto duly executed) at the principal office of the Issuer, and by the payment
to the Issuer of an amount of consideration therefor equal to the Warrant Price
in effect on the date of such exercise multiplied by the number of shares of
Warrant Stock with respect to which this Warrant is then being exercised,
payable at such Holder's election by certified or official bank check.
(c) Issuance of Stock Certificates. In the event of any
exercise of the rights represented by this Warrant in accordance with and
subject to the terms and conditions hereof, (i) certificates for the shares of
Warrant Stock so purchased shall be dated the date of such exercise and
delivered to the Holder hereof within a reasonable time, not exceeding three
Trading Days after such exercise, and the Holder hereof shall be deemed for all
purposes to be the Holder of the shares of Warrant Stock so purchased as of the
date of such exercise, and (ii) unless this Warrant has expired, a new Warrant
representing the number of shares of Warrant Stock, if any, with respect to
which this Warrant shall not then have been exercised (less any amount thereof
which shall have been canceled in payment or partial payment of the Warrant
Price as hereinabove provided) shall also be issued to the Holder hereof at the
Issuer's expense within such time.
(d) Transferability of Warrant. If transferred pursuant to
this paragraph and subject to the provisions of subsection (e) of this Section
2, this Warrant may be transferred on the books of the Issuer by the Holder
hereof in person or by duly authorized attorney, upon surrender of this Warrant
at the principal office of the Issuer, properly endorsed (by the Holder
executing an assignment in the form attached hereto) and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer.
This Warrant is exchangeable at the principal office of the Issuer for Warrants
for the purchase of the same aggregate number of shares of Warrant Stock, each
new Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange. All
Warrants issued on transfers or exchanges shall be dated the Original Issue Date
and shall be identical with this Warrant except as to the number of shares of
Warrant Stock issuable pursuant hereto.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Warrant Stock to be issued upon
exercise hereof are being acquired solely for the Holder's own account and not
as a nominee for any other party, and for investment' and that the Holder will
not offer, sell or otherwise dispose of this Warrant or any shares of Warrant
Stock to be issued upon exercise hereof except pursuant to an effective
registration statement, or an exemption from registration, under the Securities
Act and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this
Warrant and all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in substantially the
following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT
-2-
<PAGE>
(iii) The restrictions Imposed by thls subsection (e) upon
the transfer of this Warrant and the shares of Warrant Stock to be purchased
upon exercise hereof shall terminate (A) when such securities shall have been
effectively registered under the Securities Act, (B) upon the Issuer's receipt
of an opinion of counsel, in form and substance reasonably satisfactory to the
Issuer, addressed to the Issuer to the effect that such restrictions are no
longer required to ensure compliance with the Securities Act or (C) upon the
Issuer's receipt of other evidence reasonably satisfactory to the Issuer that
such registration is not required. Whenever such restrictions shall cease and
terminate as to any such securities, the Holder thereof shall be entitled to
receive from the Issuer (or its transfer agent and registrar), without expense
(other than applicable transfer taxes, if any), new Warrants (or, in the case of
shares of Warrant Stock, new stock certificates) of like tenor not bearing the
applicable legends required by paragraph (ii) above relating to the Securities
Act and state securities laws.
(f) Continuing Rights of Holder. The Issuer will, at the time
of or at any time after each exercise of this Warrant, upon the request of the
Holder hereof or of any shares of Warrant Stock issued upon such exercise,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
richts to such Holder.
3. Stock Fully Paid: Reservation and Listing of Shares: Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants,
covenants and agrees that all shares of Warrant Stock which may be issued upon
the exercise of this Warrant or otherwise hereunder will. upon issuance, be duly
authorized, validly issued, fully paid and non-assessable and free from all
taxes, liens and charges created by or through Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may be
exercised, the Issuer will at all times have authorized and reserved for the
purpose of the issue upon exercise of this Warrant a sufficient number of shares
of Common Stock to provide for the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock requlred to be
reserved for Issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any governmental authority
under any federal or state law before such shares may be so issued the Issuer
will in good faith use its best efforts as expeditiously as possible at its
expense to cause such shares to be duly registered or qualified. If the Issuer
shall list any shares of Common Stock on any securities exchange or market it
will, at its expense, list thereon, maintain and increase when necessary such
listing. of, all shares of Warrant Stock from time to time issued upon exercise
of this Warrant or as otherwise provided hereunder, and, to the extent
permissible under the applicable securities exchange rules, all unissued shares
of Warrant Stock which are at any time issuable hereunder, so long as any shares
of Common Stock shall be so listed. The Issuer will also so list on each
securities exchange or market, and will maintain such listing of, any other
securities which the Holder of this Warrant shall be entitled to receive upon
the exercise of this Warrant if at the time any securities of the same class
shall be listed on such securities exchange or market bv the Issuer.
(c) Covenants. The Issuer shall not by any action including,
without limitation, amending the Certificate of Incorporation or the by-laws of
the Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically
-3-
<PAGE>
provided herein) or impairment. Without limiting the generality of the
foregoing, the Issuer will (i) not permit the par value, if any, of its Common
Stock to exceed the then effective Warrant Price, (ii) not amend or modify any
provision of the Certificate of Incorporation or by-laws of the Issuer in any
manner that would adversely affect in any way the powers, preferences or
relative participating, optional or other special rights of the Common Stock or
which would adversely affect the rights of the Holders of the Warrants, (iii)
take all such action as may be reasonably necessary in order that the Issuer may
validly and legally issue fully paid and nonassessable shares of Common Stock,
free and clear of any liens, claims, encumbrances and restrictions (other than
as provided herein) upon the exercise of this Warrant, and (iv) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this Warrant.
(d) Loss. Theft. Destruction of Warrants. Upon receipt of
evidence satisfactory to the Issuer of the ownership of and the loss, theft,
destruction or mutilation of any Warrant and, in the case of any such loss,
theft or destruction, upon receipt of indemnity or security satisfactory to the
Issuer or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
(e) Rights and Obli(pound)ations under the Registration Rights
Agreement. The Warrant Stock are entitled to the benefits and subject to the
terms of the Registration Rights Agreement dated as of even date herewith
between the Issuer and the Holders listed on the signature pages thereof (as
amended from time to time, the "Registration Rights Agreement"). The Issuer
shall keep or cause to be kept a copy of the Registration Rights Agreement, and
any amendments thereto, at its chief executive office and shall furnish, without
charge, copies thereof to the Holder upon request.
4. Adjustment of Warrant Price and Warrant Share Number. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) Recapitalization, Reorganization, Reclassification,
Consolidation, Merger or Sale. (i) In case the Issuer after the Original Issue
Date shall do any of the following (each, a "TrigPering Event") (a) consolidate
with or merge into any other Person and the Issuer shall not be the continuing
or surviving corporation of such consolidation or merrger, or (b) permit any
other Person to consolidate with or merge into the Issuer and the Issuer shall
be the continuing or surviving Person but, in connection with such consolidation
or merger, any Capital Stock of the Issuer shall be changed into or exchanged
for Securities of any other Person or cash or any other property, or (c)
transfer all or substantially all of its properties or assets to any other
Person, or (d) effect a capital reorganization or reclassification of its
Capital Stock, then, and in the case of each such Triggering Event, proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the Holder of this Warrant shall be entitled (x) upon
the exercise hereof at any time after the consummation of such Triggering Event,
to the extent this Warrant is not exercised prior to such Triggering Event, or
is redeemed in connection with such Triggering Event, to receive at the Warrant
Price in effect at the time immediately prior to the consummation of such
Triggering Event in lieu of the Common Stock issuable upon such exercise of this
Warrant prior to such Triggering Event, the Securities, cash and property to
which such Holder would have been entitled upon the consummation of such
Triggering Event if such Holder had exercised the rights represented by this
Warrant immediately prior thereto, subject to adjustments and increases
(subsequent to such corporate action) as nearly equivalent as possible to the
adjustments provided for h~ Section 4 hereof or (y) to sell this Warrant (or. at
such Holder's election, a portion hereof) to the Person continuing after or
surviving such Triggering Event, or to the Issuer (if Issuer is the continuing
or surviving Person) at a sales price equal to the amount of cash, property
and/or Securities to which a holder of the number of shares of Common Stock
which would otherwise have been delivered upon the exercise of this Warrant
would have been entitled upon the
-4-
<PAGE>
effective date or closing of any such Triggering Event (the "Event
Consideration"), less the amount or portion of such Event Consideration having a
fair value equal to the aggregate Warrant Price applicable to this Warrant or
the portion hereof so sold.
(i) Notwithstanding anything contained in this Warrant to
the contrary, the Issuer will not effect any Triggering Event unless, prior to
the consummation thereof, each Person (other than the Issuer) which may be
required to deliver any Securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written instrument delivered to, and
reasonably satisfactory to, the Holder of this Warrant, (A) the obligations of
the Issuer under this Warrant (and if the Issuer shall survive the consummation
of such Triggering Event, such assumption shall be in addition to, and shall not
release the Issuer from, any continuing obligations of the Issuer under this
Warrant) and (B) the obligation to deliver to such Holder such shares of
Securities, cash or property as, in accordance with the foregoing provisions of
this subsection (a), such Holder shall be entitled to receive, and such Person
shall have similarly delivered to such Holder an opinion of counsel for such
Person, which counsel shall be reasonably satisfactory to such Holder, stating
that this Warrant shall thereafter continue in full force and effect and the
terms hereof (including, without limitation, all of the provisions of this
subsection (a)) shall be applicable to the Securities, cash or property which
such Person may be required to deliver upon any exercise of this Warrant or the
exercise of any rights pursuant hereto.
(ii) If with respect to any Triggering Event, the Holder
of this Warrant has exercised its right as provided in clause (y) of
subparagraph (i) of this subsection (a) to sell this Warrant or a portion
thereof, the Issuer agrees that as a condition to the consummation of any such
Triggering Event the Issuer shall secure such right of Holder to sell this
Warrant to the Person continuing after or surviving such Triggering Event and
the Issuer shall not effect any such Triggering Event unless upon or prior to
the consummation thereof the amounts of cash, property and/or Securities
required under such clause (y) are delivered to the Holder of this Warrant. The
obligation of the Issuer to secure such right of the Holder to sell this Warrant
shall be subject to such Holder's cooperation with the Issuer, including,
without limitation, the giving of customary representations and warranties to
the purchaser in connection with any such sale. Prior notice of any Triggering
Event shall be given to the Holder of this Warrant in accordance with Section 11
hereof.
(b) Subdivision or Combination of Shares. If the Issuer, at
any time while this Warrant is outstanding, shall subdivide or combine any
shares of Common Stock, (i) in case of subdivision of shares, the Warrant Price
shall be proportionately reduced (as at the effective date of such subdivision
or, if the Issuer shall take a record of Holders of its Common Stock for the
purpose of so subdividing, as at the applicable record date, whichever is
earlier) to reflect the increase in the total number of shares of Common Stock
outstanding as a result of such subdivision, or (ii) in the case of a
combination of shares' the Warrant Price shall be proportionately increased (as
at the effective date of such combination or, if the Issuer shall take a record
of Holders of its Common Stock for the purpose of so combining, as at the
applicable record date, whichever is earlier) to reflect the reduction in the
total number of shares of Common Stock outstanding as a result of such
combination.
(c) Certain Dividends and Distributions. If the Issuer, at any
time while this Warrant is outstanding, shall:
(i) Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of, shares of
Common Stock, the Warrant Price shall be adjusted, as at the date the Issuer
shall take a record of the Holders of the Issuer's Capital Stock for the purpose
of receiving such dividend or other distribution (or if no such record is taken,
as at the date of such payment or other distribution), to that price determined
bv multiplying the Warrant Price in effect immediately prior to such record date
(or if no such record is taken, then immediately prior to such
-5-
<PAGE>
payment or other distribution), by a fraction ( I ) the numerator of which shall
be the total number of shares of Common Stock outstalldillg immediately prior to
such dividend or distribution, and (2) the denominator of which shall be the
total number of shares of Common Stock outstanding immediately after such
dividend or distribution (plus in the event that the Issuer paid cash for
fractional shares, the number of additional shares which would have been
outstanding had the Issuer issued fractional shares in connection with said
dividends); or
(ii) Other Dividends. Pay a dividend on, or make any
distribution of its assets upon or with respect to (including, but not limited
to, a distribution of its property as a dividend in liquidation or partial
liquidation or by way of return of capital), the Common Stock (other than as
described in clause (i) of this subsection (c)), or in the event that the
Company shall offer options or rights to subscribe for shares of Common Stock,
or issue any Common Stock Equivalents, to all of its holders of Common Stock,
then on the record date for such payment, distribution or offer or, in the
absence of a record date, on the date of such payment, distribution or offer,
the Holder shall receive what the Holder would have received had it exercised
this Warrant in full immediately prior to the record date of such payment,
distribution or offer or, in the absence of a record date, immediately prior to
the date of such payment, distribution or offer.
(d) Issuance of Additional Shares of Common Stock. If the
Issuer, at any time while this Warrant is outstanding, shall issue any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less than
the Warrant Price then in effect or less than the Per Share Market Value then in
effect or without consideration, then the Warrant Price upon each such issuance
shall be adjusted to that price (rounded to the nearest cent) determined by
multiplying the Warrant Price then in effect by a fraction:
(i) the numerator of which shall be equal to the sum of
(A) the number of shares of Common Stock outstanding immediately prior to the
issuance of such Additional Shares of Common Stock plus (B) the number of shares
of Common Stock (rounded to the nearest whole share) which the aggregate
consideration for the total number of such Additional Shares of Common Stock so
issued would purchase at a price per share equal to the greater of the Per Share
Market Value then in effect and the Warrant Price then in effect and
(ii) the denominator of which shall be equal to the number
of shares of Common Stock outstanding immediately after the issuance of such
Additional Shares of Common Stock. The provisions of this subsection (d) shall
not apply under any of the circumstances for which an adjustment is provided in
subsections (a), (b) or (c) of this Section 4. No adjustment of the Warrant
Price shall be made under this subsection (d) upon the issuance of any
Additional Shares of Common Stock which are issued pursuant to any Common Stock
Equivalent if upon the issuance of such Common Stock Equivalent (x) any
adjustment shall have been made pursuant to subsection (e) of this Section 4 or
(y) no adjustment was required pursuant to subsection (e) of this Section 4. No
adjustment of the Warrant Price shall be made under this subsection (d) in an
amount less than $.01 per share, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment, if any, which together with any adjustments so carried forward shall
amount to $.01 per share or more, provided that upon any adjustment of the
Warrant Price as a result of amv dividend or distribution payable in Common
Stock or Convertible Securities or the reclassification, subdivision or
combination of Common Stock into a greater or smaller number of shares, the
foregoing figure of $.01 per share (or such figure as last adjusted) shall be
adjusted (to the nearest one-half cent) in proportion to the adjustment in the
Warrant Price.
-6-
<PAGE>
(e) Issuance of Common Stock Equivalents. If the Issuer, at
any time while this Warrant is outstanding, shall issue any Common Stock
Equivalent and the price per share for which Additional Shares of Common Stock
may be issuable thereafter pursuant to such Common Stock Equivalent shall be
less than the Warrant Price then in effect or less than the Per Share Market
Value then in effect, or if, after any such issuance of Common Stock
Equivalents, the price per share for which Additional Shares of Common Stock may
be issuable thereafter is amended or adjusted, and such price as so amended
shall be less than the Warrant Price or less than the Per Share Market Value in
effect at the time of such amendment, then the Warrant Price upon each such
issuance or amendment shall be adjusted as provided in the first sentence of
subsection (d) of this Section 4 on the basis that (1) the maximum number of
Additional Shares of Common Stock issuable pursuant to all such Common Stock
Equivalents shall be deemed to have been issued (whether or not such Common
Stock Equivalents are actually then exercisable, convertible or exchangeable in
whole or in part) as of the earlier of (A) the date on which the Issuer shall
enter into a firm contract for the issuance of such Common Stock Equivalent, or
(B) the date of actual issuance of such Common Stock Equivalent, and (2) the
aggregate consideration for such maximum number of Additional Shares of Common
Stock shall be deemed to be the millimum consideration received or receivable by
the Issuer for the issuance of such Additional Shares of Common Stock pursuant
to such Common Stock Equivalent. No adjustment of the Warrant Price shall be
made under this subsection (e) upon the issuance of any Convertible Security
which is issued pursuant to the exercise of any warrants or other subscription
or purchase rights therefor, if any adjustment shall previously have been made
in the Warrant Price then in effect upon the issuance of such warrants or other
rights pursuant to this subsection (e). If no adjustment is required under this
subsection (e) upon issuance of any Common Stock Equivalent or once an
adjustment is made under this subsection (e) based upon the Per Share Market
Value in effect on the date of such adjustment, no further adjustment shall be
made under this subsection (e) based solely upon a change in the Per Share
Market Value after such date.
(f) Purchase of Common Stock bv the Issuer. If the Issuer at
any time while this Warrant is outstanding shall, directly or indirectly through
a Subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of
Common Stock at a price per share greater than the Per Share Market Value then
in effect, then the Warrant Price upon each such purchase, redemption or
acquisition shall be adjusted to that price determined by multiplying such
Warrant Price by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such purchase,
redemption or acquisition minus the number of shares of Common Stock which the
aggregate consideration for the total number of such shares of Common Stock so
purchased, redeemed or acquired would purchase at the Per Share Market Value;
and (ii) the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such purchase, redemption or acquisition. For the
purposes of this subsection (f), the date as of which the Per Share Market Value
shall be computed shall be the earlier of (x) the date on which the Issuer shall
enter into a firm contract for the purchase, redemption or acquisition of such
Common Stock, or (y) the date of actual purchase, redemption or acquisition of
such Common Stock. For the purposes of this subsection (f), a purchase,
redemption or acquisition of a Common Stock Equivalent shall be deemed to be a
purchase of the underlying Common Stock, and the computation herein required
shall be made on the basis of the full exercise, conversion or exchange of such
Common Stock Equivalent on the date as of which such computation is required
hereby to be made. whether or not such Common Stock Equivalent is actually
exercisable, convertible or exchangeable on such date.
(g) Other Provisions Applicable to Adjustments Under this
Section 4. The following provisions shall be applicable to the making of
adjustments in the Warrant Price hereinbefore provided in Section 4:
(i) Computation of Consideration. The consideration received
by the Issuer shall be deemed to be the following: to the extent that any
Additional Shares of Common Stock or any Common Stock Equivalents shall be
issued for a cash consideration, the consideration received by the
-7-
<PAGE>
Issuer therefor, or if such Additional Shares of Common Stock or Common Stock
Equivalents are offered by the Issuer for subscription, the subscription price,
or, if such Additional Shares of Common Stock or Common Stock Equivalents are
sold to underwriters or dealers for public offering without a subscription
offering, the public offering price. in any such case excluding any amounts paid
or receivable for accrued interest or accrued dividends and without deduction of
any compensation, discounts, commissions, or expenses paid or incurred by the
Issuer for or in connection with the underwriting thereof or otherwise iR
connection with the issue thereof; to the extent that such issuance shall be for
a consideration other than cash. then, except as herein otherwise expressly
provided, the fair market value of such consideration at the time of such
issuance as determined in good faith by the Board. The consideration for any
Additional Shares of Common Stock issuable pursuant to any Common Stock
Equivalents shall be the consideration received by the Issuer for issuing such
Common Stock Equivalents, plus the additional consideration payable to the
Issuer upon the exercise, conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of any Additional Shares of
Common Stock or Common Stock Equivalents in payment or satisfaction of any
dividend upon any class of Capital Stock of the Issuer other than Common Stock,
the Issuer shall be deemed to have received for such Additional Shares of Common
Stock or Common Stock Equivalents a consideration equal to the amount of such
dividend so paid or satisfied. In any case in whicl1 the consideration to be
received or paid shall be other than cash, the Board shall notify the Holder of
this Warrant of its determination of the fair market value of such consideration
prior to payment or accepting receipt thereof. If, within thirty days after
receipt of said notice, the Majority Holders shall notify the Board in writing
of their objection to such determination. a determination of the fair market
value of such consideration shall be made by an Independent Appraiser selected
by the Majority Holders with the approval of the Board (which approval shall not
be unreasonably withheld), whose fees and expenses shall be paid by the Issuer.
(ii) Readjustment of Warrant Price. Upon the expiration or
termination of the right to convert, exchange or exercise any Common Stock
Equivalent the issuance of which effected an adjustment in the Warrant Price, if
such Common Stock Equivalent shall not have been converted, exercised or
exchanged in its entirety, the number of shares of Common Stock deemed to be
issued and outstanding by reason of the fact that they were issuable upon
conversion, exchange or exercise of any such Common Stock Equivalent shall no
longer be computed as set forth above, and the Warrant Price shall forthwith be
readjusted and thereafter be the price which it would have been (but reflecting
any other adjustments in the Warrant Price made pursuant to the provisions of
this Section 4 after the issuance of such Common Stock Equivalent) had the
adjustment of the Warrant Price been made in accordance with the issuance or
sale of the number of Additional Shares of Common Stock actually issued upon
conversion~ exchange or issuance of such Common Stock Equivalent and thereupon
only the number of Additional Shares of Common Stock actually so issued shall be
deemed to have been issued and only the consideration actually received by the
Issuer (computed as in clause (i) of this subsection (g)) shall be deemed to
have been received by the Issuer.
(iii) Outstanding Common Stock. The number of shares of
Common Stock at anv time outstanding shall (A) not include any shares thereof
then directly or indirectly owned or held by or for the account of the Issuer or
any of its Subsidiaries, and (B) be deemed to include all shares of Common Stock
then issuable upon conversion, exercise or exchange of any then outstanding
Common Stock Equivalents or any other evidences of Indebtedness, shares of
Capital Stock (including, without limitation, the Preferred Stock) or other
Securities which are or may be at any time convertible into or exchangeable for
shares of Common Stock or Other Common Stock.
(h) Other Action Affecting Common Stock. In case after the
Original Issue Date the Issuer shall take any action affecting its Common Stock,
other than an action described in any of the foregoing subsections (a) through
(g) of this Section 4, inclusive, and the failure to make any adjustment
-8-
<PAGE>
would not fairly protect the purchase rights represented by this Warrant in
accordance with the essential intent and principle of this Section 4, then the
Warrant Price shall be adjusted in such manner and at such time as the Board may
in good faith determine to be equitable in the circumstances.
(i) Adjustment of Warrant Share Number. Upon each adjustment
in the Warrant Price pursuant to any of the foregoing provisions of this Section
4, the Warrant Share Number shall be adjusted, to the nearest one hundredth of a
whole share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving effect
to such adjustment and the denominator of which shall be the Warrant Price
immediately after giving effect to such adjustment. If the Issuer shall be in
default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which such shares may then be validly issued under applicable
law. Such exercise shall not constitute a waiver of any claim arising against
the Issuer by reason of its default under Section 3 of this Warrant.
(j) Form of Warrant after Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Warrant Price or
the number and kind of Securities purchasable upon the exercise of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" selected by the Holder,
provided that the Issuer shall have ten days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection. The firm selected by the Holder of this Warrant as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such
matters to the Issuer and such Holder within thirty days after submission to it
of such dispute. Such opinion shall be final and binding on the parties hereto.
The fees and exDenses of such accounting firm shall be naid bv the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with an exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.
7. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
"Additional Shares of Common Stock" means all shares of Common Stock
issued by the Issuer after the Original Issue Date, and all shares of Other
Common, if any, issued by the Issuer after the Original Issue Date, except (i)
Warrant Stock, (ii) any shares of Common Stock issuable upon conversion of the
Preferred Stock pursuant to the Preferred Stock Certificate of Designation and
(iii) any shares of
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<PAGE>
Common Stock issuable pursuant to agreements filed by the Issuer as exhibits to
its reports filed with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, prior to the Original Issue Date.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other tYpe.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Issuer as in effect on the Original Issue Date and the Preferred Stock
Certificate of Designation, and as hereafter from time to time amended,
modified, supplemented or restated in accordance with the terms hereof and
thereof and pursuant to applicable law.
"Common Stock" means the Common Stock, $.01 par value, of the Issuer
and any other Capital Stock into which such stock maY hereafter be chanced.
"Common Stock Equivalent" means any Convertible Security or warrant,
option or other right to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness, shares of
Capital Stock or other Securities which are or may be at any time convertible
into or exchangeable for Additional Shares of Common Stock. The term
"Convertible Security" means one of the Convertible Securities.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and whether
domestic or foreign.
"Holders" mean the Persons who shall from time to time own any Warrant.
The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.
"Issuer" means Finantra Capital, Inc., a Delaware corporation, and its
successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable under the
Warrants at the time outstanding.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"Original Issue Date" means November 5, 1999.
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<PAGE>
"Other Common" means any other Capital Stock of the Issuer of any class
which shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.
"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on The Nasdaq Small-Cap
Market, the Nasdaq National Market or other registered national stock exchange
on which the Common Stock is then listed or if there is no such price on such
date, then the closing bid price on such exchange or quotation system on the
date nearest preceding such date, or (b) if the Common Stock is not listed then
on The Nasdaq Small-Cap Market, the Nasdaq National Market or any registered
national stock exchange, the closing bid price for a share of Common Stock in
the over-the-counter market, as reported by NASDAQ or in the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the holder, or (d) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Independent Appraiser selected in good faith by
the Majority Holders; provided, however, that the Issuer, after receipt of the
determination by such Independent Appraiser, shall have the right to select an
additional Independent Appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such Independent Appraiser;
and provided, further that all determinations of the Per Share Market Value
shall be appropriately adjusted for any stock dividends, stock splits or other
similar transactions during such period. The determination of fair market value
by an Independent Appraiser shall be based upon the fair market value of the
Issuer determined on a going concern basis as between a willing buyer and a
willing seller and taking into account all relevant factors determinative of
value, and shall be final and binding on all parties. In determining the fair
market value of any shares of Common Stock, no consideration shall be given to
any restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws. or to the existence or absence of, or any
limitations on, voting rights.
"Preferred Stock" means the Issuer's Series C Preferred Stock, par
value .01 per share and stated value $1,000 per share.
"Preferred Stock Certificate of Designation" means the Certificate of
Designation, Powers, Preferences and Rights of the Preferred Stock adopted by
the Board on November 5, 1999.
"Registration Rights Agreement" has the meaning specified in Section
3(e) hereof.
"Securities" means any debt or equity securities of the Issuer, whether
now or hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security. "Security" means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute then in effect.
"Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of November
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<PAGE>
5, 1999 among the Issuer and Esquire Trade & Finance Inc.. Austinvest Anstalt
Balzers, Nesher Inc., Amro International, S.A., Altra Trading & Investment,
S.A., the Gross Foundation, Libra Finance, S.A., Talbiya B. Investments Ltd.,
Ellis Enterprises and A.L. Schwartz.
"Subsidiary" means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the Issuer or
by one or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.
"Trading Day" means (a) a day on which the Common Stock is traded on
The Nasdaq Small-Cap Market, the Nasdaq National Market or other registered
national stock exchange on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on The Nasdaq Small-Cap Market, the Nasdaq National
Market or any registered national stock exchange, a day or which the Common
Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day
on which the Common Stock is quoted in the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, however, that in
the event that the Common Stock is not listed or quoted as set forth in (a), (b)
and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other government
action to close.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board of
Directors (or other governing body) of such corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the
Securities Purchase Agreement, including, without limitation, this Warrant, and
any other warrants of like tenor issued in substitution or exchange for any
thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof or of
any of such other Warrants
"Warrant Price" means initially $3.09, as such price may be adjusted
from time to time as shall result from the adjustments specified in Section 4
hereof.
"Warrant Share Number' means at any time the aggregate number of shares
of Warrant Stock which may at such time be purchased upon exercise of this
Warrant, after giving effect to all prior adjustments and increases to such
number made or required to be made under the terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants.
8. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to
the holders of Common Stock; or
(B) the Issuer shall authorize the granting to
all holders of its Common Stock of rights to
subscribe for or purchase any shares of
Capital Stock of any class or of any Common
Stock
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<PAGE>
Equivalents or Convertible Securities or
other rights; or
(C) there shall be any reclassification of the
Capital Stock of the Issuer; or
(D) there shall be any capital reorganization by
the Issuer; or
(E) there shall be any (i) consolidation or
merger involving the Issuer or (ii) sale,
transfer or other disposition of all or
substantially all of the Issuer's property,
assets or business (except a merger or other
reorganization in which the Issuer shall be
the surviving corporation and its shares of
Capital Stock shall continue to be
outstanding and unchanged and except a
consolidation, merger, sale, transfer or
other disposition involvina a wholly-owned
Subsidiary); or
(F) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of
the Issuer or any partial liquidation of the
Issuer or distribution to holders of Common
Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition. dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which action
is to be taken). The Holder shall have the right to send two representatives
selected by it to each meeting, who shall be permitted to attend, but not vote
at, such meeting and any adjournments thereof. This Warrant entitles the Holder
to receive copies of all financial and other information distributed or reauired
to be distributed to the holders of the Common Stock.
9. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 9 without the consent of the Holder of this Warrant.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
11. Notices. Any and all notices or other communications or deliveries
required or permitted
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<PAGE>
to be provided hereunder shall be in writing and shall be deemed given and
effective on the earlier of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice prior to 5:00 p.m., New York City time, on a Business Day,
(ii) the Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice later than 5:00 p.m., New York City time, on any date and
earlier than 11:59 p.m., New York City time, on such date, (iii) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be with
respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:
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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
FINANTRA CAPITAL. INC.
By:
------------------------------------
Name:
Title:
-15-
<PAGE>
EXERCISE FORM
FINANTRA CAPITAL, INC.
The undersigned ____________________, pursuant to the provisions of the within
Warrant, hereby elects to purchase ______________ shares of Common Stock of
FINANTRA CAPITAL, INC. covered by the within Warrant.
Dated: Signature
------------------------- ----------------------------
Address
----------------------------
----------------------------
ASSIGNMENT
FOR VALUE RECEIVED, ______________________ hereby sells, assigns and
transfers unto ________________ the within Warrant and all rights evidenced
thereby and does irrevocably constitute and appoint ___________________,
attorney, to transfer the said Warrant on the books of the within named
corporation.
Dated: Signature
------------------------- ----------------------------
Address
----------------------------
----------------------------
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, hereby sells, assigns and transfers unto
___________________the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint _____________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: Signature
------------------------- ----------------------------
Address
----------------------------
----------------------------
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_________ canceled (or transferred or exchanged)
this _______day of ________________, shares of Common Stock issued therefor in
the name of ________________, Warrant No. W- _______________ issued for shares
of Common Stock in the name of ___________.
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EXECUTION COPY
- - --------------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
BETWEEN
Travelers Acquisition Corporation,
as Borrower,
AND
BHC Interim Funding, L.P.,
as Lender.
Dated as of October 29, 1999
- - --------------------------------------------------------------------------------
<PAGE>
TABLE of CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SECTION 1 DEFINITIONS.................................................................................................. Page 2
1.1 Certain Defined Terms..................................................................................... Page 2
1.2 Accounting Terms.......................................................................................... Page 8
1 3 Other Definitional Provisions............................................................................. Page 9
SECTION 2 TERM LOAN AND COLLATERAL ............................................................................ Page 9
2.1 Term Loan............................................................................................ Page 9
2.2 Interest............................................................................................. Page 9
2.3 Fees................................................................................................ Page 10
2.4 Payments and Prepayments............................................................................ Page 11
(A) Manner and Time of Payment ..................................................................... Page 11
(B) Payments on Business Days....................................................................... Page 11
(C) Voluntary Prepayment............................................................................ Page 11
(D) Mandatory Repayment............................................................................. Page 11
2.5 Grant of Security Interest.......................................................................... Page 11
2.6 Preservation of Collateral and Perfection of Security Interests Therein . .......................... Page 11
2.7 Possession of Collateral and Related Matters........................................................ Page 12
SECTION3 CONDITIONS TO TERM LOAN...................................................................................... Page 12
3.1 Conditions to Term Loan............................................................................. Page 12
(A) Closing Deliveries......................................................................... Page 12
(B) Security Interests; Guarantees; Stock Pledges.............................................. Page 12
(C) Representations and Warranties ............................................................ Page 13
(D) Fees....................................................................................... Page 13
(E) No Default................................................................................. Page 13
(F) Performance of Agreements.................................................................. Page 13
(G) No Prohibition............................................................................. Page 13
(H) No Litigation.............................................................................. Page 13
(I) Warrants................................................................................... Page 13
(J) Confession of Judgment..................................................................... Page 13
(K) Acquisition Consummated.................................................................... Page 13
(L) Sellers Subordination...................................................................... Page 13
SECTION 4 BORROWER'S REPRESENTATIONS AND WARRANTIES .......................................................... Page 14
4.1 Organization, Powers, Capitalization................................................................ Page 14
(A) Organization and Powers........................................................... Page 14
(B) Capitalization.................................................................... Page 14
4.2 Authorization of Borrowing, No Conflict ............................................................ Page 14
4.3 Financial Condition................................................................................. Page 15
4.4 Indebtedness and Liabilities ....................................................................... Page 15
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
4.5 Account Warranties ................................................................................. Page 15
4.6 Names .............................................................................................. Page 15
4.7 Locations; FEIN..................................................................................... Page 15
4.8 Title to Properties; Liens.......................................................................... Page 15
4.9 Litigation; Adverse Facts........................................................................... Page 16
4.10 Payment of Taxes.................................................................................... Page 16
4.11 Performance of Agreements........................................................................... Page 16
4.12 Employee Benefits Plans............................................................................. Page 16
4.13 Intellectual Property............................................................................... Page 16
4.14 Broker's Fees....................................................................................... Page 16
4.15 Environmental Compliance............................................................................ Page 17
4.16 Solvency............................................................................................ Page 17
4.17 Disclosure.......................................................................................... Page 17
4.18 Insurance........................................................................................... Page 17
4.19 Compliance with laws................................................................................ Page 17
4.20 Bank Accounts....................................................................................... Page 18
4.21 Subsidiaries........................................................................................ Page 18
4.22 Employee Matters.................................................................................... Page 18
SECTION 5 AFFIRMATIVE COVENANTS............................................................................... Page 18
5.1 Financial Statements and Other Reports.............................................................. Page 18
(A) Monthly Financials......................................................................... Page 19
(B) Quarterly Financials....................................................................... Page 19
(C) Year-End Financials........................................................................ Page 19
(D) Accountants' Certification and Reports..................................................... Page 20
(E) Management Report.......................................................................... Page 20
(F) Government Notices......................................................................... Page 20
(G) Events of Default, etc. .................................................................. Page 20
(H) Trade Names................................................................................ Page 20
(I) Locations ................................................................................ Page 20
(J) Bank Accounts ............................................................................. Page 21
(K) Litigation ............................................................................... Page 21
(L) Other Information.......................................................................... Page 21
5.2 Access to Accountants............................................................................... Page 21
5.3 Inspection ........................................................................................ Page 21
5.4 Collateral Records ................................................................................ Page 21
5.5 Account Covenants; Verification ................................................................... Page 21
5.6 Endorsement ....................................................................................... Page 22
5.7 Corporate Existence ............................................................................... Page 22
5.8 Payment of Taxes.................................................................................... Page 22
5.9 Maintenance of Properties; Insurance................................................................ Page 22
5.10 Compliance with Laws ............................................................................... Page 22
5.11 Further Assurances ................................................................................. Page 23
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
5.12 Collateral Locations ............................................................................... Page 23
5.13 Bailees ............................................................................................ Page 23
5.14 Use of Proceeds and Margin Security................................................................. Page 23
5.15 Observer Rights .................................................................................... Page 23
5.16 Financial Covenants. ............................................................................... Page 23
SECTION 6 NEGATIVE COVENANTS ................................................................................. Page 24
6.1 Indebtedness and Liabilities........................................................................ Page 24
6.2 Guaranties.......................................................................................... Page 94
6.3 Transfers, Liens and Related Matters................................................................ Page 24
6.4 Restricted Junior Payments ......................................................................... Page 25
6.5 Restriction on Fundamental Changes.................................................................. Page 25
6.6 Transactions with Affiliates........................................................................ Page 25
6.7 Environmental Liabilities........................................................................... Page 25
6.8 Conduct of Business................................................................................. Page 25
6.9 Compliance with ERISA............................................................................... Page 25
6.10 Subsidiaries........................................................................................ Page 26
6.11 Fiscal Year......................................................................................... Page 26
6.12 Press Release; Public Offering Materials............................................................ Page 26
6.13 Bank Accounts....................................................................................... Page 26
6.14 Charter Documents................................................................................... Page 26
SECTION 7 DEFAULT, RIGHTS AND REMEDIES........................................................................ Page 26
7.1 Event of Default.................................................................................... Page 26
(A) Payment.................................................................................... Page 26
(B) Default in Other Agreements................................................................ Page 26
(C) Breach of Certain Provisions............................................................... Page 26
(D) Breach of Warranty......................................................................... Page 26
(E) Other Defaults Under Loan Documents........................................................ Page 27
(F) Involuntary Bankruptcy; Appointment of Receiver, etc ...................................... Page 27
(G) Voluntary Bankruptcy; Appointment of Receiver, etc ........................................ Page 27
(H) Liens .................................................................................... Page 27
(I) Judgment and Attachments ................................................................. Page 27
(J) Dissolution .............................................................................. Page 28
(K) Solvency ................................................................................. Page 28
(L) Injunction ................................................................................ Page 28
(M) Invalidity of Loan Documents ............................................................. Page 28
(N) Failure of Security ...................................................................... Page 28
(O) Licenses and Permits ..................................................................... Page 28
(P) Forfeiture ............................................................................... Page 28
7.2 Acceleration ...................................................................................... Page 28
7.3 Remedies............................................................................................ Page 29
7.4 Appointment of Attorney-in-Fact..................................................................... Page 29
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
7.5 Limitation on Duty of Lender with Respect to Collateral ............................................ Page 30
7.6 Application of Proceeds ........................................................................... Page 30
7.7 License of Intellectual Property.................................................................... Page 30
7.8 Waivers, Non-Exclusive Remedies..................................................................... Page 30
SECTION 8 MISCELLANEOUS....................................................................................... Page 31
8.1 Assignments and Participations...................................................................... Page 31
8.2 Set Off............................................................................................. Page 31
8.3 Expenses and Attorneys' Fees ....................................................................... Page 31
8.4 Indemnity........................................................................................... Page 32
8.5 Amendments and Waivers ............................................................................. Page 32
8.6 Notices............................................................................................. Page 32
8.7 Survival of Warranties and Certain Agreements....................................................... Page 33
8.8 Indulgence Not Waiver............................................................................... Page 34
8.9 Marshaling; Payments Set Aside...................................................................... Page 34
8.10 Entire Agreement ................................................................................... Page 34
8.11 Independence of Covenants........................................................................... Page 34
8.12 Severability ....................................................................................... Page 34
8.13 Headings ........................................................................................... Page 34
8.14 APPLICABLE LAW...................................................................................... Page 35
8.15 Successors and Assigns.............................................................................. Page 35
8.16 No Fiduciary Relationship; Limitation of Liabilities................................................ Page 35
8.17 CONSENT TO JURISDICTION............................................................................. Page 35
8.18 WAIVER OF JURY TRIAL................................................................................ Page 35
8.19 Construction........................................................................................ Page 36
8.20 Counterparts; Effectiveness......................................................................... Page 36
8.21 No Duty............................................................................................. Page 36
SECTION 9 SUBORDINATION....................................................................................... Page 36
9.1 Obligations Subordinate to Senior Indebtedness ..................................................... Page 36
9.2 Payment Over of Proceeds Upon Dissolution........................................................... Page 37
9.3 No Payment in Certain Circumstances................................................................. Page 38
9.4 Acceleration Rights; Remedies....................................................................... Page 39
9.5 Payment Otherwise Permitted......................................................................... Page 39
9.6 Subrogation to Rights of Holders of Senior Indebtedness............................................. Page 39
9.7 Provisions Solely to Define Relative Rights......................................................... Page 40
9.8 No Waiver of Subordination Provisions; Amendment.................................................... Page 40
9.9 Reliance on Judicial Order or Certificate of Liquidating Agent...................................... Page 41
9.10 Turnover. Miscellaneous Subordination Provisions.................................................... Page 41
</TABLE>
Exhibits and Schedules
Exhibit A -- Form of Warrants
Exhibit B -- Confession of Judgment
Schedule 1.1 (A)...................................................... Page 7
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Schedule 1.1 (B)........................................................ Page 7
Schedule 3.1 (A)....................................................... Page 13
Schedule 4.1 (B)....................................................... Page 14
Schedule 4.6 .......................................................... Page 15
Schedule 4.7........................................................... Page 15
Schedule 4.13.......................................................... Page 16
Schedule 4.20.......................................................... Page 18
Schedule 4.21 ......................................................... Page 18
Schedule 4.22 ......................................................... Page 18
Schedule 4.24.......................................................... Page 19
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EXECUTION COPY
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of October 29, 1999, and
entered into by and between TRAVELERS ACQUISITION CORPORATION, a Florida
corporation (hereinafter "TAC" or the "Borrower"), with its principal place of
business at 2233 Faraday Avenue, Suite K, Carlsbad, Califomia 92008, and BHC
[NTERIM FUNDING, L.P., a Delaware limited partnership (hereinafter "Lender"),
with offices at 444 Madison Avenue, New York, New York 1 ()()22
RECITALS
WHEREAS, TAC has entered into a Stock Purchase Agreement dated as of
September 30, 1999 (as the same may be amended, modified or restated, the "Stock
Purchase Agreement") among TAC, as purchaser, and Tony Broda, Laurie Broda,
Davis Family Trust, Charles Hawk, W.F. Huhner, W.F. Hubner Voting Trust flb/o
Glenn Barth, W.F. Hubner Voting Trust flb/o James Hoppin, Alana McMains, Amber
McMains, McMains Children's Trust, Ray Scurlock, Marjorie Scurlock, Rodney and
Ingeborg G. Sears Family Trust, Gisela Sutter, Ronald Thompson, Earl and Lori
Wilson Family Trust, Perry Wilson, Rosie Lee Wilson-Cheever Family Trust, Sheila
Rai Wilson Family Trust, and Wilson Trust (Ray Wilson), as sellers (the
"Sellers") and Travelers Investment Corporation, a California corporation
("TIC") for the acquisition of 100% of the authorized, issued and outstanding
common shares of TIC; and
WHEREAS, pursuant to the Stock Purchase Agreement, TAC will acquire
from the Sellers, and Sellers shall sell to TAC, all of the authorized, issued
and outstanding common shares of TIC consisting of 442,312 shares (the "Shares")
on the terms and conditions contained in the Stock Purchase Agreement; and
WHEREAS, Borrower has requested Lender to assist Borrower by providing
a portion of the financing needed to consummate the purchase of the Shares; and
WHEREAS, Borrower desires to secure its obligations under the Loan
Documents (as defined in Section 1 hereof) by granting to Lender a security
interest in and lien upon Borrower's property; and
WHEREAS, Borrower desires to further secure its obligations under the
Loan Documents by causing each of its Subsidiaries to unconditionally guaranty
the payment and performance of all Obligations and secure such guaranty by
granting to Lender a security interest in and lien upon such Subsidiary's
property; and
WHEREAS, Borrower has agreed to sell to Lender warrants to purchase
common stock of the Borrower (the "TIC Warrants"); and
WHEREAS, Finantra Capital, Inc., a Delaware corporation ("Finantra" or
the "Parent") is the parent of TAC and has agreed to guarantee the obligations
of the Borrower and sell's to lender warrants to purchase common stock of
Finantra (the "Finantra Warrants");
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NOW, THEREFORE, in consideration ofthe premises and the agreements,
provisions and covenants herein contained, Borrower and Lender agree as follows:
SECTION 1 DEFINITIONS
1.1 Certain Defined Temms. The following terms used in this Agreement
shall have the following meanings:
"Acceptance" means Travelers Acceptance Corporat~on, a Califomia
corporation and a Subsidiary of Borrower.
"Accounts" means all accounts (as defined in the WCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other fomns of obligations owed to or owned by Borrower arising or
resulting from the sale of goods or the rendering of services.
"Affiliate" means any Person (other than Lender): (a) directly or
indirectly controlling, controlled by, or under common control with any Loan
Party; (b) directly or indirectly owning or holding five percent (5%) or more of
any equity interest in Borrower; or (c) five percent (5%) or more of whose
voting stock or other equity interest having ordinary voting power for the
election of directors or the power to direct or cause the direction of
management, is directly or indirectly owned or held by Borrower; or (d) which
has a senior executive officer who is also a senior executive officer of
Borrower. For purposes of this definition, "control" (including with correlative
meanings, the temms "controlling", "controlled by" and "under common control
with") means the possession directly or indirectly of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities or other equity interest, or by contract or
otherwise.
"Agreement" means this Loan and Security Agreement as it may be
amended, restated supplemented or otherwise modified from time to time.
"ALLAR-TIC" means ALLAR-TIC Financial Services, Inc., a Califomia
corporation and a Subsidiary of Borrower.
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or all of
the assets of Borrower or any of its Subsidiaries other than sales of Inventory
in the ordinary course of business or dispositions of obsolete equipment in the
ordinary course of business.
"Borrower" has the meaning assigned to that term in the preamble to this
Agreement.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York, or is a day on
which banking institutions located in such state are closed
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Govemment or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
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Poor's Corporation or at least P-l from Moody's Investors Service, Inc.; and (c)
certificates of deposit or bankers' acceptances maturing within six (6) months
from the date of issuance thereof issued by, or ovemight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than 5250,000,000 and not subject to
setoff rights in favor of such bank.
"Closing Date" means October 29, 1999.
"Collateral" has the meaning assigned to that temm in subsection 2.5.
"Control Person" has the meaning assigned to that temm in subsection
5.17.
"Default Rate" has the meaning assigned to that temm in subsection 2.2.
"Default" means a condition, act or event that, after notice or lapse
of time or both, would constitute an Event of Default if that condition or event
were not cured or removed within any applicable crace or cure Deriod.
"Default Rate" has the meaning assigned to that temm in subsection
2.2(A).
"EBITDA" means earnings before interest, taxes, depreciation and
amortization.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of
Borrower or any ERISA Affiliate or (b) has at any time within the preceding six
(6) years been maintained for the employees of Borrower or any current or fommer
ERISA Affiliate.
"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.
"Environmental Laws" means any present or future federal, state or
local law, rule, regulation or order relating to pollution, waste, disposal or
the protection of human health or safety, plant life or animal life, natural
resources or the environment.
"Equipment" means all equipment (as defined in the WCC), including,
without limitation, all furniture, furnishings, fixtures, machinery, motor
vehicles, trucks, trailers, vessels, aircraft and rolling stock and all parts
thereof and all additions and accessions thereto and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to Borrower, means any Person who is a
member of a group which is under common control with Borrower, who together with
Borrower is treated as a single employer within the meaning of Section 414(b)
and (c) of the IRC.
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"Event of Default" means each of the events set forth in subsection
7.1.
"Excess Interest" has the meaning assigned to that term in subsection
2.2(C).
"Excess Proceeds" has the meaning assigned to that term in subsection
2.4(D).
"Finantra" means Finantra Capital, Inc, a Florida Corporation.
"Finantra Common Stock" means 200,000 shares of common stock of
Finantra.
"Finantra Warrants" has the meaning assigned to that term in the
preamble to this
"Finova" means Finova Capital Corporation, a Delaware corporation.
"Fiscal Year" means each twelve month period ending on the last day of
December Agreement in each year.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination
"Hazardous Material" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
Environmental Laws or regulations as "hazardous substances", "hazardous
materials", "hazardous wastes", "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity, or
toxicity; (b) 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; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
polychlorinated biphenyls.
"Indebtedness", as applied to any Person, means without duplication: (a)
all indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute capital leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; and (e) all indebtedness secured by any
Lien on any property or asset owned or held by that Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is
non recourse to the credit of that Person.
"Intangible Assets" means all intangible assets (determined in
conformity with GAAP) including, without limitation, goodwill, Intellectual
Property, licenses, organizational costs, deferred amounts, covenants not to
compete, unearned income and restricted funds.
"Intellectual Property" means all present and future designs, patents,
patent rights and
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<PAGE>
applications therefor, trademarks and registrations or applications therefor,
trade names, inventions, copyrights and all applications and registrations
therefor, software or computer programs, license rights, trade secrets, methods,
processes, know-how, drawings, specifications, descriptions, and all memoranda,
notes and records with respect to any research and development, whether now
owned or hereafter acquired, all goodwill associated with any of the foregoing,
and proceeds of all of the foregoing, including, without limitation, proceeds of
insurance policies thereon.
"Intercreditor Agreement" means the Intercreditor agreement between
Lender and Finova dated as of October 29, 1999.
"Interest Expenses" means, without duplication, for any period, the
following, for Borrower and its Subsidiaries each calculated for such period:
interest expenses deducted in the determination of net income (excluding (i) the
amortization of fees and costs with respect to the transactions contemplated by
this Agreement which have been capitalized as transaction costs in accordance
with the provisions of subsection 1.2; and (ii) interest paid in kind).
"Inventory" means all inventory (as defined in the UCC) including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business, and goods which
are returned or repossessed.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"Lender" means BHC Interim Funding, L.P. together with its successors
and permitted assigns pursuant to subsection 8.1.
"Liabilities" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement. any lease in the nature
thereof, and any agreement to give any security interest).
"Loan Documents" means this Agreement, the Term Note, the Intercreditor
Agreement and all other instruments, documents and agreements executed by or on
behalf of Borrower and its Subsidiaries and Finantra and its Subsidiaries and
delivered concurrently herewith or at any time hereafter to or for Lender in
connection with the Term Loan, and other transactions contemplated by this
Agreement, all as amended, restated, supplemented or modified from time to time
"Loan Party" means Finantra and its Subsidiaries and includes Borrower,
each of Borrower's Subsidiaries, and any other Person (other than Lender) which
is or becomes a party to any Loan Document.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of Borrower and its Subsidiaries taken as a whole or (b) the ability
of any Loan Party to perform its obligations
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<PAGE>
under any Loan Document to which it is a party or Lender to enforce or collect
any of the Obligations.
"Maturity Date" means October 24. 2000.
"Maximum Rate" has the meaning assigned to that term in subsection
2.2(c).
"Obligations" means all obligations, liabilities and indebtedness of
every nature of each Loan Party from time to time owed to Lender under the Loan
Documents including the principal amount of the Term Loan, all debts, claims and
indebtedness (whether incurred before or after the Termination Date), accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable including, without limitation, all
interest, fees, costs and expenses accrued or incurred after the filing of any
petition under any bankruptcy or insolvency law.
"Offered Shares" has the meaning assigned to that term in subsection
5.17.
"Offering Price" has the meaning assigned to that term in subsection
5.17.
"Parent" means Finantra Capital, Inc. a Delaware corporation and the
parent of Borrowers.
"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other then Liens relating to Environmental Claims or ERISA for taxes,
assessments or other governmental charges not yet due and payable; (b) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent; (c) Liens (other
than any Lien imposed by ERISA) incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (d) easements, rightsof-way, restrictions,
and other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of Borrower or any of its
Subsidiaries; (e) Liens in favor of Lender; (f) Liens in favor of a seller of
Equipment to secure purchase money financing of such Equipment; and (g) Liens
set forth on Schedule 1.1 (A).
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Pro Forma" means the unaudited consolidated and consolidating balance
sheet of Finantra and its Subsidiaries as of the Closing Date after giving
effect to the transactions contemplated by this Agreement. The Pro Forma and the
consolidated and consolidating balance sheet of Finantra and its Subsidiaries as
of the Closing Date are annexed hereto as Schedule 1.1 (B).
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"Proposed Transferee" means a person or group of persons, as defined in
Section 1 3(d)(3) of the Securities Exchange Act of 1934, as amended to whom
Common Stock is proposed to be transferred.
"Restricted Junior Payment" means: (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Borrower or any of its Subsidiaries now or hereafter outstanding, except a
dividend payable solely with shares of the class of stock on which such dividend
is declared, or a dividend paid to Borrower by a wholly-owned Subsidiary of
Borrower; (b) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, retirement, defeasance,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any Subordinated Debt or any shares of any class of stock of
Borrower or any of its Subsidiaries now or hereafter outstanding, or the
issuance of a notice of an intention to do any of the foregoing; (c) any payment
made to retire, or to obtain the surrender of, any outstanding warrants, options
or other rights to acquire shares of any class of stock of Borrower or any of
its Subsidiaries now or hereafter outstanding; and (d) any payment by Borrower
or any of its Subsidiaries of any management, consulting or similar fees to any
Affiliate, whether pursuant to a management agreement or otherwise, except for
bona fide and reasonable compensation for services actually rendered.
"Sellers" has the meaning assigned to that term in the preamble to this
Agreement.
"Shares" has the meaning assigned to that term in the preamble to this
Agreement.
"Subordinated Debt" means any Indebtedness of Borrower or any of its
Subsidiaries, with respect to which the right of the holder of such Indebtedness
to receive any payments thereon is subordinated to the prior right of the holder
to receive payment in full of all Obligations, pursuant to a subordination
agreement between the Lender and such holder.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other subsidiaries of that Person or a combination thereof.
"TAC" means Travelers Acceptance Corporation, a California corporation,
and a Subsidiarv of the Rnrrnwer
"Term Loan" means the unpaid balance of the term loan made pursuant to
subsection 2.1.
"Term Note" means the Senior Secured Term Note of Borrower in a form
reasonably acceptable to Lender, issued pursuant to subsection 2.1.
"TIC" means Travelers Investment Corporation, a California corporation.
"TIC Common Stock" means 18,931 shares of common stock of TIC
comprising 4.28%
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<PAGE>
of the authorized share capital of TIC, of which 442,312 shares are issued and
outstanding on the Closing Date.
"TIC Warrants" has the meaning assigned to that term in the preamble to
this Agreement.
"TLC" means Travelers Leasing Corporation, a Washington corporation,
and a Subsidiary of the Borrower.
"Trace" means Trace Credit Services, Inc., a California corporation,
and a Subsidiary of the Borrower.
"WCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York' as amended from time to time, and any successor
statute.
"Warrants" has the meaning assigned to that term in the preamble to
this Agreement. Each Warrant issued by TIC and Finantra to Lender which will be
in the form of Exhibit A hereto.
1.2 Accounting Terms. For purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP.
Financial statements and other information furnished to Lender pursuant to
subsection 5.1 shall be prepared in accordance with GAAP (as in effect at the
time of such preparation) on a consistent basis.
1.3 Other Definitional Provisions. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection l . l may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. In this Agreement, words importing any gender include the
other genders; the words "including," "includes" and "include" shall be deemed
to be followed by the words "without limitation"; references to agreements and
other contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include its
respective permitted successors and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons; and all
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations.
SECTION 2 TERM LOAN AND COLLATERAL
2.1 Term Loan. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Borrower set forth
herein and in the other Loan Documents, Lender agrees to lend to Borrower, on
the Closing Date, a Term Loan in the original principal amount of Three Million
Six Hundred Fifty Thousand Dollars ($3,650,000). The Term Loan shall be funded
in full on the Closing Date. Amounts borrowed under this subsection 2.1 and
repaid, may not be reborrowed without Lender's written consent. The Term Loan
shall be
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<PAGE>
repaid on October 24, 2000 (the "Maturity Date"). On the Closing
Date, Borrower shall execute and deliver to Lender with appropriate insertions,
a Term Note to evidence the Term Loan.
2.2 Interest.
A. Rate of Interest. The Term Loan and all other Obligations
shall bear interest from the Closing Date to, and including the Maturity Date,
at the rate of thirteen and one-half percent (13.5%) per annum.
After the occurrence and during the continuance of an Event of
Default, at Lender's option, the Term Loan and all other Obligations shall bear
interest at a rate per annum equal to 15% for 90 days and thereafter 18% (the
"Default Rate").
B. Computation and Payment of Interest. Interest on the Term
Loan and all other Obligations shall be computed on the daily principal balance
on the basis of a 360 day year for the actual number of days elapsed in the
period during which it accrues. In computing interest on any Loan, the date of
funding of the Loan shall be included and the date of payment of such Loan shall
be excluded. Interest on the Term Loan and all other Obligations shall be
payable to Lender monthly in arrears on the first day of each month by automatic
wire transfer to Lender's bank account, and on the date of any prepayment of
Loans, and at maturity, whether by acceleration or otherwise. As of the Closing
Date, the amount of each monthly installment of interest shall equal $39,375.0,
which amount is subject to change (i) in the event of any prepayment of
principal ofthe Term Loan or the addition to the unpaid principal balance of the
Term Loan of any other Obligations, and (ii) under the circumstances set forth
in the second sentence of Section 2.2(A) hereof.
C. Interest Laws. Notwithstanding any provision to the
contrary contained in this Agreement or any other Loan Document, Borrower shall
not be required to pay, and Lender shall not be permitted to collect, any amount
of interest in excess of the maximum amount of interest permitted by applicable
law ("Excess Interest"). If any Excess Interest is provided for or determined by
a court of competent jurisdiction to have been provided for in this Agreement or
in any other Loan Document, then in such event: (1) the provisions of this
subsection shall govern and control; (2) neither Borrower nor any other Loan
Party shall be obligated to pay any Excess Interest; (3) any Excess Interest
that Lender may have received hereunder shall be, at Lender's option, (a)
applied as a credit against the outstanding principal balance of the Obligations
or accrued and unpaid interest (not to exceed the maximum amount permitted by
law), (b) refunded to the payer thereof, or (c) any combination of the
foregoing; (4) the interest rate(s) provided for herein shall be automatically
reduced to the maximum lawful rate allowed from time to time under applicable
law (the "Maximum Rate"), and this Agreement and the other Loan Documents shall
be deemed to have been and shall be, reformed and modified to reflect such
reduction; and (5) neither Borrower nor any Loan Party shall have any action
against Lender for any damages arising out of the payment or collection of any
Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligations is calculated at the Maximum Rate rather than the
applicable rate under this Agreement, and thereafter such applicable rate
becomes less than the Maximum Rate, the rate of interest payable on such
Obligations shall remain at the Maximum Rate until Lender shall have received
the amount of interest which Lender would have received during such period on
such Obligations had the rate of interest not been limited to the Maximum Rate
during such period.
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2.3 Fees.
A. Transaction Fee. Borrower shall pay to Lender on the
Closing Date a transaction fee in the amount of One Hundred Twenty Seven
Thousand Five Hundred Dollars ($127,750) less the sum of Seventy Five Thousand
Dollars ($75,000) previously paid to Lender.
B. Extension Fee. Borrower shall pay to lender on July 28,
2000, an extension fee of One Hundred Eighty Two Thousand Five Hundred Dollars
($ 182,500) if the Obligations have not been repaid, in full, on or before that
date.
C. Other Fees and Expenses. Borrower shall pay to Lender, for
its own account, all charges for returned items and all other bank charges
incurred by Lender, as well as wire transfer charges incurred by Lender for each
wire transfer made under this Agreement.
2.4 Payments and Prepayments.
A. Manner and Time of Pavment. All payments made by Borrower
with respect to the Obligations shall be made without deduction, defense, setoff
or counterclaim.
B. Payments on Business Davs. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the amount of interest or fees due
hereunder.
C. Voluntary Prepayment. Borrower shall have the right to
prepay, without premium or penalty, at any time or times after the date hereof,
all or any portion of the outstanding Term Loan, with interest to date of
Payment.
D. Mandatory Repayment. In the event Finantra or any of its
Subsidiaries (including, but not limited to Borrower) (i) procures financing
aggregating $10,000,000 or more (the "Excess Proceeds") from any source, whether
in the form of debt or equity, or (ii) sells any of its assets, or the assets of
any of its Subsidiaries including, but not limited to, the Borrower's are sold,
out of the ordinary course of business, or (iii) sells any of its capital stock
or that of any of its Subsidiaries, the Excess Proceeds shall be paid by
Finantra or any of its Subsidiaries or Borrower or any of its Subsidiaries to
Lender to repay or reduce the Term Loan, in whole or in part. All payments shall
first be applied to interest and then to principal.
2.5 Grant of Security Interest. To secure the payment and performance
of the Obligations, including all renewals, extensions, restructurings and
refinancings of any or all of the Obligations, Borrower hereby grants to Lender
a continuing Lien in and to all right, title and interest of Borrower in the
following property of Borrower, whether now owned or existing or hereafter
acquired or arising and regardless of where located (all being collectively
referred to as the "Collateral"): (A) Accounts, and all guaranties and security
therefor, and all goods and rights represented thereby or arising therefrom
including the rights of stoppage in transit, replevin and reclamation; (B)
Inventory; (C) general intangibles (as defined in the WCC); (D) documents (as
defined in the UCC) or other receipts covering, evidencing or representing
goods; (E) instruments (as defined in the WCC); (F) chattel paper (as defined in
the WCC); (G)
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Equipment;(H) Intellectual Property; (I) all deposit accounts of Borrower
maintained with any bank or financial institution; (J) all cash and other monies
and property of Borrower in the possession or under the control of Lender; (K)
all books, records, ledger cards, files, correspondence, computer programs,
tapes, disks and related data processing software that at any time evidence or
contain information relating to any of the property described above or are
otherwise necessary or helpful in the collection thereof or realization thereon;
and (L) proceeds of all or any of the property described above, including,
without limitation, the proceeds of any insurance policies covering any of the
above described property.
2.6 Preservation of Collateral and Perfection of Securitv Interests
Therein. Borrower shall, at Lender's request, at any time and from time to time,
execute and deliver to Lender such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same in
all public offices deemed reasonably necessary or desirable by Lender) and do
such other acts and things as Lender may deem necessary or desirable in order to
establish and maintain a valid, attached and perfected security interest in the
Collateral in favor of Lender (free and clear of all other liens, claims and
rights of third parties whatsoever, whether voluntarily or involuntarily
created, except Permitted Encumbrances) to secure payment of the Obligations,
and in order to facilitate the collection of the Collateral. Borrower
irrevocably hereby make, constitute and appoint Lender (and all Persons
designated by Lender for that purpose) as Borrower' true and lawful attorney and
agent-in-fact to execute such financing statements, documents and other
agreements and instruments and do such other acts and things as may be necessary
to preserve and perfect Lender's security interest in the Collateral. Borrower
further agree that a carbon, photographic, photostatic or other reproduction of
this Agreement or of a financing statement shall be sufficient as a financing
statement.
2.7 Possession of Collateral and Related Matters. Until an Event of
Default has occurred and is continuing, Borrower shall have the right, except as
otherwise provided in this Agreement, in the ordinary course of Borrower'
business, to sell, lease or furnish under contracts of service any of Borrower's
Inventory nominally held by Borrower for any such purpose, provided, however,
that a sale in the ordinary course of business shall not include any transfer or
sale in satisfaction, partial or complete, of a debt owed by Borrower.
SECTION 3 CONDITIONS TO TERM LOAN
3.1 Conditions to Term Loan. The obligation of Lender to make the Temm
Loan on the Closing Date is subject to satisfaction of all of the conditions set
forth below.
A. Closing Deliveries. Lender shall have received, in form and
substance satisfactory to Lender, all documents, instruments and information
identified on Schedule 3.1 (A) and all other agreements, notes, certificates,
orders, authorizations, financing statements, mortgages and other documents
which Lender may at any time reasonably request.
B. Security Interests; Guarantees; Stock Pledaes. Lender shall
have received satisfactory evidence that all security interests and liens
granted to Lender pursuant to this Agreement or the other Loan Documents have
been duly perfected and constitute liens on the Collateral, subject only to
Permitted Encumbrances. Lender shall have received instruments of secured
guaranty, in form and substance satisfactory to Lender, from the Parent and from
each
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of the Borrower's Subsidiaries. The Parent shall have pledged and collaterally
assigned to the Lender all of the issued and outstanding shares of capital stock
of the Borrower owned by the Parent, the Borrower shall have pledged and
collaterally assigned to the Lender all of the issued and outstanding shares of
capital stock of each of the Borrower's Subsidiaries owned by the Borrower, in
each case pursuant to a Stock Pledge Agreement in form and substance
satisfactory to the lender, and in connection therewith, the Lender (or its
agent) shall have received delivery of the stock certificates evidencing such
shares, together with appropriate stock powers, executed in blank.
C. Representations and Warranties. The representations and
warranties contained herein and in the Loan Documents shall be true, correct and
complete in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date, except for any representation or
warranty limited by its terms to a specific date.
D. Fees. Borrower shall have paid the fee payable on the
Closing Date referred to in subsection 2.3(A).
E. No Default. No event shall have occurred and be continuing
or would result from the consummation of the requested borrowing that would
constitute an Event of Default or a Default.
F. Performance of Agreements. Each Loan Party shall have
performed in all material respects all agreements and satisfied all conditions
which any Loan Document provides shall be performed by it on or before the
Closing Date.
G. No Prohibition. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain Lender
from making the Term Loan.
H. No Litigation. There shall not be pending or, to the
knowledge of Borrower, threatened, any action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration by, against or
affecting Borrower or any of its Subsidiaries or any property of Borrower or any
of its Subsidiaries that has not been disclosed by Borrower in writing, and
there shall have occurred no development in any such action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration
that. in the opinion of Lender, would reasonably be expected to have a Material
Adverse Effect.
I. Warrants. (i) TIC shall have issued and delivered to the
Lender the certificate with respect to the TIC Warrants in the form of Exhibit
A, and (ii) Finantra shall have issued and delivered to the Lender the
certificate with respect to the Finantra Warrants in the form of Exhibit A.
J. Confession of Judgment. Borrower shall have delivered to
Lender a Confession of Judgment in the form of Exhibit B hereto.
K. Acquisition Consummated. The acquisition by the Borrower
from the Sellers of the Shares shall have occurred, the Stock Purchase Agreement
shall have been consummated in accordance with its terms, and all of the
conditions precedent to its effectiveness shall have occurred.
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L. Sellers Subordination. Sellers shall have subordinated in
favor of Lender, the purchase money promissory note of $5,000,000 made and
delivered to them by TAC, on terms and conditions acceptable to Lender.
SECTION 4 BORROWER'S REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, and to make the Term
Loan, Borrower represent and warrant to Lender that the following statements are
true, correct and complete. Such representations and warranties, and all other
representations and warranties made by the Borrower, shall survive the execution
and delivery of this Agreement and the closing contemplated hereby:
4.1 Organization, Powers, Capitalization.
A. Organization and Powers. Borrower and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and qualified to do
business in all states where such qualification is required except where failure
to be so qualified could not be reasonably expected to have a Material Adverse
Effect. Borrower and each of its Subsidiaries have all requisite corporate power
and authority to own and operate its properties, to carry on its business as now
conducted and proposed to be conducted and to enter into each Loan Document.
B. Capitalization. The authorized capital stock of Borrower
and each of its Subsidiaries is as set forth on Schedule 4.1 (B). All issued and
outstanding shares of capital stock of Borrower and each of its Subsidiaries are
duly authorized and validly issued, fully paid, nonassessable, free and clear of
all Liens other than those in favor of Lender and Finova and the Sellers, except
that the Lien in favor of the Sellers is subordinate to that of Lender and
Finova, and such shares were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. No shares of the capital
stock of Borrower and each of its Subsidiaries, other than those described
above, are issued and outstanding. There are no preemptive or other outstanding
rights, options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition from Borrower and each of its
Subsidiaries, of any shares of capital stock or other securities of any such
entity except as set forth on Schedule 4.1 (B).
4.2 Authorization of Borrowing No Conflict. Borrower has the corporate
power and authority to incur the Obligations and to grant security interests in
the Collateral. On the Closing Date, the execution, delivery and performance of
the Loan Documents by Borrower and each of its Subsidiaries signatory thereto
will have been duly authorized by all necessary corporate and shareholder
action. The execution, delivery and performance by Borrower and each of its
Subsidiaries of each Loan Document to which it is a party and the consummation
of the transactions contemplated by this Agreement and the other Loan Documents
by Borrower and each of its Subsidiaries do not contravene and will not be in
contravention of any applicable law, the corporate charter or bylaws of Borrower
and each of its Subsidiaries or any agreement or order by which they or any of
its property is bound. This Agreement is, and the other Loan Documents,
including the Term Note, when executed and delivered, will be the legally valid
and binding obligations of Borrower and its Subsidiaries (to the extent a party
thereto), each
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enforceable against the Borrower and its Subsidiaries (to the extent a party
thereto), as applicable, in accordance with its respective terms.
4.3 Financial Condition. All financial statements concern~ng Finantra
and its Subsidiaries which have been or will hereafter be furnished by Finantra
and its Subsidiaries to Lender pursuant to this Agreement have been or will be
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as disclosed therein); do or will present fairly the financial
condition of the corporations covered thereby as at the dates thereof and the
results of their operations for the periods then ended, and do and will
accurately reflect the financial condition of Finantra and its Subsidiaries, and
there has been no event or development which has had, or is reasonably likely to
have a Material Adverse Effect. The Pro Forma was prepared by Finantra based on
the unaudited consolidated balance sheet of Finantra dated SePtember 30, 1999.
4.4 Indebtedness and Liabilities. As of the Closing Date, neither
Borrower nor any of its Subsidiaries has (a) any Indebtedness except as
reflected on the Pro Forma and the most recent financial statements delivered to
Lender; or (b) any Liabilities other than as reflected on the Pro Forma, the
most recent financial statements delivered to Lender or as incurred in the
ordinary course of business following the date of the most recent financial
statements delivered to Lender.
4.5 Account Warranties. Borrower represents, warrants and covenants as
to each Account arising from the sale of Inventory or from services rendered,
that, at the time of its creation, the Account is a valid, bona fide account,
representing an undisputed indebtedness incurred by the named account debtor for
goods actually sold and delivered or for services completely rendered; there are
no setoffs, offsets or counterclaims, genuine or otherwise, against the Account
(other than customary prompt payment discounts and Borrower' standard warranty
policies); the Account does not represent a sale to an Affiliate or a
consignment, sale or return or a bill and hold transaction; no agreement exists
permitting any deduction or discount (other than the discount stated on the
invoice); Borrower are the lawful owners of the Account and have the right to
assign the same to Lender; the Account is free of all security interests, liens
and encumbrances other than those in favor of Lender, Finova and the Sellers;
and the Account is due and payable in accordance with its terms.
4.6 Names. Schedule 4.6 sets forth all names, trade names, fictitious
names and business names under which Borrower currently conduct business or have
at any time during the past five years conducted business.
4.7 Locations; FEIN. Schedule 4.7 sets forth the location of Borrower'
principal place of business, the location of Borrower' books and records, the
location of all other of fices of Borrower and all Collateral locations, and
such locations are Borrower' sole locations for its business and the Collateral.
Borrower' federal employer identification numbers are set forth on the signature
page hereof.
4.8 Title to Properties; Liens. Borrower and each of its Subsidiaries
have good, sufficient and legal title, subject to Permitted Encumbrances, to all
its respective material properties and assets. Except for Permitted
Encumbrances, all such properties and assets are free and clear of Liens. To the
best knowledge of Borrower after due inquiry, there are no actual,
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threatened or alleged defaults with respect to any leases of real property under
which Borrower or any of its Subsidiaries are lessee or lessor which would have
a Material Adverse Effect. The Liens granted to Lender under Section 2.5 are
perfected security interests subject to no senior security interest except for
the lien in favor of Finova Capital Corporation.
4.9 Litigation: Adverse Facts. There are no judgments outstanding
against any Loan Party or affecting any property of any Loan Party nor is there
any action, charge, claim, demand, suit, proceeding, petition, govemmental
investigation or arbitration now pending or, to the best knowledge of Borrower
after due inquiry, threatened against or affecting any Loan Party or any
property of any Loan Party which could reasonably be expected to result in any
Material Adverse Effect. No Loan Party has received any opinion or memorandum or
legal advice from legal counsel to the effect that it is exposed to any
liability which could reasonably be expected to result in any Material Adverse
Effect.
4.10 Payment of Taxes. All material tax returns and reports of Borrower
and each of its Subsidiaries required to be filed by any of them have been
timely filed, and all taxes, assessments, fees and other governmental charges
upon such Persons and upon its respective properties, assets, income and
franchises which are shown on such returns as due and payable have been paid
when due and payable. As of the Closing Date, none of the United States income
tax returns of Borrower or any of its Subsidiaries are under audit. No tax liens
have been filed or are being asserted with respect to any such taxes. The
charges, accruals and reserves on the books of Borrower and each of its
Subsidiaries in respect of any taxes or other govemmental charges are in
accordance with GAAP.
4.11 Performance of Agreements. None of the Loan Parties and none of
its respective Subsidiaries is in default in the perfommance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
contractual obligation of any such Person, and no condition exists that, with
the giving of notice or the lapse of time or both, would constitute such a
default, which in any case could reasonably be expected to have a Material
Adverse Effect.
4.12 Employee Benefit Plans. Borrower, each of its Subsidiaries and
each ERISA Affiliate is in compliance in all material respects with all
applicable provisions of ERISA, the IRC and all other applicable laws and the
regulations and interpretations thereof with respect to all Employee Benefit
Plans. No material liability has been incurred by Borrower, any of its
Subsidiaries or any ERISA Affiliate which remains unsatisfied for any funding
obligation, taxes or penalties with respect to any Employee Benefit Plan.
4.13 Intellectual Property. Borrower and each of its Subsidiaries owns,
is licensed to use or otherwise has the right to use, all Intellectual Property
used in or necessary for the conduct of its business as currently conducted, and
all such Intellectual Property is identified on Schedule 4.13.
4.14 Broker's Fees. No broker's or finder's fee or commission will be
payable by reason of any action of Borrower with respect to any of the
transactions contemplated hereby.
4.15 Environmental Compliance. Borrower and each of its Subsidiaries
has been and is currently in compliance in all material respects with all
applicable Environmental Laws,
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including obtaining and maintaining in effect all material permits, licenses or
other authorizations required by applicable Environmental Laws. There are no
claims, liabilities, investigations, litigation, administrative proceedings,
judgments or orders relating to any Hazardous Materials asserted or, to
Borrower' knowledge, threatened against Borrower or any of its Subsidiaries or
relating to any real property currently or formerly owned, leased or operated by
Borrower or any of its Subsidiaries.
4.16 Solvency. After giving effect to the transactions contemplated by
the Loan Documents, and, as of, from and after the date of this Agreement,
Borrower: (a) owns and will own assets the fair salable value of which are (i)
greater than the total amount of its liabilities (including contingent
liabilities) and (ii) greater than the amount that will be required to pay the
probable liabilities of Borrower as they mature; (b) has capital that is not
unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (c) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due. There is no material fact known to Borrower that has or
could have a Material Adverse Effect and that has not been fully disclosed
herein or in such other documents, certificates and statements fumished to
Lender for use in connection with the transactions contemplated hereby.
4.17 Disclosure. No representation or warranty of Borrower or any of
its Subsidiaries contained in this Agreement, the financial statements, the
other Loan Documents, or any other document, certificate or written statement
furnished to Lender by or on behalf of any such Person for use in connection
with the Loan Documents contains any untrue statement of a material fact or
omitted, omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances in which the same were made. The Projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by Lender that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results.
There is no material fact known to Borrower that has had or will have a Material
Adverse Effect and that has not been disclosed herein or in such other
documents, certificates and statements fumished to Lender for use in connection
with the transactions contemplated hereby.
4.18 Insurance. Borrower and each of its Subsidiaries maintains
insurance policies for public liability, property damage for its business and
properties, product liability, and business interruption, of types and in
amounts customarily maintained by comparable businesses; and no notice of
cancellation has been received with respect to such policies and Borrower and
each of its Subsidiaries is in compliance with all conditions contained in such
policies.
4.19 Compliance with Laws. Neither Borrower nor any of its Subsidiaries
is in violation of any law, ordinance, rule, regulation, order, policy,
guideline or other requirement of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of its
business or the ownership of its properties, including, without limitation, any
violation relating to any use, release, storage, transport or disposal of any
Hazardous Material, which violation would subject Borrower or any of its
Subsidiaries, or any of its respective officers to criminal liability or have a
Material Adverse Effect and no notice of any such violation has been received.
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4.20 Bank Accounts. Schedule 4.20 sets forth the account numbers and
locations of all bank accounts of Borrower and its Subsidiaries.
4.21 Subsidiaries. Borrower has no Subsidiaries other than as set forth
on Schedule 4.21.
4.22 Employee Matters. Except as set forth on Schedule 4.22, (a)
neither Borrower, any of its Subsidiaries nor any of such Loan Party's employees
is subject to any collective bargaining agreement, (b) no petition for
certification or union election is pending with respect to the employees of
Borrower or any of its Subsidiaries and no union or collective bargaining unit
has sought such certification or recognition with respect to the employees of
any Loan Party and (c) there are no strikes, slowdowns, work stoppages or
controversies pending or, to the best knowledge of Borrower after due inquiry,
threatened between Borrower or any of its Subsidiaries and its respective
employees, other than employee grievances arising in the ordinary course of
business which could reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect. Except as set forth on Schedule 4.22,
neither Borrower nor any of its Subsidiaries is subject to an employment
contract.
4.23 Governmental Regulation. Neither Borrower nor any of its
Subsidiaries is, or, after giving effect to any loan, will be, subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940 or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.
4.24 Receivables and Pavables. As of October 1, 1999, the Borrower and
its Subsidiaries' receivables and payables were as set forth in detail on
Schedule 4.24, all of which are respectively collectible and payable in the
ordinary course of business in accordance with the usual terms and conditions of
the Borrower and its Subsidiaries.
SECTION 5 AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall be in effect and until payment in full of all Obligations unless
Lender shall otherwise give its prior written consent, Borrower shall perform,
and shall cause each of its Subsidiaries to perform, all covenants in this
Section 5 aDDlicable to such Person.
5.1 Financial Statements and Other Reports. Borrower will maintain, and
cause each of its Subsidiaries and its Parent to maintain, a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with GAAP.
Borrower will deliver to Lender the financial statements and other reports
described below.
A. Monthly Financials. As soon as available and in any event
within twenty (20) days after the end of each month, Borrower will deliver (1)
the consolidated and consolidating balance sheet of Borrower and its
Subsidiaries and the consolidated and consolidating balance sheet of Parent and
its Subsidiaries as at the end of such month and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow
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for such month and for the period from the beginning of the then current Fiscal
Year to the end of such month, and (2) a schedule of the outstanding
Indebtedness for borrowed money of Borrower and its Subsidiaries and Parent and
its Subsidiaries describing in reasonable detail each such debt issue or loan
outstanding and the principal amount and amount of accrued and unpaid interest
with respect to each such debt issue or loan.
B. Quarterly Financials. As soon as available and in any event
within forty-five (45) days after the end of each quarter of each Fiscal Year,
Borrower will deliver the consolidated and consolidating balance sheet of
Borrower and its Subsidiaries and the consolidated and consolidating balance of
Parent and its Subsidiaries as at the end of such period and the related
consolidated and consolidating statements of income, stockholders' equity and
cash flow for such quarter of such Fiscal Year and for the period from the
beginning of the then current Fiscal Year to the end of such quarter of such
Fiscal Year.
C. Year-End Financials. As soon as available and in any event
within ninety (90) days after the end of each Fiscal Year, Borrower will deliver
(1) the consolidated balance sheet of Borrower and its Subsidiaries and the
consolidated and consolidating balance of Parent and its Subsidiaries as at the
end of such year and the related consolidated statements of income,
stockholders' equity and cash flow for such Fiscal Year; (2) a schedule of the
outstanding Indebtedness of Borrower and its Subsidiaries and Parent and its
Subsidiaries describing in reasonable detail each such debt issue or loan
outstanding and the principal amount and amount of accrued and unpaid interest
with respect to each such debt issue or loan; and (3) a report with respect to
the financial statements from a firm of independent certified public accountants
selected by Borrower, and reasonably acceptable to Lender, which report shall be
unqualified as to going concern and scope of audit of Borrower and its
Subsidiaries and the consolidated and consolidating balance of Parent and its
Subsidiaries and shall state that (a) such consolidated financial statements
present fairly the consolidated financial position of Borrower and its
Subsidiaries and the consolidated and consolidating balance of Parent and its
Subsidiaries as at the dates indicated and the results of their operations and
cash flow for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years and (b) that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards; and (4) copies of the
consolidating financial statements of Borrower and its Subsidiaries and Parent
and its Subsidiaries, including (a) consolidating balance sheets of Borrower and
its Subsidiaries and the consolidated and consolidating balance of Parent and
its Subsidiaries as at the end of such Fiscal Year showing intercompany
eliminations and (b) related consolidating statements of earnings of Borrower
and its Subsidiaries and the consolidated and consolidating balance of Parent
and its Subsidiaries showing intercompany eliminations.
D. Accountants' Certification and Reports. Promptly upon
receipt thereof, Borrower will deliver copies of all significant reports
submitted to Borrower by independent public accountants in connection with each
annual, interim or special audit of the financial statements of Borrower made by
such accountants, including the comment letter submitted by such accountants to
management in connection with its annual audit.
E. Management Report. Together with each delivery of financial
statements of Borrower and its Subsidiaries pursuant to subdivisions (B) and (C)
of this subsection 51, Borrower will deliver a management report: (1) describing
the operations and financial condition
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of Borrower and its Subsidiaries and Parent and its Subsidiaries for the month
then ended and the portion of the current Fiscal Year then elapsed (or for the
Fiscal Year then ended in the case of year-end financials); (2) setting forth in
comparative form the corresponding figures for the corresponding periods of the
previous Fiscal Year; and (3) discussing the reasons for any significant
variations. The information above shall be presented in reasonable detail and
shall be certified on behalf of Borrower and Parent by the chief financial of
ficer or Chief Executive Of ficer of Borrower and Parent to the effect that such
information fairly presents the results of operations and financial condition of
Borrower and its Subsidiaries and Parent and its Subsidiaries as at the dates
and for the periods indicated.
F. Government Notices. Borrower will deliver to Lender
promptly after receipt copies of all notices, requests, subpoenas, inquiries or
other writings received from any governmental agency concerning any Employee
Benefit Plan, the violation or alleged violation of any Environmental Laws, the
storage, use or disposal of any Hazardous Material, the violation or alleged
violation of the Fair Labor Standards Act or Borrower's payment or non-payment
of any taxes including any tax audit.
G. Events of Default' etc. Promptly upon any officer of
Borrower obtaining knowledge of any of the following events or conditions,
Borrower shall deliver a certificate signed by Borrower's chief executive of
ficer specifying the nature and period of existence of such condition or event
and what action Borrower has taken, is taking and proposes to take with respect
thereto: (1 ) any condition or event that constitutes an Event of Default or
Default; (2) any notice of material default that any Person has given to
Borrower or any of its Subsidiaries or any other action taken with respect to a
claimed material default; or (3) any Material Adverse Effect.
H. Trade Names. Borrower and each of its Subsidiaries will
give Lender at least thirty (30) days' advance written notice of any change of
name or of any new trade name or fictitious business name. Borrower's use of any
trade name or fictitious business name will be in compliance with all laws
regarding the use of such names.
I. Locations. Borrower will give Lender at least thirty (30)
days advance written notice of any change in Borrower~s principal place of
business or any change in the location of its books and records or the
Collateral or of any new location for Its books and records or the Collateral.
J. Bank Accounts. Borrower will give Lender prompt notice of
any new bank accounts Borrower or any of its Subsidiaries intends to establish
prior to its opening same.
K. Litigation. Promptly upon any of ficer of Borrower or its
subsidiaries obtaining knowledge of( 1 ) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of Borrower or any Subsidiary not previously
disclosed by Borrower to Lender or (2) any material development in any action,
suit, proceeding, governmental investigation or arbitration at any time pending
against or affecting Borrower or any Subsidiary or any property of Borrower or
any Subsidiary which could reasonably be expected to have a Material Adverse
Effect, Borrower will promptly give notice thereof to Lender and provide such
other information as may be reasonably available to them to enable Lender and
its counsel to evaluate such matter.
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L. Other Information. With reasonable promptness, Borrower
will deliver such other information and data as may be available to and
disclosable by Borrower with respect to any Loan Party, any Subsidiary of any
Loan Party or the Collateral as Lender may reasonably request from time to time.
5.2 Access to Accountants. Borrower authorizes Lender to discuss the
financial condition and financial statements of Borrower and its Subsidiaries
with Borrower's independent public accountants upon reasonable notice to
Borrower of its intention to do so, and authorizes such accountants to respond
to all of Lender's inquiries.
5.3 Inspection. Borrower shall permit Lender and any authorized
representatives designated by Lender to visit and inspect any of th properties
of Borrower or any of its Subsidiaries, including its financial and accounting
records, and in conjunction with such inspection, to make copies and take
extracts therefrom, and to discuss its affairs, finances and business with its
officers and independent public accountants, at such reasonable times during
normal business hours and as often as may be reasonably requested.
5.4 Collateral Records. Borrower shall keep full and accurate books and
records relating to the Collateral and shall mark such books and records to
indicate Lender's security interests in the Collateral.
5.5 Account Covenants: Verification. Borrower shall, at its own expense
use its best efforts to assure prompt payment of all amounts due or to become
due under the Accounts. Borrower will promptly notify Lender in the event that a
customer alleges any dispute or claim with respect to an Account or of any other
circumstances known to Borrower that may impair the validity or collectibility
of an Account. Lender shall have the right, at any time or times hereafter, to
verify the validity, amount or any other matter relating to an Account, by mail,
telephone or in person. After the occurrence of a Default or an Event of
Default, Borrower shall not, without the prior consent of Lender, adjust, settle
or compromise the amount or payment of any Account, or release wholly or partly
any customer or obligor thereof, or allow any credit or discount thereon.
5.6 Endorsement. Borrower hereby constitutes and appoints Lender and
all Persons designated by Lender for that purpose as Borrower's true and lawful
attomey-in-fact, with power to endorse Borrower's name to any check or other
instrument and all proceeds of Collateral that come into Lender's possession or
under Lender's control. Both the appointment of Lender as Borrower's attorney
and Lender's rights and powers are coupled with an interest and are irrevocable
until payment in full and complete performance of all of the Obligations.
5.7 Corporate Existence. Borrower will, and will cause each of its
Subsidiaries to, at all times preserve and keep in full force and effect its
corporate existence and all rights and franchises material to its business.
Borrower will promptly notify Lender of any change in its or its Subsidiaries'
ownership or corporate structure.
5.8 Payment of Taxes. Borrower will, and will cause each of its
Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or with respect to any of its
franchises, business, income or property before any penalty
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accrues thereon provided that no such tax need be paid if Borrower or one of its
Subsidiaries is contesting same in good faith by appropriate proceedings
promptly instituted and diligently conducted and if Borrower or such Subsidiary
has established appropriate reserves as shall be required in conformity with
GAAP.
5.9 Maintenance of Properties: Insurance. Borrower will maintain or
cause to be maintained in good repair, working order and condition all material
properties used in the business of Borrower and its Subsidiaries and will make
or cause to be made all appropriate repairs, renewals and replacements thereof.
Borrower will maintain or cause to be maintained, with financially sound and
reputable insurers, public liability and property damage insurance with respect
to its business and properties and the business and properties of its
Subsidiaries against loss or damage of the kinds customarily carried or
maintained by corporations of established reputation engaged in similar
businesses and in amounts reasonably acceptable to Lender. Borrower shall cause
Lender to be named as loss payee on all insurance policies relating to any
Collateral and as additional insured under all liability policies, in each case
pursuant to appropriate endorsements in form and substance reasonably
satisfactory to Lender and shall collaterally assign to Lender as security for
the payment of the Obligations all business interruption insurance of Borrower.
Borrower shall apply any proceeds received from any policies of insurance
relating to any Collateral (except to the extent of proceeds used to replace
Inventory) to the Obligations.
5.10 Compliance with Laws. Borrower will, and will cause each of its
Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority as now in effect and which
may be imposed in the future in all jurisdictions in which Borrower or any of
its Subsidiaries is now doing business or may hereafter be doing business, other
than those laws the noncompliance with which would not have a Material Adverse
Effect.
5.11 Further Assurances. Borrower shall, and shall cause each of its
Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Lender such instruments, certificates of title or other
documents as Lender at any time may reasonably request to evidence, perfect or
otherwise implement the guaranties and security for repayment of the Obligations
provided for in the Loan Documents, provided that Borrower shall not be required
to execute any document or take any action which would create an event of
default with respect to Borrower's Obligations to Finova or Sellers. At Lender's
request, Borrower shall cause any wholly-owned or substantially whollyowned
Subsidiaries of Borrower promptly to guaranty the Obligations and to grant to
Lender security interests in the real, personal and mixed property of such
Subsidiary to secure the Obligations.
5.12 Collateral Locations. Borrower will keep the Collateral at the
locations specified on Schedule 4.7. With respect to any new location (which in
any event shall be within the continental United States), Borrower will execute
such documents and take such actions as Lender deems necessary to perfect and
protect the security interests of the Lender in the Collateral prior to the
transfer or removal of any Collateral to such new location.
5.13 Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Borrower's agents or processors,
Borrower shall, upon the
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request of Lender, notify such warehouseman, bailee, agent or processor of the
security interests in favor of Lender created hereby and shall instruct such
Person to hold all such Collateral for Lender's account subject to Lender's
instructions.
5.14 Use of Proceeds and Marain Security. Borrower shall use the
proceeds of all Loans for proper business purposes (as described in the recitals
to this Agreement) consistent with all applicable laws, statutes, rules and
regulations. No portion of the proceeds of any Loan shall be used by Borrower or
any Or its Subsidiaries for the purpose of purchasing or carrying of margin
stock within the meaning of Regulation U, or in any manner that might cause the
borrowing or the application of such proceeds to violate Regulation T or
Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System, or to violate the Exchange Act.
5.15 Observer Rights. Lender shall have the right (i) to appoint one
representative as an observer who shall have the right to receive notice of, and
attend any meetings of, the Board of directors and Executive Committees of the
Borrower and (ii) to receive on a timely basis, copies of all written
information provided to the Board of Directors or Executive Committee of
Borrower.
5.16 Financial Covenants. Borrower shall maintain and keep in full
force and effect, on a consolidated basis with its Subsidiaries, each of the
financial covenants set forth below. The calculation and determination of each
such financial covenant, and all accounting terms contained therein, shall be so
calculated and construed in accordance with GAAP, applied on a basis consistent
with the financial statements of Borrower delivered on or before the Closing
Date:
A. Net Worth. Borrower shall maintain a net worth at all times
during and at the end of each fiscal quarter, commencing with the fiscal quarter
ending in December, 1999, of not less than 512,000,000.
B. Interest Coverage. Borrower shall maintain for each fiscal
quarter of each fiscal year, in each case together with the preceding fiscal
quarters of such fiscal year, commencing with the fiscal quarter ending in
December, 1999, a ratio of(i) EBITDA for such period to (ii) interest expense
for each such period of not less than 1.50 to 1.00.
SECTION 6 NEGATIVE COVENANTS
Borrower covenants and agrees that until payment in full of all
Obligations unless Borrower has received the prior written consent of Lender,
Borrower shall not and will not permit any of its Subsidiaries to:
6.1 Indebtedness and Liabilities. Directly or indirectly create, incur,
assume, guaranry, or otherwise become or remain directly or indirectly liable,
on a fixed or contingent basis, with respect to any Indebtedness except: (a) the
Obligations; (b) purchase money financing; and (c) trade payables and normal
accruals in the ordinary course of business not yet due and payable or with
respect to which Borrower or any of its Subsidiaries is contesting in good faith
the amount or validity thereof by appropriate proceedings and then only to the
extent that Borrower or any of its Subsidiaries has established adequate
reserves therefor, if appropriate
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under GAAP.
6.2 Guaranties. Except for endorsements of instruments or items of
payment for collection in the ordinary course of business, guaranty, endorse, or
otherwise in any way become or be responsible for any obligations of any other
Person (other than a wholly-owned Subsidiary of Borrower), whether directly or
indirectly by agreement to purchase the indebtedness of any other Person or
through the purchase of goods, supplies or services, or maintenance of working
capital or other balance sheet covenants or conditions, or by way of stock
purchase, capital contribution, advance or loan for the purpose of paying or
discharging any indebtedness or obligation of such other Person or otherwise.
6.3 Transfers. Liens and Related Matters.
A. Transfers. Sell, assign (by operation of law or otherwise)
or otherwise dispose of, or grant any option with respect to any of the
Collateral except that Borrower and its Subsidiaries may (i) sell Inventory and
dispose of obsolete Equipment in the ordinary course of business; and (ii) make
Asset Dispositions if all of the following conditions are met: (1) the market
value of assets sold or otherwise disposed of in any single transection or
series of related transections does not exceed S50,000 and the aggregate market
value of assets sold or otherwise disposed of in any Fiscal Year does not exceed
$1 00,0DO; (2) the consideration received is at least equal to the fair market
value of such assets; (3) the sole consideration received is cash; and (4) no
Default or Event of Default shall then exist or result from such sale or other
disposition.
B. Liens. Except for Permitted Encumbrances, directly or
indirectly create, incur, assume or permit to exist any Lien on or with respect
to any of the Collateral or any proceeds, income or Profits therefrom.
C. No Negative. Pledges. Enter into or assume any agreement
(other than the Loan Documents) prohibiting the creation or assumption of any
Lien upon its properties or assets. whether now owned or hereafter acquired.
6.4 Restricted Junior Payments. Directly or indirectly declare, order,
pay, make or set apart any sum for any Restricted Junior Payment, except that
Subsidiaries of Borrower may make Restricted Junior Payments with respect to its
common stock to the extent necessary to permit Borrower to pay the Obligations,
and to permit Borrower to pay expenses incurred in the ordinary course of
business.
6.5 Restriction on Fundamental Changes. (a) Enter into any transaction
of merger or consolidation; (b) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution); (c) convey, sell, lease, sublease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets, or the capital stock of any of its
Subsidiaries, whether now owned or hereafter acquired; or (d) acquire by
purchase or otherwise all or any substantial part ofthe business or assets of,
or stock or other evidence of beneficial ownership of, any Person, except with
the prior written consent of Lender.
6.6 Transactions with Affiliates. Directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director or employee of any Loan Party, except
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for transactions in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms which are
fully disclosed to Lender and which are no less favorable to Borrower than it
would obtain in a comparable arm's length transaction with an unaffiliated
Person.
6.7 Environmental Liabilities. (a) Violate in any material respect any
applicable Environmental Law; (b) dispose of any Hazardous Materials (except in
accordance with applicable law) into or onto or from, any real property owned,
leased or operated by any Loan Party; or (c) permit any Lien imposed pursuant to
any Environmental Law to be imposed or to remain on any real property owned,
leased or operated by Borrower or any of its Subsidiaries.
6.8 Conduct of Business. From and after the Closing Date, engage in any
business other than businesses of the type engaged in by Borrower or any
Subsidiary on the Closing Date.
6.9 Compliance with ERISA. Establish any new Employee Benefit Plan or
amend any existing Employee Benefit Plan if the liability or increased liability
resulting from such establishment or amendment is material. Neither Borrower nor
any Subsidiary shall fail to establish, maintain and operate each Employee
Benefit Plan in compliance in all material respects with the provisions of
ERISA, the IRC and all other applicable laws and the regulations and
interpretations thereof.
6.10 Subsidiaries. Establish, create or acquire any new Subsidiaries.
6.11 Fiscal Year. Change its Fiscal Year.
6.12 Press Release; Public Offering Materials. Disclose the name of
Lender in any press re ease or m any prospectus, proxy statement or other
materials filed with any governmental entity relating to a public offering of
the capital stock of any Loan Party except as may be required by law.
6.13 Bank Accounts. Establish any new bank accounts, or amend or
terminate any Blocked Account or lockbox agreement without Lender's prior
written consent.
6.14 Charter Documents. Make any material changes to any of Borrower',
or its Subsidiaries', charter documents.
SECTION 7 DEFAULT, RIGHTS AND REMEDIES
7.1 Event of Default. "Event of Default" shall mean the occurrence or
existence of any one or more of the following:
A. Payment. Failure to make payment of any of the Obligations
when due and in the case of interest, such failure shall not be cured within
five (5) days of the applicable due date; or
B. Default in Other Agreements. (1) Failure of Borrower or any
of its Subsidiaries to pay when due (or within any applicable grace period) any
principal or interest on any Indebtedness (other than the Obligations) or (2)
default by Parent, Borrower or any of
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its Subsidiaries under any agreement evidencing any Indebtedness (other than the
Obligations), or pursuant to which such Indebtedness was issued or governed, and
such default continues beyond any applicable grace or cure period; or
C. Breach of Certam Provisions. Failure of Borrower to perform
or comply with any term or condition contained in subsections 2.1 (D), 5.1 (B),
5.1 (C), 5.1 (D), 5.3, 5.5, 5.9 or contained in Section 6; or
D. Breach of Warrantv. Any representation, warranty,
certification or other statement made by any Loan Party in any Loan Document or
in any statement or certificate at any time given by such Person in writing
pursuant or in connection with any Loan Document is false or misleading in any
material respect on the date made; or
E. Other Defaults Under Loan Documents. Borrower or any other
Loan Party defaults in the performance of or compliance with any term contained
in this Agreement or the other Loan Documents and such default is not remedied
or waived within ten ( 10) days after receipt by Borrower of notice from Lender
of such default (other than occurrences described in other provisions of this
subsection 7.1 for which a different grace or cure period is specified or which
constitute immediate Events of Default); or
F. Involuntary Bankruptcy; Appointment of Receiver. etc. (1) A
court enters a decree or order for relief with respect to Borrower or any of its
Subsidiaries in an involuntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, which
decree or order is not stayed or other similar relief is not granted under any
applicable federal or state law; or (2) the continuance of any of the following
events for sixty (60) days unless dismissed, bonded or discharged: (a) an
involuntary case is commenced against Borrower or any of its Subsidiaries, under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (b) a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other of ficer having similar
powers over Borrower or any of its Subsidiaries, or over all or a substantial
part of its respective property, is entered; or (c) an interim receiver, trustee
or other custodian is appointed without the consent of Borrower or any of its
Subsidiaries, for all or a substantial part of the property of Borrower or any
such Subsidiary: or
G. Voluntary Bankruptcy: Appointment of Receiver. etc. (1) An
order for relief is entered with respect to Borrower or any of its Subsidiaries
or Borrower or any of its Subsidiaries commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
or to the conversion of an involuntary case to a voluntary case under any such
law or consents to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or (2)
Borrower or any of its Subsidiaries makes any assignment for the benefit of
creditors; or (3) the board of directors of Borrower or any of its Subsidiaries
adopts any resolution or otherwise authorizes action to approve any of the
actions referred to in this subsection 7.1(G); or
H. Liens. Any lien, levy or assessment is filed or recorded
with respect to or otherwise imposed upon all or any part of the Collateral or
the assets of Borrower or any of its Subsidiaries by the United States or any
department or instrumentality thereof or by any state,
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county, municipality or other governmental agency (other than Permitted
Encumbrances) and such lien, levy or assessment is not stayed, vacated, paid or
discharged within ten (10) days; or
I. Judgment and Attachments. Any money judgment, writ or
warrant of attachment, or similar process involving ( 1 ) an amount in any
individual case in excess of $50,000, or (2) an amount in the aggregate at any
time in excess of $100,000 (in either case not adequately covered by insurance
as to which the insurance company has acknowledged coverage or undertaken the
defense thereof subject only to customary reservation of rights) is entered or
filed against Borrower or any of its Subsidiaries or any of its respective
assets and remains undischarged, unvacated, unbonded or unstayed for a period of
thirty (30) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
J. Dissolution. Any order, judgment or decree is entered
against Borrower or any of its Subsidiaries decreeing the dissolution or split
up of Borrower or that Subsidiary and such order remains undischarged or
unstayed for a period in excess of twenty (20) days; or
K. Solvency. Borrower ceases to be solvent (as represented by
Borrower in subsection 4.16) or admits in writing its present or prospective
inability to pay its debts as they become due: or
L. Injunction. Borrower or any of its Subsidiaries is
enjoined, restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business and such order continues for more than thirty (30) days; or
M. Invalidity of Loan Documents. Any of the Loan Documents for
any reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void, or any Loan Party denies that it has any further liability under any Loan
Documents to which it is party, or gives notice to such effect; or
N. Failure of Securitv. Lender does not have or ceases to have
a valid and perfected first priority security interest in the Collateral
(subject to Permitted Encumbrances), in each case, for any reason other than the
failure of Lender to take any action within its control; or
O. Licenses and Permits. The loss, suspension or revocation
of, or failure to renew, any license or permit now held or hereafter acquired by
Borrower or any of its Subsidiaries, if such loss, suspension, revocation or
failure to renew could reasonably be expected to have a Material Adverse Effect.
P. Forfeiture. There is filed against Borrower any civil or
criminal action, suit or proceeding under any federal or state racketeering
statute (including, without limitation, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1 ) is not
dismissed within one hundred twenty (120) days; and (2) could result in the
confiscation or forfeiture of any material portion of the Collateral.
7.2 Acceleration. Upon the occurrence of any Event of Default described
in the
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foregoing subsections 7.1 (F) or 7.1 (G), all Obligations shall automatically
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by
Borrower. Upon the occurrence of any other Event of Default, the Lender may
declare all Obligations to be immediately due and payable, without presentment,
demand, protest or other requirements of any kind. all of which are hereby
expressly waived by Borrower.
7.3 Remedies. If any Event of Default shall have occurred and be
continuing, in addition to and not in limitation of any rights or remedies
available to Lender at law or in equity, Lender may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and may also (a) notify any or all obligors on the Accounts to make
all payments directly to Lender; (b) require Borrower to, and Borrower hereby
agrees that it will, at its expense and upon request of Lender forthwith,
assemble all or part of the Collateral as directed by Lender and make it
available to Lender at a place to be designated by Lender which is reasonably
convenient to both parties; (c) without notice or demand or legal process, enter
upon any premises of Borrower and take possession of the Collateral, if this can
be done without breach of the peace; and (d) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Lender's of fices or elsewhere, at such time or
times, for cash, on credit or for future delivery, and at such price or prices
and upon such other terms as Lender may deem commercially reasonable. Borrower
agrees that, to the extent notice of sale shall be required by law, at least ten
(10) days notice to Borrower of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. At any sale of the Collateral, if permitted by law, Lender may bid
(which bid may be, in whole or in part, in the fomm of cancellation of
indebtedness) for the purchase of the Collateral or any portion thereof for the
account of Lender. Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Borrower shall remain liable for
any deficiency. Lender may adjourr any public or private sale from time to time
by announcement at the time and place fixed there or, and such sale may, without
further notice, be made at the time and place to which it was so ad :)umed. To
the extent pemmitted by law, Borrower hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted. Lender shall not be required to proceed against
any Collateral but may proceed against Borrower directly.
7.4 Appointment of Attorney-in-Fact. Borrower hereby constitutes and
appoints Lender as Borrower's attomey-in-fact with full authority in the place
and stead of Borrower and in the name of Borrower, Lender or otherwise, from
time to time in Lender's discretion while an Event of Default is continuing to
take any action and to execute any instrument that Lender may deem necessary or
advisable to accomplish the purposes of this Agreement, including: (a) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral; (b) to adjust, settle or compromise the amount or payment of any
Account, or release wholly or partly any customer or obligor thereunder or allow
any credit or discount thereon; (c) to receive, endorse, and collect any drafts
or other instruments, documents and chattel paper, in connection with clause (a)
above; (d) to file any claims or take any action or institute any proceedings
that Lender may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Lender with respect to any of
the Collateral; and (e) to sign and endorse
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any invoices, freight or express bills, bills of lading, storage or warehouse
receipts, assignments, verifications and notices in connection with Accounts and
other documents relating to the Collateral. The appointment of Lender as
Borrower's attomey and Lender's rights and powers are coupled with an interest
and are irrevocable until payment in full and complete performance of all of the
Obligations.
7.5 Limitation on Duty of Lender with Respect to Collateral. Beyond the
safe custody thereof, Lender shall have no duty with respect to any Collateral
in its possession or control (or in the possession or control of any agent or
bailee) or with respect to any income thereon or the preservation of rights
against prior parties or any other rights pertaining thereto. Lender shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which Lender accords its own property. Lender shall
not be liable or responsible for any loss or damage to any of the Collateral, or
for any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by Lender in good faith.
7.6 Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, (a) Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Lender from or on behalf of Borrower, and Borrower hereby
irrevocably agrees that Lender shall have the continuing exclusive right to
apply and to reapply any and all payments received at any time or times after
the occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Lender may deem advisable notwithstanding any
previous entry by Lender upon any books and records and (b) the proceeds of any
sale of, or other realization upon, all or any part of the Collateral shall be
applied: first, to all fees, costs and expenses incurred by Lender with respect
to this Agreement, the other Loan Documents or the Collateral; second, to all
fees due and owing to Lender; third, to accrued and unpaid interest on the
Obligations; fourth, to the principal amounts of the Obligations outstanding;
and fifth, to any other indebtedness or obligations of Borrower owing to Lender.
7.7 License of Intellectual Property. Borrower hereby assigns,
transfers and conveys to Lender, effective upon the occurrence, and during the
continuance, of any Event of Default hereunder, the non-exclusive right and
license to use all Intellectual Property owned or used by Borrower together with
any goodwill associated therewith, all to the extent necessary to enable Lender
to realize on the Collateral and any successor or assign to enjoy the benefits
ofthe Collateral. This right and license shall inure to the benefit of all
successors, assigns and transferees of Lender and its successors, assigns and
transferees, whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and
license is granted free of charge, without requirement that any monetary payment
whatsoever be made to Borrower by Lender.
7.8 Waivers, Non-Exclusive Remedies. No failure on the part of Lender
to exercise, and no delay in exercising and no course of dealing with respect
to, any right under this Agreement or the other Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise by Lender of any
right under this Agreement or any other Loan Document preclude any other or
further exercise thereof or the exercise of any other right. The rights in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other
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remedies provided bv law.
SECTION 8 MISCELLANEOUS
8.1 Assignments and Participations. Lender may assign its rights and
delegate its obligations under this Agreement and further may assign, or sell
participations in, all or any part of the Temm Loan or any other interest herein
to an Affiliate or to another Person. In the case of an assignment authorized
under this subsection 8.1, the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would if it were a
Lender hereunder. Lender shall be relieved of its obligations hereunder with
respect to the Commitments or assigned portion thereof. Borrower hereby
acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be considered
to be a "Lender". Lender may fumish any infommation concerning Borrower and its
Subsidiaries in its possession from time to time to assignees and participants
(including prospective assignees and participants).
8.2 Set Off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence, and during the continuance, of any Event of Default, Lender, each
assignee of Lender's interest, and each participant is hereby authorized by
Borrower at any time or from time to time, without notice to Borrower or to any
other Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of Borrower or any of its Subsidiaries (regardless of whether
such balances are then due to Borrower or its Subsidiaries) and any other
property at any time held or owing by that Lender or assignee to or for the
credit or for the account of Borrower against and on account of any of the
Obligations then outstanding; provided, that no participant shall exercise such
right without the prior written consent of Lender.
Borrower hereby agrees, to the fullest extent perrnitted by
law, that any Lender, assignee or participant may exercise its right of setoff
with respect to amounts in excess of its pro rata share of the Obligations (or,
in the case of a participant, in excess of its pro rata participation interest
in the Obligations) and that such Lender, assignee or participant, as the case
may be, shall be deemed to have purchased for cash in the amount of such excess,
participations in each other Lender's or holder's share of the Obligations.
8.3 Expenses and Attomeys' Fees. Whether or not the transactions
contemplated hereby shall be consummated, Borrower agrees to promptly pay all
reasonable fees, costs and expenses incurred by Lender in connection with any
matters contemplated by or arising out of this Agreement or the other Loan
Documents including the following, and all such fees, costs and expenses shall
be part ofthe Obligations, payable on demand and secured by the Collateral: (a)
fees, costs and expenses (including attomeys' fees, allocated costs of intemal
counsel and fees of environmental consultants, accountants and other
professionals retained by Lender) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents; (b) fees, costs and expenses
(including reasonable attomeys' fees, allocated costs of intemal counsel and
fees of environmental consultants, accountants and other professionals retained
by Lender) incurred in connection with the review, negotiation, preparation,
documentation, execution and administration of the Loan Documents, the Temm
Loan, and any amendments, waivers,
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consents, forbearance and other modifications relating thereto or any
subordination or intercreditor agreements; (c) fees, costs and expenses incurred
in creating, perfecting and maintaining perfection of Liens in favor of Lender;
(d) fees, costs and expenses incurred in connection with forwarding to Borrower
the proceeds of Loans including Lender's standard wire transfer fee; (e) fees,
costs, expenses and bank charges, including bank charges for resumed checks,
incurred by Lender in establishing, maintaining and handling lock box accounts,
blocked accounts or other accounts for collection of the Collateral; (f) fees,
costs, expenses (including reasonable attorneys' fees and allocated costs of
intemal counsel) and costs of settlement incurred in collecting upon or
enforcing rights against the Collateral or incurred in any action to enforce
this Agreement or the other Loan Documents or to collect any payments due from
Borrower or any other Loan Party under this Agreement or any other Loan Document
or incurred in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement, whether in the nature of a "workout"
or in connection with any insolvency or bankruptcy proceedings or otherwise.
8.4 Indemnity. In addition to the payment of expenses pursuant to
subsection 8.3, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender and any holder of
the Temm Note and the officers, directors, employees, agents, consultants,
auditors, persons engaged by Lender and any holder of the Temm Note to evaluate
or monitor the Collateral, affiliates and attomeys of Lender and such holders
(collectively called the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative orjudicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out ofthis Agreement orthe
other Loan Documents, the consummation ofthe transactions contemplated by this
Agreement, the statements contained in the commitment letters, if any, delivered
by Lender, Lender's agreement to make the Temm Loan hereunder, the use or
intended use of the proceeds of any of the Temm Loan or the exercise of any
right or remedy hereunder or under the other Loan Documents (the "Indemnified
Liabilities"); provided that Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of that Indemnitee as detemmined by a court of
competent jurisdiction.
8.5 Amendments and Waivers. No amendment, modification, temmination or
waiver of any provision of this Agreement or of the other Loan Documents, or
consent to any departure by Borrower therefrom, shall be effective unless the
same shall be in writing and signed by Lender and Borrower. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given.
8.6 Notices. Unless otherwise specifically provided herein, all notices
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by ovemight courier service or United
States mail and shall be deemed to have been given:
(a) if delivered in person, when delivered; (b) if delivered by telecopy, on the
date of transmission if transmitted on a Business Day before 4:00 p.m. Eastern
standard time or, if not,
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on the next succeeding Business Day; (c) if delivered by overnight courier, two
(2) days after delivery to such courier properly addressed; or (d) if by U.S.
Mail, four (4) Business Days after depositing in the United States mail, with
postage prepaid and properly addressed.
If to Borrower: Travelers Acquisition Corporation
2233 Faraday Avenue, Suite 1C
Carlsbad, CA 92008
Attention: Robert D. Press, Chairman
Facsimile: (760) 931 -9568
With copies to: Maynard J. Hellman, Esq.
Westside Corporate Center
150 S. Pine Island Road, Suite 500
Plantation, FL 33324
Facsimile: (954) 577-9883
and
Finantra Capital, Inc
Attention: Robert D. Press, Chairman
Westside Corporate Center
150 S. Pine Island Road, Suite 500
Plantation, FL 33324
If to Lender: BHC Interim Funding, L.P.
c/o Brooks, Houghton & Company, Inc.
444 Madison Avenue, 25th Floor
New York, NY 10022
Attention: Mr. Tedmund W. Pryor
Facsimile: (212) 753-7730
With a copy to: Wolf, Block, Schorr and Solis-Cohen LLP
250 Park Avenue, Suite 1000
New York, NY 10177
Attention: George N. Abrahams, Esq.
Facsimile: (212) 986-0604
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this subsection
8.6.
8.7 Survival of Warranties and Certain Acreements. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Term Loan hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower set forth in subsections 8.3 and 8.4 shall survive
the payment of the Term Loan and the termination of this Agreement.
8.8 Indulgence Not Waiver. No failure or delay on the part of Lender in
the exercise of any power, right or privilege shall impair such power, right or
privilege or be construed to
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be a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
8.9 Marshaling: Payments Set Aside. Lender shall not be under any
obligation to marshal any assets in favor of any Loan Party or any other party
or against or in payment of any or all of the Obligations. To the extent that
any Loan Party makes a payment or payments to Lender or Lender enforces its
security interests or exercise its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
8.10 Entire Agreement. This Agreement, the Term Note, and the other
Loan Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject maker hereof and may not be contradicted or varied by evidence of prior,
contemporaneous, or subsequent oral agreements or discussions of the parties
hereto. There are no oral agreements among the parties hereto.
8.11 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
8.12 Severability. The invalidity, illegality or unenforceability in
any jurisdiction of any provision in or obligation under this Agreement or the
other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.
8.13 Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
8.14 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
8.15 Successors and Assigns. This Agreement shall be binding upon and
Inure to the benefit of the parties hereto and its respective successors and
assigns except that Borrower may not assign its rights or obligations hereunder
without the prior written consent of Lender.
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8.16 No Fiduciary Relationship: Limitation of Liabilities.
A. No provision in this Agreement or in any of the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by Lender to Borrower.
B. Neither Lender, nor any affiliate, officer, director,
shareholder, employee, attorney, or agent of Lender shall have any liability
with respect to, and Borrower hereby waives, releases, and agrees not to sue any
of them upon, any claim for any special, indirect, incidental, or consequential
damages suffered or incurred by Borrower in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Agreement or any of the other Loan
Documents. Borrower hereby waives, releases, and agrees not to sue Lender or any
of Lender's affiliates, officers, directors, employees, attorneys, or agents for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Agreement or any of the transactions
contemplated hereby.
8.17 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE TERM NOTE, OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH
COURTS. Borrower ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE
TERM NOTE, THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS.
8.18 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRL4L OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE TERM NOTE OR THE OTHER LOAN DOCUMENTS.
Borrower AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER
IN ENTERING INTO THIS AGREEMENT, THE TERM NOTE AND THE OTHER LOAN DOCUMENTS AND
THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN ITS RELATED FUTURE DEALINGS.
Borrower AND LENDER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
8.19 Construction. Borrower and Lender each acknowledge that it has had
the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement and the other Loan Documents with its legal
counsel and that this Agreement and the other Loan Documents shall be construed
as if jointly drafted by Borrower and Lender.
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8.20 Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents, or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto. Delivery of an executed counterpart of a signature
page to this Agreement, any amendments, waivers consents or supplements, or to
any other Loan Document by Facsimile shall be as effective as delivery of a
manually executed counterpart thereof.
8.21 No Duty. All attorneys, accountants, appraisers, and
otherprofessional Persons and consultants retained by Lender shall have the
right to act exclusively in the interest of Lender and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to Borrower or any of Borrower's shareholders or any
other Person.
SECTION 9 SUBORDINATION
9.1 Obligations Subordinate to Senior Indebtedness. The Borrower, and
each Person that has guaranteed the payment of the Obligations (each a
"Guarantor") covenants and agrees, and the Lender and each other holder of the
Term Note, if any, likewise covenants and agrees, that, (a) to the extent and in
the manner hereinafter set forth in this Section 9, the payment of the
Obligations, including pursuant to any amendment, modification, restatement or
renewal thereof, and any guaranty of such payment (the "Subordinated
Obligations"), is hereby expressly made subordinated and subject in right of
payment to the prior payment in full of all "Senior Indebtedness", as
hereinafter defined, and (b) the terms and conditions of such subordination is
for the benefit of the holders of the Senior Indebtedness and each such holder
may enforce such subordination. As used herein, the term "Senior Indebtedness"
shall mean all (i) payment obligations now or hereafter incurred pursuant to and
in accordance with the terms of the Loan and Security Agreement dated September
23, 1999 (as the same may be amended, modified, supplemented or restated, the
"Senior Credit Agreement") among Travelers Acceptance Corporation, Travelers
Leasing Corporation and Trace Credit Services, Inc. (each a "Traveler's
Company") and Finova Capital Corporation (the "Senior Creditor") and (ii) the
contingent liability of each Person arising from its guaranty of the payment of
Indebtedness incurred pursuant to the Senior Credit Agreement (each a
"Traveler's Guarantor", and collectively with each Traveler's Company, a
"Traveler's Obligor"). Senior Indebtedness shall include, without limitation,
all principal, interest (including without limitation, any post-petition
interest on such obligations at the rate set forth in the Senior Credit
Agreement, accruing whether or not granted or permitted in connection with an
event of the type referred to in Section 7.1 (F) or (G) hereof), premium,
penalties, fees, expenses, indemnification, reimbursements, damages and other
liabilities payable under the Senior Credit Agreement; provided that in no event
shall the principal amount of Senior Indebtedness exceed $32,500,000 (as such
amount is reduced by reductions of revolving commitments to the extent such
reductions are permanent). Senior Indebtedness outstanding under the Senior
Credit Agreement shall continue to constitute Senior Indebtedness for all
purposes hereof, notwithstanding that such Senior Indebtedness or any claim in
respect thereof may be disallowed, avoided or subordinated pursuant to any
insolvency law, the Bankruptcy Code or any similar federal or state law for the
relief of debtors or other applicable insolvency law or equitable principles as
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a claim for unmatured interest.
9.2 Payment Over of Proceeds Upon Dissolution. In the event of (i) any
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith,
relative to the Traveler's Obligor or to its assets, or (ii) any liquidation,
dissolution or other winding up of the Traveler's Obligor, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or (iii) any
assignment for the benefit of creditors or any other marshaling of assets and
liabilities of the Traveler's Obligor (collectively, "Bankruptcy Events"), then
and in any such event:
A. the holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all amounts due or to become due on or in
respect of all Senior Indebtedness (including interest after the commencement of
a Bankruptcy Event at the rate specified in the Senior Indebtedness, whether or
not allowed), before the Lender is entitled to receive any direct or indirect
payment or distribution on account of Subordinated Obligations including,
without limitation, by exercise of set-off and any payment which may be payable
or deliverable by any reason of any other Indebtedness being subordinated in
right of payment to the Subordinated Obligations;
B. any payment or distribution of assets of the Traveler's
Obligor of any kind or character, whether in cash, property or securities, by
set-off or otherwise, to which the Lender would be entitled but for the
provisions of this Section 9, with the exception of any such payment or
distribution (each a "Permitted Payment" or a "Permitted Distribution",
respectively) ( 1 ) authorized by an unstayed, final, nonappealable order or
decree stating that effect is being given to the subordination of such
Subordinated Obligations to the Senior Indebtedness, and made by a court of
competent jurisdiction in a reorganization proceeding under any applicable
bankruptcy law or (2) of securities which, if debt securities, are subordinated
to at least the same extent as the Subordinated Obligations are to (A) such
Senior Indebtedness or (B) any securities issued in exchange for Senior
Indebtedness; provided, however, that (x) the final maturity of such securities
shall not be earlier than one year following the maturity date of the last to
mature of the Senior Indebtedness (including any issued in exchange therefor) at
the time outstanding and the scheduled amortization shall not be more favorable
(as to amount or time of payment ) then the scheduled amortization of the
principal amount of the Subordinated Obligations, (y) such securities shall
contain covenants which are no more restrictive than the covenants contained
herein and shall not contain greater defaults than as are contained herein and
(z) such securities shall bear interest at a rate per annum less than or equal
to 18% per annum computed on the same basis as described herein, shall be paid
by the liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise, directly to the holder of all Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the principal of, and interest on, such Senior Indebtedness
held or represented by each, to the extent necessary to make payment in full of
all such Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders such Senior Indebtedness, and
C. in the event that, notwithstanding the foregoing provisions
of this Section
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9, the Lender shall have received any such payment or distribution of assets of
the Borrower or any Guarantor of any kind or character, whether property or
securities (but excluding any Permitted Payment or Permitted Distribution
received by the Lender) before all Senior Indebtedness is paid in full or
payment thereof is provided for, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Traveler's Obligor for
application to the payment of all such Senior Indebtedness remaining unpaid, to
the extent necessary to pay such Senior Indebtedness in full, after giving
effect to any concurrent payment or distribution to or for the holders of such
Senior Indebtedness.
If, notwithstanding the provisions of this Agreement, there shall occur
any consolidation of the Traveler's Obligor with, or any merger of the
Traveler's Obligor into, another corporation or the liquidation or dissolution
of the Traveler's Obligor following any conveyance, transfer or lease of its
properties and assets substantially as an entirety to another corporation, such
consolidation, merger or liquidation shall not be deemed a Bankruptcy Event
provided that no other Bankruptcy Event shall have occurred and be continuing at
the time of such consolidation, merger or liquidation. The Senior Creditor is
hereby authorized to file an appropriate claim on behalf of the Lender if the
Lender does not file such claim or there is not filed on behalf of the Lender a
proper proof of claim in the form required in any Bankruptcy Event prior to
thirty (30) days before the expiration of the time to file such claim or claims.
D. No Payment in Certain Circumstances. In the event that (i)
the Traveler's Obligor shall fail to pay when due (after giving effect to any
applicable grace periods), upon acceleration or otherwise, any amount or
obligation with respect to Senior Indebtedness under the Senior Credit Agreement
(a "Payment Default") which Payment Default shall not have been cured or waived,
or (ii) an event of default arising from a breach or violation of Section 5,
Section 6.1 (E), Section 6.2 or Section 6.3 of the Senior Credit Agreement, as
in effect on the date of execution thereof shall occur and be continuing, which
shall not have been cured or waived (a "Non-Payment Default"), and the Borrower
and the Lender receive written notice of such Non-Payment Default from the
Senior Creditor (a "Non-Payment Blockage Notice"), then no payment on account of
the Subordinated Obligations shall be made by the Borrower or any Guarantor (x)
in the case of any Payment Default, unless and until such Senior Indebtedness
shall have been paid in full or until such Payment Default shall have been cured
or waived, or (y) in the case of any Non-Payment Default, from the earlier of
the date on which the Borrower and the Lender receive such Non-Payment Blockage
Notice until the earlier of (1) 120 days after such date and (2) the date, if
any, on which the Senior Indebtedness under the Senior Credit Agreement is paid
in full or such Non-Payment Default is waived by the Senior Creditor or
otherwise cured (a "Blockage Period"); provided that only one Non-Payment
Blockage Notice may be given in any 360-day period.
In the event that, notwithstanding the foregoing, the Borrower or any
Guarantor shall make any payment to the Lender prohibited by the foregoing
provisions of this Section 9.3, then and in such event such payment shall be
paid over and delivered forthwith to the Senior Creditor. The provisions of this
Section 9.3 shall not apply to any payment with respect to which Section 9.2
would be applicable.
9.3 Acceleration Rights; Remedies. If an Event of Default, other than
an Event of
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Default under Section 7.1 (F) or (G), shall exist at any time that any Senior
Indebtedness under the Senior Credit Agreement shall be outstanding, neither the
Lender nor any other holder of the Term Note shall take any action, judicial or
otherwise, to collect payment on the Subordinated Obligations or to pursue any
other remedy with respect to the Subordinated Obligations so long as the Senor
Creditor is diligently exercising rights and pursuing remedies with respect to
the Senior Indebtedness or the collateral securing the Senior Indebtedness;
provided, that any amount received by the Lender as a result of any action
permitted above prior to payment in full in cash of the Senior Indebtedness
under the Senior Credit Agreement shall be paid to the Senior Creditor in
accordance with the provisions of this Section 9.
9.4 Payment Otherwise Permitted. Nothing contained in this Section 9 or
elsewhere in this Agreement or in the Term Note shall prevent the Borrower, or
the Guarantors, at any time except as set forth in Section 9.2 or under the
conditions described in Section 9.3, from making payments at any time of
principal of and interest on the Term Loan or any other amount payable by the
Borrower or the Guarantors under the Term Note or this Agreement.
Notwithstanding the provisions of this Section 9, the Lender shall not be
charged with knowledge of the existence of any facts, including of the
occurrence of a payment Default, which would prohibit the making of any payment
or distribution by the Borrower or the Guarantors or the receipt or retention
thereof by the Lender, or the taking of any action by the Lender of the type
referred to in Section 9.4, unless the Lender shall have received at least two
Business Day's prior written notice of such facts.
9.5 Subrogation to Rights of Holders of Senior Indebtedness. Subject
to, and solely effective following, the final indefeasible payment in full of
all Senior Indebtedness, the Lender shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments and distributions of cash,
property and securities applicable to such Senior Indebtedness to the extent of
the payments or distributions made to such holders, or otherwise applied to
payment of, the Senior Indebtedness pursuant to the provisions of this Section 9
until the principal of and the interest on the Term Loan and the Term Note shall
be paid in full in cash. For purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of any cash, property or
securities to which the Lender would be entitled except for the provisions of
this Section 9, and no payments over pursuant to the provisions of this Section
9 to the holders of Senior Indebtedness by the Lender shall, as among the
Borrower or any Guarantor, its creditors (other than holders of Senior
Indebtedness) and the Lender, be deemed to be a payment or distribution by the
Borrower or such Guarantor to or on account of the Senior Indebtedness.
9.6 Provisions Solely to Define Relative Rights. The provisions of this
Section 9 are and are intended solely for the purpose of defining the relative
rights of the holder of the Term Note on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this Section 9 or elsewhere
in this Agreement or in the Term Note is intended to or shall (i) impair, as
among the Borrower or any Guarantor, its creditors (other than holders of Senior
Indebtedness) and the Lender, the obligation of the Borrower and the Guarantors
which is absolute and unconditional, to pay to the Lender the principal of, and
premium and interest on, and any other amount payable by the Borrower under, the
Term Loan, the Term Note or this Agreement as and when the same shall become due
and payable in accordance with its terms; or (ii) affect the relative rights
against the Borrower and the Guarantors of the Lender and its creditors (other
than the holders of Senior Indebtedness); or (iii) prevent the Lender from
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accelerating the Term Loan and all other Obligations and exercising all other
remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the rights, if any, under this Section 9 of the holders of
Senior Indebtedness (x) upon the occurrence of a Bankruptcy Event, to receive,
pursuant to and in accordance with Section 9.2, cash, property and securities
otherwise payable or deliverable to the Lender, (y) under the conditions
specified in Section 9.3. to prevent any payment prohibited by such Section or
(z) under Section 9.4.
9.7 No Waiver of Subordination Provisions: Amendment. No right of any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Borrower or any Guarantor or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Borrower or any Guarantor with the terms, provisions, and covenants of this
Agreement, regardless of any Knowledge thereof any such holder may have or be
otherwise charged with. Without in any way limiting the generality of the
foregoing, the holder of Senior Indebtedness may at any time and from time to
time, without the consent of or notice to the Lender or any other holder of the
Term Note, without incurring responsibility to the Lender or such holder and
without impairing or releasing the subordination provided in this Section 9 or
the obligations hereunder of the Lender and such holder to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Traveler's Obligor and any other Person, subject to the obligation
to diligently exercise rights and pursue remedies in accordance with Section
9.4.
9.8 Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Traveler's Obligor referred to
in this Section 9, the Lender shall be entitled to rely upon any unstayed,
final, nonappealable order or decree entered by any court of competent
jurisdiction in which a Bankruptcy Event is pending, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 9.
9.9 Turnover, Miscellaneous Subordination Provisions. (A) If a
distribution is made to any holder of Subordinated Obligations that because of
this Section 9 should not have been made to it, such holder shall segregate such
distribution from its other funds and property and hold it in trust for the
benefit of, and, upon written request, pay it over (in the same form as
received, with any necessary endorsement) to, the holders of Senior Indebtedness
as their interests may appear, or their agent or representative or the trustee
under the indenture or other agreement (if any) pursuant to which Senior
Indebtedness may have been issued, as their respective interests may appear, for
application (in the case of cash) to, or as collateral (in the case of non-cash
property or securities) for the payment or prepayment of, all obligations with
respect to Senior Indebtedness remaining unpaid to the extent necessary to pay
such obligations in full in accordance with their terms, after giving effect to
an concurrent payment or distribution to or for the holders of Senior
Indebtedness.
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<PAGE>
B. A distribution may consist of cash, securities or other
property, by setoff or otherwise, and a payment or distribution on account of
any obligations with respect to the holders of Subordinated Obligations shall
include any redemption, purchase or other acquisition of the Subordinated
Obligations.
C. For the purpose of this Section 9, all Senior Indebtedness
now or hereafter existing shall not be deemed to have been paid in full unless
the holders or the owners thereof shall have received the indefeasible payment
in full in cash.
D. The agreements contained in this Section 9 shall continue
to be effective or be reinstated, as the case may be, if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by
any holder of Senior Indebtedness upon any Bankruptcy Event or any other
nonappealable order of a court of competent jurisdiction of the Borrower, all as
though such payment had not been made.
E. All rights and interests under this Agreement of the
holders of Senior Indebtedness, and all agreements and obligations )f the
holders of Subordinated Obligations and the Borrower and the Guarantors under
this Section 9, shall remain in full force and effect irrespective of (i) any
lack of validity or enforceability of the Senior Credit Agreement, any
promissory notes evidencing the Indebtedness thereunder, or any other agreement
or instrument relating thereto or to any other Senior Indebtedness, or (ii) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any holders of Subordinated Obligations, the Borrower or the
Guarantors including, but not limited to, priority liens or lack of lien
perfection.
F. The provisions set forth in this Section 9 constitute a
continuing agreement and shall (i) be and remain in full force and effect until
payment in full of all Senior Indebtedness and at such time when Finova shall
not have any obligation to make advances under the Senior Credit Agreement, (ii)
be binding upon the holders of Subordinated Obligations, the Borrower and the
Guarantors, and their respective successors, transferees and assigns, and (iii)
inure to the benefit of, and be enforceable directly by, each of the holders of
Senior Indebtedness and their respective successors, transferees and assigns.
THIS SPACE INTENTIONALLY LEFT BLANK
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<PAGE>
Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
Lender: BHC INTERIM FUNDING, L.P.
By BHCGP, L.L.C., its General Partner
By BHC Investors, L.L.C., its Managing Member
By:
------------------------------------------
Borrower: TRAVELERS ACQUISITION CORPORATION
By:
------------------------------------------
Robert D. Press, Vice President
(EIN: 65-0930O556)
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<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF1933 AND MAY NOT BE SOLD OR
OFFERED FOR SALE UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION IN
REASONABLY ACCEPTABLE FORM AND SCOPE TO THE COMPANY OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH
ACTIONS ARE NOT REQUIRED UNDER ANY SUCH LAWS OR THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. THE OFFERING OF THIS WARRANT HAS NOT BEEN REVIEWED OR
APPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, OR BY ANY
STATE'S SECURITIES ADMINISTRATOR. THIS WARRANT IS ALSO SUBJECT TO CERTAIN
ADDITIONAL TRANSFER RESTRICTIONS PROVIDED FOR HERE1N.
Warrant No. Dated: October 29 1999
WARRANT
THIS IS TO CERTIFY THAT, for value received, BHC INTERIM FUNDING L.P.
or registered assigns ("Holder") is entitled to purchase from TRAVELERS
INVESTMENT CORPORATION., a California corporation (the "Company"), at any time
prior to 5:00 p.m., (New York time) on October 29, 2004, such number of shares
of the Company's Common Stock, no par value per shares (the "Common Stock") as
shall equal, upon issuance, the Bested Percentage (as hereinafter defined) on
such exercise date, of the total number of shares of the Company's Common Stock
outstanding, on a fully diluted basis after giving effect to the exercise of
this Warrant and all other warrants, options and rights to acquire any shares of
the Company's Common Stock and the conversion of all convertible securities (if
any) theretofore issued by the Company (the "Aggregate Shares"), at a price (the
"Exercise Price") equal to $.01 per share, payable as provided below. The Common
Stock issuable upon exercise of this Warrant are herein called the "Warrant
Shares".
This Warrant is the Warrant referred to in the Loan Agreement between
Travelers Acquisition Corporation, a Florida corporation, and Holder, of even
date herewith, and is issued pursuant to, and entitled to the benefits of, the
Loan Agreement as amended from time to time. Capitalized terms used and not
otherwise defined in this Warrant shall have the meanings assigned to them in
the Loan Agreement.
Certain terms used in this Warrant are defined in Article VI.
For purposes of this Warrant, the "Vested Percentage" shall be
determined as follows, subject to adjustment as provided in Article IV of this
Warrant:
i. Vested Percentage on the date hereof and at all times
hereafter if the Loan is repaid in full on or prior
to April 29,2000, shall mean 4.28%.
ii. If the Loan is not paid in full prior to April 29,
2000, then from and after such date the Vested
Percentage shall be 7.41%.
<PAGE>
iii. If the Loan is not paid in full prior to July 29,
2000, then from and after such date the Vested
Percentage shall increase at a rate of 1.0% of the
Aggregate Shares per month for each month thereafter
that the Loan is not paid in full for the first three
months (so that if the Loan is not paid in full by
January 29, 2001, the Vested Percentage shall be
13.1%), and for each and every three month period
thereafter until the Loan is paid in full, the Vested
Percentage shall increase by an additional 2.0% of
the Aggregate Shares.
ARTICLE I - EXERCISE OF WARRANT
1.1 Method of Exercise. To exercise this Warrant in whole or in part,
the Holder shall deliver on any Business Day to the Company at its principal
place of business (a) this Warrant, (b) a written notice in substantially the
form of the Subscription Notice attached hereto, of the Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased (which shall be a whole number of shares if for less than
all the shares then issuable hereunder), and (c) payment of the Exercise Price
with respect to such shares. Such payment may be made, at the option of the
Holder, either (a) by cash, certified or bank cashier's check or wire transfer
in an amount equal to the product of (i) the Exercise Price times (ii) the
number of Warrant Shares as to which this Warrant is being exercised or (b) by a
"cashless exercise" of this Warrant, in which event the Holder shall receive
from the Company the number of Warrant Shares equal to (i) the number of Warrant
Shares as to which this Warrant is being exercised minus (ii) the number of
Warrant Shares having an aggregate value (determined by reference to the Fair
Market Value of a share of Common Stock on the Business Day immediately prior to
the date of such exercise), equal to the product of (x) the Exercise Price times
(y) the number of Warrant Shares as to which this Warrant is being exercised.
The Company shall, as promptly as practicable and in any event within
seven days after receipt of such notice and payment, execute and deliver or
cause to be executed and delivered, in accordance with such notice, a
certificate or certificates representing the aggregate number of shares of
Common Stock specified in said notice together with cash in lieu of any
fractions of a share as provided in Section 1.3. The share certificate or
certificates so delivered shall be in such denominations as may be specified in
such notice, and shall be issued in the name of the Holder or such other name or
names as shall be designated in such notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and such Holder or any other Person so designated to be named
therein shall be deemed for all purposes to have become a holder of record of
shares, as of the date the aforementioned notice and payment is received by the
Company. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of such certificate or certificates, deliver to
the Holder a new Warrant evidencing the right to purchase the remaining shares
of Common Stock called for by this Warrant, which new Warrant shall, in all
other respects, be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant which shall then be
returned to the Holder. The Company shall pay all expenses, stamp, documentary
and similar taxes and other charges payable in connection with the preparation,
issuance and delivery of share certificates and new Warrants under this
Provision.
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<PAGE>
1.2 Shares to Be Fully Paid And Nonassessable. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable and, if such Common Stock is then quoted on NASDAQ or
listed on any national securities exchange (as defined in the Exchange Act),
such Common Stock shall, to the extent permitted under the applicable rules of
such exchange or NASDAQ, be duly quoted or listed thereon, as the case may be.
1.3 No Fractional Shares Required to Be Issued. The Company shall not
be required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section 1.3, be issuable
upon final exercise of this Warrant, in lieu of such fractional share, the
Company shall pay to the Holder in cash an amount equal to the same fraction of
the Fair Market Value of the Company per share of Common Stock Outstanding on
the Business Day immediately prior to the date of such exercise.
1.4 Legend. Each certificate for shares of Common Stock issued upon
exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of 1933
and may not be sold or offered for sale unless registered or qualified
under said Act and any applicable state securities laws or unless the
Company receives an opinion in reasonably acceptable form and scope to
the Company of counsel reasonably satisfactory to the Company that
registration, qualification or other such actions are not required
under any such laws or that an exemption from such registration is
available. The offering of this security has not been reviewed or
approved by the United States Securities and Exchange Commission or by
any state's securities administrator. This security is also subject to
certain additional transfer restrictions provided for in the Warrant
the exercise of which resulted in the original issuance of this
security, a copy of which restrictions shall be furnished to the holder
hereof by the Company upon written request and without charge."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such no legend (except a new certificate issued upon
completion of a public offering pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
selected by the Holder of such certificate (who may be an employee of such
Holder) and reasonably acceptable to the Company, the securities represented
thereby need no longer be subject to restrictions on resale under the Securities
Act.
1.5 Reservation: Authorization; Capitalization. The Company has duly
reserved. and will keep available for issuance upon exercise of the Warrant, the
total number of Warrant Shares deliverable from time to time upon exercise of
his Warrant in its entirety, provided, however, that prior to September ___,
2000, the Company shall not be required to reserve for issuance a number of
Warrant Shares greater than ____% of the Aggregate Shares. . The Company will
not take any actions during the term of this Warrant that would result in any
adjustment of the number of shares of Common Stock issuable upon the exercise of
this Warrant if (i) the total number of shares of Common Stock issuable after
such action upon exercise of this Warrant, (ii) all shares of Common
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<PAGE>
Stock issued and outstanding and (iii) all shares of Common Stock then issuable
(y) upon the exercise of all outstanding options and (z) upon the exercise,
conversion or exchange of all other outstanding securities which are exercisable
for, convertible into or exchangeable for Common Stock, would exceed the total
number of shares of Common Stock then authorized for issuance by the Company.
The Company will not, for as long as this Warrant has not been exercised, change
the par value of its Common Stock. The issuance of the Warrant Shares has been
duly and validly authorized and, when issued and sold in accordance with the
Warrants, the Warrant Shares will be duly and validly issued, fully paid and
non-assessable. As of the date of issuance of this Warrant (the 'Issuance
Date"), the Company had outstanding (i) 442,132 shares of Common Stock, (ii) 0
shares of Preferred Stock, (iii) options and warrants to acquire an additional 0
shares of Common Stock, and (iv) no other shares of Capital Stock or any
securities exercisable for, convertible into or exchangeable for shares of
capital stock or any rights, options or warrants to purchase any shares of
Capital Stock or any securities exercisable for, convertible into or
exchangeable for shares of Capital Stock. Neither the issuance of this Warrant
nor the issuance of Warrant Shares upon exercise of this Warrant violates or
conflicts with the Company's certificate of incorporation or bylaws or any
agreement to which the Company is a party.
ARTICLE II - TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS
2.1 Ownership of Warrant. The Company shall deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until due presentment of this Warrant for registration of
transfer as provided in this Article II.
2.2 Transfer of Warrant. The Company agrees to maintain at its
principal office the books for the registration of transfers of the Warrants,
and transfer of this Warrant and all rights hereunder shall be registered, in
whole or in part, on such books, upon surrender of this Warrant at the Company,
together with (i) a written assignment of this Warrant duly executed by the
Holder or its duly authorized agent or attorney, with (if the Holder is a
natural person) signatures guaranteed by a bank or trust company or a broker or
dealer registered with the NASD, (ii) funds sufficient to pay any transfer taxes
payable upon such transfer. Upon surrender and. if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denominations specified in the instrument of
assignment (which shall be whole numbers of shares only) and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be canceled. The Company shall permit the
Warrant Securityholders to inspect the warrant registration books from time to
time during normal business hours at the Company. Holder shall pay all fees
(including reasonable attorneys fees), costs and expenses associated with any
transfer of this Warrant requested by Holder.
2.3 Division or Combination of Warrants. This Warrant may be divided or
combined with other Warrants upon presentment to the Company of this Warrant and
of any Warrant or Warrants with which this Warrant is to be combined, together
with a written notice specifying the names and denominations (which shall be
whole numbers of shares only) in which the new Warrant or Warrants are to be
issued, signed by the holders hereof and thereof or their respective duly
authorized agents
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<PAGE>
or attorneys. Subject to compliance with Section 2.2 as to any transfer or
assignment which may be involved in the division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
2.4 Expenses of Delivery of Warrants. The Company shall pay all
expenses, stamp, documentary and similar taxes (other than transfer taxes) and
other charges payable in connection with the preparation, issuance and delivery
of the Warrants.
ARTICLE III - CERTAIN RIGHTS
3.1 Put Rights.
(a) Holder shall have the right, but not the obligation, once
only, to put 25% of the Warrants to the Company upon the earlier to occur of the
repayment of the Obligations of the Maturity Date, by delivery of written notice
to the Company, as follows. If the repayment of the Obligations or the Maturity
Date occurs between (i) the Closing Date and 180 days thereafter, the Put Price
will be $105,000; (ii) 181 days after the Closing Date and 270 days after the
Closing Date, the Put Price will be $172,000; and (iii) 271 days after the
Closing Date to the Maturity Date, the Put Price will be $240,000.
(b) Effective from the second anniversary of the Closing Date,
Holder shall have the right, but not the obligation to put all of the Warrants
it then holds to Finantra Capital, Inc. ("Finantra") for the higher of (i)
92,000 for each 1% of the Aggregate Shares to which Holder is entitled under the
Warrants, or (ii) exchange the Warrants valued at Fair Market Value, for
registered Common Stock of Finantra valued at the lower of the Fair Market Value
as of the Closing Date or the Fair Market Value as of the Holder exercises its
put rights hereunder, or (iii) cash, representing the Fair Market Value of the
Warrants.
(c) Holder shall also be entitled to exercise its tag along
and put rights set forth in that certain Stockholders Agreement of even date
herewith, By and among the Holder, the Company, Finantra, Amer-Cap Consumer
Finance Group, Inc. and Travelers Acquisition Corporation.
3.2 Determination of Fair Market Value. Subject to Section 3.2 hereof,
each determination of Fair Market Value shall be made by the Company in
accordance with the definition of the term Fair Market Value set forth in
Article VI hereof. Upon each determination of Fair Market Value, the Company
shall promptly give written notice thereof to all Warrant Securityholders,
setting forth in reasonable detail (i) the transaction giving rise to the
necessity for such determination (ii) the calculation of such Fair Market Value
and the (iii) method and basis of determination thereof (the "Company
Determination"). In the event Fair Market Value is determined with reference to
subsection (i)(C) or (ii) of the definition Fair Market Value, the Company's
Board of Directors shall make such initial determination within twenty-one (21 )
days of the event giving rise to the necessity for such determination.
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<PAGE>
3.3 Contest And Appraisal Rights
(a) If a Warrantholder disagrees with the Company
Determination (an "Objecting Holder") and by notice to the Company given within
20 days after receipt of notice of the Company Determination (an "Appraisal
Notice") elects to dispute the Company Determination, such dispute shall be
resolved as set forth in subsection (b) of this Section 3.3.
(b) For a period of 10 days after the Appraisal Notice, the
Company and the Objecting Holder shall negotiate in good faith to resolve their
differences as to the determination of Fair Market Value. In the absence of a
mutually satisfactory resolution within such 10 day period, the Company shall
within 5 days after the last day of such 10 day period engage an investment bank
or other qualified appraisal firm reasonably acceptable to the Objecting Holder
(the "Appraiser') to make an independent determination of Fair Market Value (the
"Appraiser Determination"). The Appraiser Determination shall be made within 20
days of the engagement of such Appraiser and shall be final and binding on the
Company and the Objecting Holder. The costs of conducting the appraisal shall be
borne solely by the Company.
(c) If the Company does not determine the Fair Market Value of
a share of Common Stock, or property or service, as applicable, within the
period specified in Section 3. 2, then any Warrantholder shall have the right to
determine the Fair Market Value (the "Holder Determination") which determination
shall be final and binding upon the Company and the Warrantholder(s). Upon each
such determination, the Warrantholder which has determined the Fair Market Value
shall promptly give written notice ofthe Holder Determination to the Company
setting forth in reasonable detail (i) the transaction giving rise to the
necessity for such determination, (ii) the calculation of such Fair Market Value
and (iii) the method and basis of determination thereof. Upon its receipt of the
Holder Determination and related notice, the Company shall promptly send such
determination and notice to all other Warrantholders. The costs of making the
Holder Determination shall be borne solely by the Company.
3.4 Financial Statements And Other Information. Promptly upon
transmission thereof, the Company will deliver to each Warrant Securityholder
copies of any and all financial statements, proxy statements. notices and other
reports as it may send to its public stockholders and copies of all registration
statements and all reports which it files with the Commission (or any
governmental body or agency succeeding to its functions).
ARTICLE IV - REORGANIZATION, RECLASSIFICATION AND LIQUIDATION
4.1 Reorganization, Reclassification and Liquidation.
(a) In the case of any reorganization or reclassification of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision of combination) or in the case of any consolidation of
the Company with, or merger of the Company with, another corporation, or in the
case of any sale, lease or conveyance of all, or substantially all, of the
property, assets, business and goodwill of the Company as an entity, the holder
of this Warrant shall thereafter have the right upon
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<PAGE>
exercise to purchase the kind and amount of shares of stock and other securities
and property receivable upon such reorganization, reclassification,
consolidation, merger or sale by a holder of the number of shares of Common
Stock which the holder of this Warrant would have received has all Warrant
Shares issuable upon exercise of this Warrant been issue immediately prior to
such reorganization, reclassification, consolidation, merger of sale, at a price
equal to the Exercise Price then in effect pertaining to this Warrant (the kind,
amount and price of such stock and other securities to be subject to adjustment
as herein provided).
(b) In case the Company shall, at any time prior to the
expiration of this Warrant and prior to the exercise thereof, dissolve,
liquidate or wind up its affairs, the Warrantholder shall be entitled, upon the
exercise thereof, to receive, in lieu of the Warrant Shares of the Company which
it would have been entitled to receive, the same kind and amount of assets as
would have been issued, distributed or paid to it upon such Warrant Shares of
the Company, had it been the holder of record of shares of Common Stock
receivable upon the exercise of this Warrant on the record date for the
determination of those entitled to receive any such liquidating distribution.
After any such dissolution, liquidation or winding up which shall result in any
distribution in excess of the Exercise Price provided for by this Warrant, the
Warrantholder may at its option exercise the same without making settlement to
said Warrantholder, shall deduct from the amount payable to such Warrantholder
an amount equal to the aggregate Exercise Price.
(c) In case the Company, at any time prior to the expiration
of the Warrant and prior to the exercise thereof make a distribution of assets
(other than cash) or securities of the Company to its stockholders (the
"Distribution") the Warrantholder shall be entitled, upon the exercise thereof,
to receive, in addition to the Warrant Shares it is entitled to receive, the
same kind and amount of assets or securities as would have been distributed to
it in the Distribution had it been the holder of record of shares of Common
Stock receivable upon exercise of this Warrant on the record date for
determination of those entitled to receive the Distribution.
(d) Irrespective of any adjustments in the kind of shares
purchasable upon exercise of this Warrant, this Warrant may continue to express
the kind of shares as originally issued.
ARTICLE V - REGISTRATION RIGHTS
5.1 Registration on Request.
(a) Subject to Section 5.1 (g), at any time or from time to
time, upon the written request of the holder or holders of a majority of the
outstanding Warrant Shares and Warrants (such majority determined, for purposes
of this Section 5.1, by calculating the number of Warrant Shares for which such
Warrants are then exercisable) (the "Initiating Holders"), requesting that the
Company effect the registration under the Securities Act of all or part of such
Initiating Holders' Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all holders of Registrable Securities (who shall have
the right to request that their Registrable Securities be included in the
registration statement requested pursuant to this Section 5.1 upon written
notice to the Company made within 20 days after receipt of the Company's written
notice. Thereupon, the Company will use its best
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<PAGE>
efforts to effect the registration under the Securities Act of the Registrable
Securities which the Company has been so requested to register for disposition
in accordance with the intended method of disposition stated in the Initiating
Holder's request; all to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid), of the Registrable
Securities and the additional shares of Common Stock, if any, to be so
registered, provided that the holders of Registrable Securities as a class shall
be entitled to not more than two registrations upon request pursuant to this
Section 5.1.
(b) Registrations under this Section 5.1 shall be on such
appropriate registration form of the Commission (i) as shall be selected by the
Company and (ii) as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified in
the Initiating Holders' their request for such registration. The Company agrees
to include in any such registration statement all information which holders of
Registrable Securities being registered shall reasonably request.
(c) The Company will pay all Registration Expenses in
connection with the registrations requested pursuant to this Section 5.1.
(d) The Initiating Holders will be entitled to request two
registrations pursuant to this Section 5.1 for which the Company will pay all
registration expenses. A registration requested pursuant to this Section 5.1
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective and closes; provided that a
registration which does not become effective after being filed by the Company
pursuant to Section 5.1 solely by reason of the refusal to proceed by the
Initiating Holders (other than a refusal to proceed based upon the advice of
counsel relating to a matter with respect to the Company) shall be deemed to
have been effected by the Company at the request of the Initiating Holders
unless the Initiating Holders shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
effective, such registration is subject to a stop order, injunction or other
order of the Commission or other governmental agency or court suspending the
effectiveness of such registration statement for any reason, other than by
reason of misstatements or omissions made or not made in the registration
statement in reliance upon and in conformity with written information furnished
to the Company by a Holder of Registrable Securities specifically for use in the
preparation of such registration statement, or (iii) the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied, other than by reason of
some act or omission by any Holder of Registrable Securities participating in
the offering. Except as provided in Section 5.1(d)(i) above, whether or not the
registration becomes effective and closes, the Company will pay all registration
expenses in connection with any registration so initiated.
(e) If a registration requested pursuant to this Section 5.1
involves an underwritten offering, the underwriter or underwriters thereof shall
be selected by the holders of at least a majority (by a number of shares) of the
Registrable Securities as to which registration has been requested and shall be
reasonably acceptable to the Company.
(f) If a requested registration pursuant to this Section 5.1
involves an
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<PAGE>
underwritten offering, and the managing underwriter shall advise the Company
(with a copy of any such notice to each holder of Registrable Securities
requesting registration) that, in its opinion, the number of securities
requested to be included in such registration (including securities proposed be
sold for the account of the Company) exceeds the number which can be sold in
such offering within a price range acceptable to the Initiating Holders, the
Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in such offering, (i) first, Registrable
Securities requested to be included in such registration by the holder or
holders of Registrable Securities, pro rata among such holders requesting such
registration on the basis of the number of such securities requested to be
included by such holders, (ii) second, all shares proposed to be included by the
Company in such registration and (iii) third, all shares other than Registrable
Shares (any such shares with respect to any registration, "Other Securities")
requested to be included in such registration by the holder or holders thereof.
(g) The Company may suspend any registration requested
pursuant to this Section 5.1 one time per registration for a single period of up
to 90 days upon notice to the holders of Registrable Securities whose Securities
are covered by the registration Statement requesting pursuant to this Section
5.1 that, in the good faith determination of the Board of Directors of the
Company, the registration and sale at such time of the Registrable Securities
requested to be so registered would not be in the best interests of the Company,
provided that notwithstanding such suspension, the Company shall continue to
diligently process the preparation of the documentation required for such
registration. No registration shall be requested pursuant to this Section 5.1
during the period from the date of the notice to the Warrant Securityholders
pursuant to Section 5.1 (a) of the Company's intention to register securities
until the expiration of the lockup period specified in Section 5.4(b), or, if
earlier, the date of the Company's notice pursuant to the proviso to the second
sentence of Section 5.2(a).
5.2 Incidental Registration.
(a) If the Company at any time proposes to register any of its
securities under the Securities Act (other than (x) by a registration on Form
S-4 or S-8 or any successor or similar forms) or (y) pursuant to Section 5.1 )
whether for its own account or for the account of the holder or holders of any
other Shares, it will each such time give prompt written notice to all holders
of Registrable Securities of its intention to do so and of such holders' rights
under this Section 5.2. Upon the written request of any such holder made within
20 days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register, by inclusion of
such Registrable Securities in the registration statement which covers the
securities which the Company proposes to register; provided that if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason either not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation
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to pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any holder of Registrable Securities entitled to
request that such registration be effected as a registration under Section 5.1,
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities, for the same period as the
delay in registering such other securities. No registration effected under this
Section 5.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 5.1, nor shall any such registration
hereunder be deemed to have been effected pursuant to Section 5.1. The Company
will pay all Registration Expenses in connection with each registration of
Registrable Securities pursuant to this Section 5.2.
(b) If the Company at any time proposes to register any of its
securities under the Securities Act as contemplated by Section 5.2 and such
securities are to be distributed by or through one or more underwriters, the
Company will, if requested by any holder of Registrable Securities as provided
in this Section 5.2, use its best efforts to arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters, provided that if
the managing underwriter of such underwritten offering shall inform the Company
and holders of the Registrable Securities requesting such registration and all
other holders of any Other Securities in respect of such underwritten offering,
by letter of its belief that inclusion in such distribution of all or a
specified number of the securities proposed to be distributed by such
underwriters would interfere with the successful marketing of the securities
being distributed by such underwriters (such letter to state the basis of such
belief and the approximate number of such Registrable Securities and such Other
Securities which may be distributed without such effect), then the Company may,
upon written notice to all holders of such Registrable Securities and holders of
such Other Securities, reduce pro rata (if and to extent stated by such managing
underwriter to be necessary to eliminate such effect) first the number of Other
Securities that have been requested be included in such registration statement
and second the number of Registrable Securities that have been requested be
included in such registration statement so that the resultant aggregate number
of such Registrable Securities and Other Securities so included in such
registration, together with the number of securities to be included in the
registration for the account of the Company, shall be equal to the number of
shares stated in such managing underwriter's letter.
5.3 Registration Procedures.
(a) If and whenever the Company is required to effect the
registration of anyRegistrable Securities under the Securities Act as provided
in Section 5.1 or Section 5.2, the Company shall, as expeditiously as possible:
(i) prepare and (within the later of 45 days after the end
of the fiscal quarter of the Company within which requests for registration may
be given to the Company or the date the Company files its quarterly report on
Form 10-Q for such period provided that such 10-Q is filed on a timely basis
taking into account all possible extension periods, except in the case (A) where
requests for registration may be given in the Company's fourth fiscal quarter,
in which case the filing shall be within the later of 90 days after the end of
such quarter or the date the Company files its annual report on Form 1 0-K for
the fiscal year then ended, provided that such 1 0-K is filed on a timely basis
taking into account all possible extension periods, or (B) a registration
pursuant
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to Section 5.1, in which case the filing shall be made as soon as possible after
the initial request of an Initiating Holder of Registrable Securities or in any
event within sixty (60) days after such request), unless such request is made
during the Company's fourth fiscal quarter, in which case the filing shall be
within the later of 90 days after the end of such quarter or the date the
Company timely files its annual report on Form 10-K for the fiscal year then
ended, file with the Commission the requisite registration statement to effect
such registration (including such audited financial statements as may be
required by the Securities Act) and thereafter use its best efforts to cause
such registration statement to become and remain effective; provided further
that the Company may discontinue any registration of its securities which are
not Registrable Securities at any time prior to the effective date of the
registration statement relating thereto; and provided further that before filing
such registration statement or any amendments thereto, the Company will furnish
to the counsel selected by the holders of Registrable Securities which are to be
included in such registration copies of all such documents proposed to be filed'
which documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
until the earlier of (x) in the case of a registration pursuant to Section 5.1,
the expiration of 180 days after such registration statement becomes effective
(provided that if the registration statement is suspended pursuant to Section
5.1 (g), the registration statement shall be effective for 180 days after
suspension is ended), or (y) in the case of a registration pursuant to Section
5.2, the expiration of 120 days after such registration statement becomes
effective:
(iii) furnish to each seller of Registrable Securities
covered by such registration statement and each underwriter, if any, of the
securities being sold by such seller such number of conformed copies of such
registration statement and of each such amendment and of copies of the
prospectus contained in such registration statement supplement thereto (in each
case including all exhibits), such number (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such seller;
(iv) use its best efforts to reglster or qualify all
Registrable Securities and other securities covered by such registration
statement under blue sky or similar laws of such jurisdictions as any seller
thereof and any underwriter of the securities being sold by such seller shall
reasonably request, to keep such registrations or qualifications in effect for
so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such seller and
underwriter to consummate the disposition in such jurisdictions of the
securities owned by such seller except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified, to subject itself to taxation
in any such jurisdiction or to consent to general service of process in any
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such jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller and the underwriters, if any of
(A) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if
such registration is in connection with an underwritten
public offering, an opinion dated the date of the closing
under the underwriting agreement), reasonably satisfactory
in form and substance to such seller, and
(B) a "cold comfort" letter, dated the effective date of
such registration statement (and, if such registration is
in connection with an underwritten public offering, a
letter dated the date of the closing under the
underwriting agreement), signed by the independent public
accountants who have certified the Company' financial
statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the cold
comfort letter, with respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's counsel and in
cold comfort letters delivered to the underwriters in underwritten public
offerings of securities;
(vii) notify the holders of Registrable Securities and the
managing underwriter or underwriters, if any, promptly and confirm such advice
in writing promptly thereafter:
(A) when the registration statement, the prospectus or any
prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed,
and, with respect to the registration statement or any
post-effective amendment thereto, when the same has become
effective;
(B) of any request by the Commission for amendments or
supplements to the registration statement or the
prospectus or for additional information:
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration or the
initiation of any proceedings by any Person for that
purpose; and
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(D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation or
threat of any proceeding for such purpose;
(viii) notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon the Company's
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and promptly prepare
and furnish to such seller and each underwriter, if any, a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that. as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(ix) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the registration statement at the
earliest possible moment;
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar quarter after the effective date
of such registration statement, which earnings statement shall satisfy the
provisions of Section I 1 (a) of the Securities Act;
(xi) make available for inspection by a representative of
the holders of Registrable Securities participating in the offering, any
underwriter participating in any disposition pursuant to the registration and
any attorney or accountant retained by such selling holders or underwriter
(each, an "Inspector"), all financial and other records, pertinent corporate
documents and properties of the Company (the "Records"), and cause the Company'
officers, directors and employees to supply all information reasonably requested
by any such Inspector in connection with such registration; provided that the
Company shall not be required to comply with this subdivision if there is a
reasonable likelihood, in the judgment of the Company, that such delivery could
result in the loss of any attorney-client privilege related thereto; and
provided further that Records which the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors (other than to any holder of Registrable Securities
participating in the offering, and if disclosed to any such holder shall not be
disclosed by such holder) unless (x) such Records have become generally
available to the public or (y) the disclosure of such Records may be necessary
or appropriate (A) to comply with any law, rule, regulation or order applicable
to any such Inspectors or holder of Registrable Securities, (B) in response to
any subpoena or other legal process or (C) in connection with any litigation to
which
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such Inspectors or any holder of Registrable Securities is a party (provided
that the Company is provided with reasonable notice of such proposed disclosure
and a reasonable opportunity to seek a protective order or other appropriate
remedy with respect to such Records);
(xii) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
Registration Statement;
(xiii) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities exchange on
which any of the Common Stock is then listed and, if not so listed, to be listed
on the NASD automated quotation system and, if listed on theNASD automated
quotation system, use its best efforts to secure designation of all such
Registrable securities covered by such registration statement as a NASDAQ
"national market system security" within the meaning of Rule 1 1 Aa2- 1 of the
Securities and Exchange Commission or, failing that. to secure NASDAQ
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the NASD; and
(xiv) use its best efforts to provide a CUSIP number for
the Registrable Securities, not later than the effective date of the
registration.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information regarding such seller and the distribution of such Registrable
Securities as the Company may from time to time reasonably request in writing
for purposes of preparing the relevant registration statement and amendments and
supplements thereto.
(b) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in of Section
5.3(a) (viii), such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by of Section 5.3(a) (viii). In
the event the Company shall give any such notice, the periods specified in of
Section 5.3(a) (ii) shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received such notice to the date on which
each such seller has received the copies of the supplemented or amended
prospectus contemplated by of Section 5.3(a)(viii).
(c) If any such registration or comparable statement refers to
any holder of Registrable Securities by name or otherwise as the holder of any
securities of the Company, then such holder shall have the right to require, in
the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such holder.
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5.4 Underwritten Offerings.
(a) If requested by the underwriters for any underwritten
offering by holders of Registrable Securities pursuant to a registration
requested pursuant to Section 5.1, the Company will enter into an underwriting
agreement with such underwriters for such offering, such agreement to be
reasonably satisfactory in substance and form to the Company, each such holder
and the underwriters, and to contain such representations and warranties by the
Company and such other terms as are generally prevailing in agreements of this
type, including, without limitation, indemnities to the effect and to the extent
provided in Section 5.5. The holders of the Registrable Securities will
cooperate with the Company in the negotiation of the underwriting agreement.
(b) Each Holder of Registrable Securities agrees by
acquisition of its Registrable Securities not to sell, make any short sale of,
loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of any equity securities of the Company,
during the ten days prior to and the 90 days after the effective date of any
registration statement filed pursuant to Section 5.1 or Section 5.2 which
involves an underwritten offering, except as part of such registered
underwritten offering, whether or not such Holder participates in such offering,
and except as otherwise permitted by the managing underwriter of such registered
underwritten (if any). Each Holder of Registrable Securities agrees that the
Company may instruct its transfer agent to place stop transfer notations in its
records to enforce this Section 5.4(b).
(c) The Company agrees (x) not to sell, make any short sale
of, loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of its equity securities or securities
convertible into or exchangeable or exercisable for any of such securities
during the ten days prior to and the 90 days after the effective date of any
registration statement filed pursuant to Section 5.1 or Section 5.2 which
involves an underwritten offering, except (i) as part of such registered
offering, (ii) pursuant to registration statements on Form S-4 or S-8 or any
successor or similar forms thereto or (iii) as otherwise permitted by the
managing underwriter of such registered offering (if any), and (y) to use all
reasonable efforts to cause each holder of its equity securities or any
securities convertible into or exchangeable or exercisable for any of such
securities, in each case purchased from the Company at any time after the date
of this Agreement (other than in a public offering) to agree not to sell, make
any short sale of, loan, grant any option for the purchase of, effect any public
sale or distribution of or otherwise dispose of such securities during such
period except as part of such registered underwritten offering; provided that no
Holder of Registrable Securities included in any registered underwritten
offering shall be required to make any representations or warranties to the
Company or the underwriters other than representations and warranties regarding
such holder and such holder's intended method of distribution.
(d) No Person may participate in any registered underwritten
offering hereunder unless such Person (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the Person or a majority of the
Persons entitled to approve such arrangements and (ii) completes and executes
all agreements, questionnaires, indemnities and other documents (other than
powers of attorney) required under the terms of such underwriting arrangements.
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5.5 Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Holder of Registrable Securities whose Registrable Securities are covered by any
registration statement, its directors and officers and each other Person, if
any, who controls such Holder within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which any such
indemnified party may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse each such indemnified
party for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, liability, action or
proceeding; provided that the Company shall not be liable in any such case to
the extent that any such loss, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
specifically for use in the preparation thereof. In addition, the Company shall
indemnify any underwriter of such offering and each other Person, if any, who
controls any such underwriter within the meaning of the Securities Act in
substantially the same manner and to substantially the same extent as the
indemnity herein provided to each indemnified party. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such holder or any such director, officer, underwriter or controlling person and
shall survive the transfer of such securities by such holder.
(b) Each prospective seller of Registrable Securities
hereunder shall indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 5.5) the Company, each
director of the Company, each officer of the Company and each other person, if
any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereof,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such seller specifically for use in the preparation
of such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Any such indemnity shall remain in
full force and effect, regardless of any investigation made by or on behalf of
the Company or any such director, officer or controlling person and shall
survive the transfer of such securities by such seller. The amount payable by
any prospective seller of Registrable Securities with respect to the
indemnification set forth in this Section 5.5 (b) in connection with any
offering of securities will not exceed the amount of net proceeds received by
such prospective seller pursuant to such offering.
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(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action or proceeding involving a claim referred to in
this Section 5.5, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party, give written notice to the latter of
the commencement of such action; provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying party
of its obligations under this Section 5.5, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly, notified. to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) If the indemnification provided for in this Section 5.5 is
unavailable to an indemnified party in respect of any expense, loss, damage or
liability referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such expense, loss, claim,
damage or liability (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Holder or
underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and, of the Holder or underwriter,
as the case may be, on the other in connection with the statements or omissions
which resulted in such expense, loss, damage or liability, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Holder or underwriter, as the case may be, on the other
in connection with the distribution of the Registrable Securities shall be
deemed to be in the same proportion as the total net proceeds received by the
Company from the initial sale of the Registrable Securities by the Company to
the purchaser bear to the gain realized by the selling Holder or the
underwriting discounts and commissions received by the underwriter, as the case
may be. The relative fault of the Company on the one hand and of the Holder or
underwriter, as the case may be, on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission to state a material fact relates to information
supplied by the Company, by the Holder or by the underwriter and parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided that the foregoing contribution
agreement shall not inure to the benefit of any indemnified party if
indemnification would be unavailable to such indemnified party by reason of the
proviso contained in the first sentence of Section 5.5 (a), and in
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no event shall the obligation of any indemnifying party to contribute under this
Section 5.5 (d) exceed the amount that such indemnifying party would have been
obligated to pay by way of indemnification if the indemnification provided for
under Section 5.5 (a) or Section 5.5 (b) had been available under the
circumstances.
The Company and the holders of Registrable Securities agree
that it would not be just and equitable if contribution pursuant to this Section
5.5 (d) were determined by pro rata allocation (even if the Holders and any
underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph and Section 5.5 (c). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.5 (d), no
holder of Registrable Securities or underwriter shall be required to contribute
any amount in excess of the amount by which (i) in the case of any such holder,
the net proceeds received by such holder from the sale of Registrable Securities
or (ii) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 1 1 (f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5.6 Rule 144. If the Company shall have filed a registration statement
pursuant to Section 12 of the Exchange Act or a registration statement pursuant
to the Securities Act, the Company will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder and will take such further action as any
Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
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ARTICLE VI - DEFINITIONS
The following terms, as used in this Warrant, have the following
meanings:
"Affiliate" has the meaning set forth in the Loan Agreement.
"Appraisal Notice" has the meaning set forth in Section 3.2(a).
"Appraiser" has the meaning set forth in Section 3.2(b).
"Appraiser Determination" has the meaning set forth in Section 3.2(b).
"Business Day" means any day excluding Saturday, Sunday and any day on
which banking institutions located in New York are authorized by law or other
governmental action to be closed, unless there shall have been an offering of
Common Stock registered under the Securities Act, in which case "Business Day"
means (a) if Common Stock is listed or admitted to trading on a national
securities exchange, a day on which the principal national securities exchange
on which the Common Stock is listed or admitted to trading is open for business
or (b) if Common Stock is not so listed or admitted to trading, a day on which
the New York Stock Exchange is open for business.
"Capital Stock" means and includes any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including without limitation, shares of preferred or preference
stock, (ii) all partnership interests (whether general or limited) in any Person
which is a partnership, (iii) all membership interests or limited liability
company interests in any limited liability company and (iv) all equity ownership
interests in any Person of any other type.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock" has the meaning ascribed to such term in the first
paragraph of this Warrant.
"Company" has the meaning set forth in the first paragraph of this
Warrant.
"Company Determination" has the meaning set forth in Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor Federal statute, and the rules and regulations of the
Commission (or its successor) thereunder, all as the same shall he in effect nt
the time.
"Expiration Date" has the meaning set forth in the first paragraph of
this Warrant.
"Fair Market Value" of:
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<PAGE>
(i) a share of common stock as of any date of determination
means:
(A) if the common stock is traded on an exchange or is quoted
on the NASDAQ National Market System, then the average of the
closing or last sale prices, respectively, reported for the 5
trading days ended immediately preceding the determination
date, provided, however, that if the date of determination is
either the Closing Date, or a date of determination for
computation of Fair Market Value accordance with Section 4.1
(b)(i /), then the Fair Market Value of a share of common
stock shall be the average of the closing or last sale prices,
respectively, reported for the 20 trading days ended
immediately preceding the Closing Date or such determination
date; or
(B)ab if the common stock is not traded on an exchange or on
the NASDAQ National Market System but is traded in the
over-the-counter market, then the mean of the average of the
closing bid and asked prices reported for the 5 trading days
ended immediately preceding the determination date, provided,
however, that if the date of determination is either the
Closing Date, or a date of determination for computation of
Fair Market Value in accordance with Section 4.1 (b)(iv), then
the Fair Market Value of a share of common stock shall be the
mean of the average of the closing bid and asked prices
reported for the 20 trading days ended immediately preceding
the Closing Date or such determination date; or
(C) in all other circumstances, the fair market value per
share of the common stock as determined in good faith by the
Board of Directors of the Company, or otherwise in accordance
with Section 3.2 hereof;
(ii) the business or property or services in question as of
any date of determination, means the amount determined in good faith by the
Board of Directors of the Company or otherwise in accordance with Section 3.2
hereof; or
(iii) the Company as of any date of determination shall be the
Fair Market Value of a share of Common Stock determined as provided in clause
(i) above multiplied by the number of shares of Common Stock then outstanding.
"Holder" has the meaning set forth in the first paragraph of this
Warrant.
"Holder Determination" has the meaning set forth in Section 3.2(c).
"Initiating Holder" has the meaning set forth in Section 5.1 hereof.
"IPO" means an initial public offering of the Common Stock in a primary
offering pursuant to a Registration Statement on Form S- 1.
-20-
<PAGE>
"Issuance Date" has the meaning set forth in Section 1.5.
'Loan Agreement" has the meaning set forth in the second paragraph of
this Warrant.
'NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Objecting Holder" has the meaning set forth in Section 3.2(a).
"Other Securities" has the meaning set forth in Section 5.1.
"Person" means any natural person, corporation, limited liability
company, limited partnership, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust or other organization, whether or not a legal entity, and any government
agency or political subdivision thereof.
"Public Sale" means any sale of Capital Stock to the public pursuant to
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 (or any
successor provision then in effect) adopted under the Securities Act.
"Registrable Securities" means any Warrants or Warrant Shares until the
date (if any) on which such Warrant Shares shall have been transferred or
exchanged and new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
them shall not require registration or qualification of them under the
Securities Act or any similar state law then in force.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 5.1 through Section 5.5 hereof,
including (i) all registration, filing and NASD fees, (ii) all fees and expenses
of complying with federal and state securities or blue sky laws, (iii) all word
processing, duplicating and printing expenses, (iv) all messenger telephone and
delivery expenses, (v) the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special
audits and "cold comfort" letters required by or incident to such performance
and compliance, (vi) the fees and disbursements of any one counsel and any one
accountant retained by the holder or holders of more than 50% of the Registrable
Securities being registered, (or, in the case of any registration effected
pursuant to Section 5.1, as the Initiating Holders shall have selected to
represent all holders of the Registrable Securities being registered), (vii) the
fees and expenses of "qualified independent appraiser participating in an
offering pursuant to Section 3 of Schedule of the By laws of the NASD, (viii)
premiums and other costs of policies of insurance (if any) against liabilities
arising out of the public offering of the Registrable Securities being
registered if the Company desires such insurance (ix) fees and expenses of other
persons retrained by the Company, (x) internal expenses of the Company
(including without limitation, all salaries and expenses of officers and
employees of the Company performed legal or accounting duties), (xi) the expense
of any annual audit, (xii) the fees and expenses of listing on any securities
exchange, and (xiii) any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but not
-21-
<PAGE>
including underwriting discounts and commissions and transfer taxes, if any,
provided that, in any case where Registration Expenses are not to be borne by
the Company, such expenses shall not include (i) salaries of the Company
personnel or general overhead expenses of the Company, (ii) auditing fees, (iii)
premiums or other expenses relating to liability insurance required by
underwriters of th~ Company or (iv) other expenses for the preparation of
financial statements or other data, to the extent that any of the foregoing
either is normally prepared by the Company in the ordinary course of its
business or would have been incurred by the Company had no public offering taken
place.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor Federal statute and the rules and regulations of the Securities and
Exchange Commission (or its successors) thereunder, all as the same shall be in
effect from time to time.
'Subsidiary" of any Person means any corporation, partnership, joint
venture, association or other business entity of which more than 50% of the
total voting power of shares of stock or other interests therein entitled to
vote in the election of members of the board of directors, partnership
committee. board of managers or trustees or other managerial body thereof is at
the time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of such Person or a combination thereof. Unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company and
"Subsidiaries" means all Subsidiaries of the Company.
"Vested Shares" has the meaning set forth in the fourth paragraph of
this Warrant.
"Warrant" means the Warrant(s) to purchase Common Stock issued by the
Company in connection with the Loan Agreement.
"Warrant Securityholder" means at any time any Warrantholder or any
holder of Warrant Shares.
"Warrant Shares" means (i) any shares of Common Stock or other
securities issued upon the exercise of any Warrants and (ii) any securities
issued with respect to any of such shares or other securities referred to in
clause (i) upon the conversion thereof into other securities or by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise;
provided that any of such securities shall cease to be Warrant Shares when such
securities shall have (x) been disposed of pursuant to a Public Sale or (y)
ceased to be outstanding.
"Warrantholder" means a holder of a Warrant.
All references herein to "days" shall mean calendar days unless
otherwise specified.
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<PAGE>
ARTICLE VII - MISCELLANEOUS
7.1 Notices. Notices and other communications provided for herein must
be in writing and may be given by mail, courier, confirmed telex or facsimile
transmission and shall, unless otherwise expressly required, be deemed given
when received or, if mailed, four Business Days after being deposited in the
United States mail with postage prepaid and properly addressed. In the case of
the Company, such notices shall be addressed to it as follows:
Finantra Capital, Inc
Attention: Robert D. Press, Chairman
Westside Corporate Center
150 S. Pine Island Road. Suite 500
Plantation, FL 33324
Facsimile: (954) 577-9883
With a copy to: Maynard J. Hellman, Esq.
Westside Corporate Center
150 S. Pine Island Road, Suite 500
Plantation, FL 33324
Facsimile: (954) 577-9883
In the case of the Holder, such notices and communications shall be
addressed to its address as shown on the books maintained by the Company, unless
the Holder shall notify the Company that notices and communications should be
sent to a different address (or telex or facsimile number), in which case such
notices and communications shall be sent to the address (or telex or facsimile
number) specified by the Holder.
7.2 Waivers: Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on the Company in any case shall entitle the
Company to any other or future notice or demand in similar or other
circumstances. The rights and remedies ofthe Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and the Warrantholders holding Warrants
entitling such holders to purchase a majority of the Common Stock subject to
purchase upon exercise of all the outstanding Warrants (exclusive of Warrants
then owned by the Company or any Subsidiary or Affiliate of the Company);
provided, however, that no such amendment, modification or waiver shall, without
the written consent of the holders of all Warrants at the time outstanding, (a)
change the number of shares of Common Stock subject to purchase upon exercise of
this Warrant, the Exercise Price or provisions for payment thereof or (b) amend,
modify or waive the provisions of this Section 7.2 or Articles III, IV, Section
1.5 or the definition of Fair Market Value in Article VI and (ii) no amendment,
modification or waiver shall, without the written consent of the holders of a
majority of Registrable Shares, amend, modify or waive the provisions of Article
V.
-23-
<PAGE>
Any such amendment, modification or waiver effected pursuant to and in
accordance with the provisions of this Section shall be binding upon the holders
of all Warrants and Warrant Shares, upon each future holder thereof and upon the
Company. In the event of any such amendment, modification or waiver, the Company
shall give prompt notice thereof to all holders of Warrants and Warrant Shares
and, if appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
7.3 Governing Law. THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW).
7.4 Transfer: Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company or the Holder shall bind its successors and assigns, whether so
expressed or not. This Warrant and all of the Holder's rights hereunder, shall
be transferable and assignable by the Holder hereof in whole, or from time to
time in part, to any other Person, subject to the restrictions on
transferability contained herein and under the applicable securities laws, and
the provisions of this Warrant shall be binding upon and inure to the benefit of
the Holder hereof and its successors and assigns.
7.5 Severability. In case any one or more of the provisions contained
in this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
7.6 Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
7.7 Right to Specific Performance. The Company acknowledges and agrees
that in the event of any breach of the foregoing covenants and agreements, the
Holder would be irreparably harmed and could not be made whole only by the award
of monetary damages. Accordingly, the Company agrees that the Holder, in
addition to any other remedy to which the Holder may be entitled at law or
equity, will be entitled to seek and obtain an award of specific performance of
any of the foregoing covenants and agreements.
7.8 CONSENT TO JURISDICTION. THE COMPANY HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO HOLDER'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS WARRANT
SHALL BE LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE
-24-
<PAGE>
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
WARRANT.
7.9 WAIVER OF JURY TRIAL. THE COMPANY AND HOLDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS WARRANT. THE COMPANY AND HOLDER ACKNOWLEDGE THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS
RELIED ON THE WAIVER IN ENTERING INTO THIS WARRANT AND THAT EACH WILL CONTINUE
TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE COMPANY AND HOLDER
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers "hereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
TRAVELERS INVESTMENT CORPORATION
[Seal]
By:
- - ------------------------------ ---------------------------------
Name: Robert D. Press
Title: Vice President
Accepted as of the date and year
first above written:
BHC INTERIM FUNDING L.P.
By: BHCGP, L.L.C., its General Partner
By: BHC Investors, L.L.C., its Managing Member
By:
------------------------------------------
Name: Steven H. Brooks
Title: Manager
Address: BHC Interim Funding L.P.
444 Madison Avenue
New York, NY 10022
Telephone: 212-753-1991
Telecopier: 212-763-7730
TO: Finantra CaPital. Inc
(solely with respect to Section 3.1 and
the definitions of the terms used therein)
By:
------------------------------------------
Name: Robert D. Press
Title: Vice President
SUBSCRIPTION FORM
(To Be Executed by the Registration Holder If He Desires to Exercise the
Warrant)
-26-
<PAGE>
TO: Travelers Investment Corporation
The undersigned hereby exercises the right to purchase _____________
shares of Common Stock, no par value per share, covered by the attached Warrant
in accordance with the terms and conditions thereof, and herewith makes payment
of the Warrant Price for such shares in full.
--------------------------------
Signature
--------------------------------
Address
--------------------------------
Dated:
-----------------------
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<PAGE>
ASSIGNMENT
(To Be Executed by the Registered Holder If He Desires to Exercise the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _____________ the right to purchase shares of Common Stock of Finantra
Capital. Inc., evidenced by the within Warrant, and does hereby irrevocably
constitute and appoint [____________________] Attorney to transfer the said
Warrant on the books of the Company, with full power of substitution.
--------------------------------
Signature
--------------------------------
Address
--------------------------------
Dated:
-----------------------
In the Presence of:
- - ----------------------------
-28-
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF1933 AND MAY NOT BE SOLD OR
OFFERED FOR SALE UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION IN
REASONABLY ACCEPTABLE FORM AND SCOPE TO THE COMPANY OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH
ACTIONS ARE NOT REQUIRED UNDER ANY SUCH LAWS OR THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. THE OFFERING OF THIS WARRANT HAS NOT BEEN REVIEWED OR
APPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, OR BY ANY
STATE'S SECURITIES ADMINISTRATOR. THIS WARRANT IS ALSO SUBJECT TO CERTAIN
ADDITIONAL TRANSFER RESTRICTIONS PROVIDED FOR HERE1N.
Warrant No. ________________________ Dated: October 29 1999
WARRANT
THIS IS TO CERTIFY THAT, for value received, BHC INTERIM FUNDING L.P.
or registered assigns ("Holder") is entitled to purchase from FINANTRA CAPITAL,
INC., a Florida corporation (the "Company"), at any time prior to 5:00 p.m., New
York City time, on October 29, 2004 (the "Expiration Date"), at the Exercise
Price set forth below per share (the "Exercise Price"), such number of shares of
Common Stock, $.01 par value, of the Company (the "Common Stock") as shall equal
the Vested Percentage on such exercise date of the total number of shares of the
Company's Common Stock issued and outstanding, (the "Aggregate Shares"). The
Exercise Price is subject to adjustment as provided in Article IV of this
Warrant. This Warrant is subject to the terms and conditions hereinafter
provided, and the Holder is entitled also to exercise the other appurtenant
rights, powers and privileges hereinafter described.
This Warrant is being issued by the Company in connection with its
entering into a Loan and Security Agreement of even date herewith between
Travelers Acquisition Corporation, a Florida corporation, and the Holder (the
"Loan Agreement").
Certain terms used in this Warrant are defined in Article VI.
For purposes of this Warrant, the "Vested Percentage" shall be
determined as follows, subject to adjustment as provided in Article IV of this
Warrant:
i. Vested Percentage on the date hereof and at all times
hereafter if the Loan is repaid in full on or prior
to April 29,2000, shall mean 2.9%, and in such event
the Exercise Price shall be the Fair Market Value of
the Common Stock as of the Closing Date.
ii. If the Loan is not paid in full prior to April 29,
2000, then from and after such date the Vested
Percentage shall be 3.95%, and in such event the
Exercise Price shall be the Fair Market Value as of
the Closing Date with respect to 2.9% of the
Aggregate Shares, and the Exercise Price for the
remaining 1.05% of the Aggregate Shares shall be the
lower of the Fair Market Value as of the Closing Date
or the Fair Market Value as of April 29' 2000.
iii. If the Loan is not paid in full prior to July 29,
2000, then from and after such date the Vested
Percentage shall be
<PAGE>
5.5%, and in such event the Exercise Price shall be
the Fair Market Value as of the Closing Date with
respect to 2.9% of the Aggregate Shares; the Exercise
Price shall be the lower of the Fair Market Value as
of the Closing Date or the Fair Market Value as of
April 29, 2000, with respect to 1.05% of the
Aggregate Shares; and the Exercise Price for the
remaining 1.55% of the Aggregate Shares shall be the
lower of the Fair Market Value as of the Closing Date
or the Fair Market Value as of July 29, 2000.
ARTICLE I - EXERCISE OF WARRANT
1.1 Method of Exercise. To exercise this Warrant in whole or in part,
the Holder shall deliver on any Business Day to the Company at its principal
place of business (a) this Warrant, (b) a written notice in substantially the
form of the Subscription Notice attached hereto, of the Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased (which shall be a whole number of shares if for less than
all the shares then issuable hereunder), and (c) payment of the Exercise Price
with respect to such shares. Such payment may be made, at the option of the
Holder, either (a) by cash, certified or bank cashier's check or wire transfer
in an amount equal to the product of (i) the Exercise Price times (ii) the
number of Warrant Shares as to which this Warrant is being exercised or (b) by a
"cashless exercise" of this Warrant, in which event the Holder shall receive
from the Company the number of Warrant Shares equal to (i) the number of Warrant
Shares as to which this Warrant is being exercised minus (ii) the number of
Warrant Shares having an aggregate value (determined by reference to the Fair
Market Value of a share of Common Stock on the Business Day immediately prior to
the date of such exercise), equal to the product of (x) the Exercise Price times
(y) the number of Warrant Shares as to which this Warrant is being exercised.
The Company shall, as promptly as practicable and in any event within
seven days after receipt of such notice and payment, execute and deliver or
cause to be executed and delivered, in accordance with such notice, a
certificate or certificates representing the aggregate number of shares of
Common Stock specified in said notice together with cash in lieu of any
fractions of a share as provided in Section 1.3. The share certificate or
certificates so delivered shall be in such denominations as may be specified in
such notice, and shall be issued in the name of the Holder or such other name or
names as shall be designated in such notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and such Holder or any other Person so designated to be named
therein shall be deemed for all purposes to have become a holder of record of
shares, as of the date the aforementioned notice and payment is received by the
Company. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of such certificate or certificates, deliver to
the Holder a new Warrant evidencing the right to purchase the remaining shares
of Common Stock called for by this Warrant, which new Warrant shall, in all
other respects, be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant which shall then be
returned to the Holder. The Company shall pay all expenses, stamp, documentary
and similar taxes and other charges payable in connection with the preparation,
issuance and delivery of share certificates and new Warrants under this
Provision.
1.2 Shares to Be Fullv Paid And Nonassessable. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable and, if such Common Stock is then quoted on NASDAQ or
listed on any national securities exchange (as defined in the Exchange Act),
such Common Stock shall, to the extent permitted under the applicable rules of
such exchange or NASDAQ, be duly quoted or listed thereon, as the case may be.
1.3 No Fractional Shares Required to Be Issued. The Company shall not
be required to issue
-2-
<PAGE>
fractions of shares of Common Stock upon exercise of this Warrant. If any
fraction of a share would, but for this Section 1.3, be issuable upon final
exercise of this Warrant, in lieu of such fractional share, the Company shall
pay to the Holder in cash an amount equal to the same fraction of the Fair
Market Value of the Company per share of Common Stock Outstanding on the
Business Day immediately prior to the date of such exercise.
1.4 Legend. Each certificate for shares of Common Stock issued upon
exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of 1933
and may not be sold or offered for sale unless registered or qualified
under said Act and any applicable state securities laws or unless the
Company receives an opinion in reasonably acceptable form and scope to
the Company of counsel reasonably satisfactory to the Company that
registration, qualification or other such actions are not required
under any such laws or that an exemption from such registration is
available. The offering of this security has not been reviewed or
approved by the United States Securities and Exchange Commission or by
any state's securities administrator. This security is also subject to
certain additional transfer restrictions provided for in the Warrant
the exercise of which resulted in the original issuance of this
security, a copy of which restrictions shall be furnished to the holder
hereof by the Company upon written request and without charge."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such no legend (except a new certificate issued upon
completion of a public offering pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
selected by the Holder of such certificate (who may be an employee of such
Holder) and reasonably acceptable to the Company, the securities represented
thereby need no longer be subject to restrictions on resale under the Securities
Act.
1.5 Reservation: Authorization; Capitalization. The Company has duly
reserved. and will keep available for issuance upon exercise of the Warrant, the
total number of Warrant Shares deliverable from time to time upon exercise of
his Warrant in its entirety. The Company will not take any actions during the
term of this Warrant that would result in any adjustment of the number of shares
of Common Stock issuable upon the exercise of this Warrant if (i) the total
number of shares of Common Stock issuable after such action upon exercise of
this Warrant, (ii) all shares of Common Stock issued and outstanding and (iii)
all shares of Common Stock then issuable (y) upon the exercise of all
outstanding options and (z) upon the exercise, conversion or exchange of all
other outstanding securities which are exercisable for, convertible into or
exchangeable for Common Stock, would exceed the total number of shares of Common
Stock then authorized for issuance by the Company. The Company will not, for as
long as this Warrant has not been exercised, change the par value of its Common
Stock. The issuance of the Warrant Shares has been duly and validly authorized
and, when issued and sold in accordance with the Warrants, the Warrant Shares
will be duly and validly issued, fully paid and non-assessable. As of the date
of issuance of this Warrant (the 'Issuance Date"), the Company had outstanding
(i) 7,162,128 shares of Common Stock, (ii) 3,458,816 shares of Preferred Stock,
(iii) options and warrants to acquire an additional 5,784,375 shares of Common
Stock, and (iv) no other shares of Capital Stock or any securities exercisable
for, convertible into or exchangeable for shares of capital stock or any rights,
options or warrants to purchase any shares of Capital Stock or any securities
exercisable for, convertible into or exchangeable for shares of Capital Stock.
Neither the issuance of this Warrant nor the issuance of Warrant Shares upon
exercise of this Warrant violates or conflicts with the Company's certificate of
incorporation or bylaws or any agreement to which the Company is a party.
-3-
<PAGE>
ARTICLE II - TRANSFER. EXCHANGE AND REPLACEMENT OF WARRANTS
2.1 Ownership of Warrant. The Company shall deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until due presentment of this Warrant for registration of
transfer as provided in this Article II.
2.2 Transfer of Warrant. The Company agrees to maintain at its
principal office the books for the registration of transfers of the Warrants,
and transfer of this Warrant and all rights hereunder shall be registered, in
whole or in part, on such books, upon surrender of this Warrant at the Company,
together with (i) a written assignment of this Warrant duly executed by the
Holder or its duly authorized agent or attorney, with (if the Holder is a
natural person) signatures guaranteed by a bank or trust company or a broker or
dealer registered with the NASD, (ii) funds sufficient to pay any transfer taxes
payable upon such transfer. Upon surrender and. if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denominations specified in the instrument of
assignment (which shall be whole numbers of shares only) and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be canceled. The Company shall permit the
Warrant Securityholders to inspect the warrant registration books from time to
time during normal business hours at the Company. Holder shall pay all fees
(including reasonable attorneys fees), costs and expenses associated with any
transfer of this Warrant requested by Holder.
2.3 Division or Combination of Warrants. This Warrant may be divided or
combined with other Warrants upon presentment to the Company of this Warrant and
of any Warrant or Warrants with which this Warrant is to be combined, together
with a written notice specifying the names and denominations (which shall be
whole numbers of shares only) in which the new Warrant or Warrants are to be
issued, signed by the holders hereof and thereof or their respective duly
authorized agents or attorneys. Subject to compliance with Section 2.2 as to any
transfer or assignment which may be involved in the division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
2.4 Expenses of Delivery of Warrants. The Company shall pay all
expenses, stamp, documentary and similar taxes (other than transfer taxes) and
other charges payable in connection with the preparation, issuance and delivery
of the Warrants.
ARTICLE III - CERTAIN RIGHTS
3.1 Determination of Fair Market Value. Subject to Section 3.2 hereof,
each determination of Fair Market Value shall be made by the Company in
accordance with the definition of the term Fair Market Value set forth in
Article VI hereof. Upon each determination of Fair Market Value, the Company
shall promptly give written notice thereof to all Warrant Securityholders,
setting forth in reasonable detail (i) the transaction giving rise to the
necessity for such determination (ii) the calculation of such Fair Market Value
and the (iii) method and basis of determination thereof (the "Company
Determination"). In the event Fair Market Value is determined with reference to
subsection (i)(C) or (ii) of the definition Fair Market Value, the Company's
Board of Directors shall make such initial determination within twenty-one (21 )
days of the event giving rise to the necessity for such determination.
3.2 Contest And Appraisal Rights
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(a) If a Warrantholder disagrees with the Company
Determination (an "Objecting Holder") and by notice to the Company given within
20 days after receipt of notice of the Company Determination (an "Appraisal
Notice") elects to dispute the Company Determination, such dispute shall be
resolved as set forth in subsection (b) of this Section 3.2.
(b) For a period of 10 days after the Appraisal Notice, the
Company and the Objecting Holder shall negotiate in good faith to resolve their
differences as to the determination of Fair Market Value. In the absence of a
mutually satisfactory resolution within such 10 day period, the Company shall
within 5 days after the last day of such 10 day period engage an investment bank
or other qualified appraisal firm reasonably acceptable to the Objecting Holder
(the "Appraiser') to make an independent determination of Fair Market Value (the
"Appraiser Determination"). The Appraiser Determination shall be made within 20
days of the engagement of such Appraiser and shall be final and binding on the
Company and the Objecting Holder. The costs of conducting the appraisal shall be
borne solely by the Company.
(c) If the Company does not determine the Fair Market Value of
a share of Common Stock, or property or service, as applicable, within the
period specified in Section 3. I, then any Warrantholder shall have the right to
determine the Fair Market Value (the "Holder Determination") which determination
shall be final and binding upon the Company and the Warrantholder(s). Upon each
such determination, the Warrantholder which has determined the Fair Market Value
shall promptly give written notice ofthe Holder Determination to the Company
setting forth in reasonable detail (i) the transaction giving rise to the
necessity for such determination, (ii) the calculation of such Fair Market Value
and (iii) the method and basis of determination thereof. Upon its receipt of the
Holder Determination and related notice, the Company shall promptly send such
determination and notice to all other Warrantholders. The costs of making the
Holder Determination shall be borne solely by the Company.
3.3 Financial Statements And Other Information. Promptly upon
transmission thereof, the Company will deliver to each Warrant Securityholder
copies of any and all financial statements, proxy statements. notices and other
reports as it may send to its public stockholders and copies of all registration
statements and all reports which it files with the Commission (or any
governmental body or agency succeeding to its functions).
ARTICLE IV - ANTIDILUTION PROVISIONS
4.1 Anti Dilution.
(a) Except as hereinafter provided, in case the Company shall
at any time after the date hereof issue or sell any shares of Common Stock
(including shares held in the Company's treasury), without consideration or
(subject to the last clause of this Section 4.1(a)) for a consideration per
share less than the Exercise Price in effect immediately prior to such issuance
or sale of such shares (subject to the last clause of this Section 4.1(a)),
then, and thereafter successively upon each issuance or sale, the Exercise Price
in effect immediately prior to each such issuance or sale shall forthwith be
reduced to a price determined by multiplying the Exercise Price in effect
immediately prior to such issuance or sale by a fraction:
(i) the numerator of which shall be (i) the total number
of shares of Common Stock outstanding immediately prior to such issuance or
sale, plus (ii) the number of shares of Common Stock which the aggregate
consideration, if any, received by the Company upon such issuance or sale would
purchase at such Exercise Price, and
(ii) the denominator of which shall be the total number of
shares of Common
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Stock outstanding immediately after such issuance or sale;
provided, however, that no adjustment shall be made under this Section 4. l(a)
for Common Stock sold, during the term of this Agreement, for a purchase price
of up to $2.0 million in the aggregate, if such Common Stock is sold for a
consideration per share that is less than 25 % below the Exercise Price.
(b) For the purposes of any computation to be made in
accordance with the provisions of Section 4. l(a), the following provisions
shall be applicable:
(i) In case of the issuance or sale of shares of Common
Stock for a consideration part or all of which shall be cash, the amount of the
cash consideration therefor shall be deemed to be the amount of cash received by
the Company for such shares (or, if such shares of Common Stock are offered by
the Company for subscription, the subscription price, or, if shares of Common
Stock shall be sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price) before deducting
therefrom any commissions or other expenses paid or incurred by the Company for
any underwriting of, or otherwise in connection with, the issuance of such
shares.
(ii) In case of the issuance or sale of shares of Common
Stock for a consideration part or all of which shall be other than cash
(otherwise than as a dividend or other distribution on any shares of the Company
or on conversion, exchange or exercise of other securities of the Company or
upon acquisition of the assets or securities of another company or upon merger
or consolidation with another entity), the amount of consideration therefor
other than cash shall be the value of such consideration as of the date of the
issuance or sale of the shares of Common Stock, irrespective of accounting
treatment. The reclassification of securities other than Common Stock into
securities including Common Stock shall be deemed to involve the issuance for a
consideration other than cash of such Common Stock immediately prior to the
close of business on the date fixed for the determination of security holders
entitled to receive such Common Stock.
(iii) In case of the issuance of shares of Common Stock
upon conversion or exchange of any obligations or of any shares of stock of the
Company that shall be convertible into or exchangeable for shares of Common
Stock or upon the exercise of rights or options to subscribe for or to purchase
shares of Common Stock, the amount of consideration received by the Company for
such shares of Common Stock shall be deemed to be the total of (A) the amount of
the consideration received by the Company upon the original issuance of such
obligations, shares, rights or options, as the case may be, plus (B) the
consideration, if any, other than such obligations, shares, rights or options,
received by the Company upon such conversion, exchange, or exercise except in
adjustment of interest and dividends. The amount of the consideration received
by the Company upon the original issuance of the obligations, shares, rights or
options so converted, exchanged or exercised and the amount of the
consideration, if any, other than such obligations, shares, rights or options,
received by the Company upon such conversion, exchange or exercise shall be
determined in the same manner provided in clauses (i) and (ii) above with
respect to the consideration received by the Company in case of the issuance of
shares of Common Stock; if such obligations, shares, rights or options shall
have been issued as a dividend upon any stock of the Company, the amount of the
consideration received by the Company upon the original issuance thereof shall
be deemed to be zero.
(iv) In case of the issuance of shares of Common Stock
upon acquisition by the Company of the assets or securities of another company
or upon merger or consolidation of the Company with another entity, the
consideration therefor received by the Company for such issuance shall be deemed
to equal the cash and the Fair Market Value of securities issued by the Company.
The Fair Market Value of securities issued shall be the lesser of the Fair
Market Value of the securities on the date an agreement in
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principle with respect to such merger, consolidation or purchase is reached
among the parties or the date the agreement of consolidation, merger or purchase
is executed Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued and
to be outstanding at the close of business on the record date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
Shares of Common Stock issued otherwise than as a dividend, shall be deemed to
have been issued and to be outstanding at the close of business on the date of
issue.
(v) The number of shares of Common Stock at any time
outstanding shall not include any shares then owned or held by or for the
account of the Company, but shall include the aggregate number of shares
deliverable in respect of the options, rights and convertible and exchangeable
securities referred to in Section 4.1(c) at all times while such options, rights
or securities remain outstanding and unexercised, unconverted or unexchanged, as
the case may be, and thereafter to the extent such options, rights or securities
have been exercised, converted or exchanged.
(vi) Notwithstanding anything to the contrary contained
herein, no adjustment shall be made to the Exercise Price in case of the
issuance of shares of Common Stock (A) upon conversion, exchange or exercise of
any obligations or securities or of any shares of stock of the Company that
shall be convertible into or exchangeable or exercisable for shares of Common
Stock or (B) upon the exercise of rights or options to subscribe for or to
purchase shares of Common Stock for which an adjustment in the Exercise Price
has previously been made in accordance with Section 4. l(c).
(c) In case the Company shall at any time after the date
hereof issue options or rights to subscribe for shares of Common Stock
(including shares held in the Company's treasury), or issue any securities
convertible into or exchangeable for shares of Common Stock, for a consideration
per share less than the Exercise Price then in effect, or without consideration,
the Exercise Price in effect immediately prior to the issuance of such options
or rights or securities shall be reduced to a price determined by making a
computation in accordance with the provisions of Section 4. 1 (a), provided
that:
(i) the aggregate maximum number of shares of Common Stock
deliverable under such options or rights shall be considered to have been
delivered at the time such options or rights were issued, and for a
consideration equal to the minimum purchase price per share of Common Stock
provided for in such options or rights, plus the cash consideration (determined
in the same manner as consideration received on the issue or sale of Common
Stock) received by the Company for such options or rights;
(ii) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or exchange for any such securities shall
be considered to have been delivered at the time of issuance of such securities,
and for a consideration equal to the consideration (determined in the same
manner as consideration received on the issue or sale of Common Stock) received
by the Company for such securities, plus the consideration, if any, to be
received by the Company upon the exchange or conversion thereof; and on the
expiration of such options or rights, or the termination of such right to
convert or exchange, the Exercise Price shall forthwith be readjusted to such
Exercise Price as would have obtained had the adjustments made upon the issuance
of such options, rights or convertible or exchangeable securities been made upon
the basis of the delivery of only the number of shares of Common Stock actually
delivered upon the exercise of such options or rights or upon conversion or
exchange of such securities.
(d) In case the Company shall at any time subdivide or combine
the outstanding shares of Common Stock, the Exercise Price shall forthwith be
proportionately decreased in the case of the subdivision or proportionately
increased in the case of combination to the nearest one cent. Any such
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adjustment shall become effective at the close of business on the date that such
subdivision or combination shall become effective.
(e) In the case of any reorganization or reclassification of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination) or in the case of any consolidation of
the Company with, or merger of the Company with, another corporation, or in the
case of any sale, lease or conveyance of all, or substantially all, of the
property, assets, business and goodwill of the Company as an entity, the holder
of this Warrant shall thereafter have the right upon exercise to purchase the
kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification, consolidation, merger or sale by a
holder of the number of shares of Common Stock which the holder of this Warrant
would have received had all Warrant Shares issuable upon exercise of this
Warrant been issued immediately prior to such reorganization, reclassification,
consolidation, merger or sale, at a price equal to the Exercise Price then in
effect pertaining to this Warrant (the kind, amount and price of such stock and
other securities to be subject to adjustment as herein provided).
(f) In case the Company shall, at any time prior to the
expiration of this Warrant and prior to the exercise thereof, dissolve,
liquidate or wind up its affairs, the Warrantholder shall be entitled, upon the
exercise thereof, to receive, in lieu of the Warrant Shares of the Company which
it would have been entitled to receive, the same kind and amount of assets as
would have been issued, distributed or paid to it upon such Warrant Shares of
the Company, had it been the holder of record of shares of Common Stock
receivable upon the exercise of this Warrant on the record date for the
determination of those entitled to receive any such liquidating distribution.
After any such dissolution, liquidation or winding up which shall result in any
distribution in excess of the Exercise Price provided for by this Warrant, the
Warrantholder may at its option exercise the same without making payment of the
aggregate Exercise Price and in such case the Company shall upon the
distribution to said Warrantholder consider that the aggregate Exercise Price
has been paid in full to it and in making settlement to said Warrantholder,
shall deduct from the amount payable to such Warrantholder an amount equal to
the aggregate Exercise.
(g) In case the Company shall, at any time prior to the
expiration of this Warrant and prior to the exercise thereof make a distribution
of assets (other than cash) or securities of the Company to its stockholders
(the "Distribution") the Warrantholder shall be entitled, upon the exercise
thereof, to receive, in addition to the Warrant Shares it is entitled to
receive, the same kind and amount of assets or securities as would have been
distributed to it in the Distribution had it been the holder of record of shares
of Common Stock receivable upon exercise of this Warrant on the record date for
determination of those entitled to receive the Distribution.
(h) Irrespective of any adjustments in the number of Warrant
Shares and the Exercise Price or the number or kind of shares purchasable upon
exercise of this Warrant, this Warrant may continue to express the same price
and number and kind of shares as originally issued. Notwithstanding anything to
the contrary contained herein, if at any time or from time to time prior to
January 1, 2002 the Company issues or sells any shares of Common Stock (which
term for purposes of this Section 4. l(i) shall be deemed to include any
securities convertible into, exchangeable for or exercisable for shares of
Common Stock (including options to purchase or other rights to subscribe for
such convertible or exchangeable securities)), for a consideration per share
(determined in accordance with the provisions of this Article IV less than the
Exercise Price in effect immediately prior to such issuance, then the Exercise
Price shall be reduced to an amount equal to such consideration per share and
thereafter the Exercise Price shall remain subject to further adjustment in
accordance with this Article IV. The provisions of the Section 4. l(i) shall not
apply to issuances of Common Stock covered by Sections 4. l(d) or 4.(e).
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4.2 Officer's Certificate. Whenever the kind of Warrant Shares and the
Exercise Price shall be adjusted pursuant to the provisions hereof, the Company
shall forthwith file, at its principal executive office a statement, signed by
the Chairman of the Board, President, or one of the Vice Presidents of the
Company and by its Chief Financial Officer or one of its Treasurers or Assistant
Treasurers, stating the adjusted number of Warrant Shares and the new Exercise
Price calculated to the nearest one hundredth and setting forth in reasonable
detail the method of calculation and the facts requiring such adjustment and
upon which such calculation is based. Each adjustment shall remain in effect
until a subsequent adjustment hereunder is required. A Copy of such statement
shall be mailed to the Warrantholder.
ARTICLE V - REGISTRATION RIGHTS
5.1 Registration on Request.
(a) Subject to Section 5.1 (g), at any time or from time to
time, upon the written request of the holder or holders of a majority of the
outstanding Warrant Shares and Warrants (such majority determined, for purposes
of this Section 5.1, by calculating the number of Warrant Shares for which such
Warrants are then exercisable) (the "Initiating Holders"), requesting that the
Company effect the registration under the Securities Act of all or part of such
Initiating Holders' Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all holders of Registrable Securities (who shall have
the right to request that their Registrable Securities be included in the
registration statement requested pursuant to this Section 5.1 upon written
notice to the Company made within 20 days after receipt of the Company's written
notice. Thereupon, the Company will use its best efforts to effect the
registration under the Securities Act of the Registrable Securities which the
Company has been so requested to register for disposition in accordance with the
intended method of disposition stated in the Initiating Holder's request; all to
the extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid), of the Registrable Securities and the additional
shares of Common Stock, if any, to be so registered, provided that the holders
of Registrable Securities as a class shall be entitled to not more than two
registrations upon request pursuant to this Section 5.1.
(b) Registrations under this Section 5.1 shall be on such
appropriate registration form of the Commission (i) as shall be selected by the
Company and (ii) as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified in
the Initiating Holders' their request for such registration. The Company agrees
to include in any such registration statement all information which holders of
Registrable Securities being registered shall reasonably request.
(c) The Company will pay all Registration Expenses in
connection with the registrations requested pursuant to this Section 5.1.
(d) The Initiating Holders will be entitled to request two
registrations pursuant to this Section 5.1 for which the Company will pay all
registration expenses. A registration requested pursuant to this Section 5.1
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective and closes; provided that a
registration which does not become effective after being filed by the Company
pursuant to Section 5.1 solely by reason of the refusal to proceed by the
Initiating Holders (other than a refusal to proceed based upon the advice of
counsel relating to a matter with respect to the Company) shall be deemed to
have been effected by the Company at the request of the Initiating Holders
unless the Initiating Holders shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
effective, such registration is subject to a stop order, injunction or other
order of the Commission or other governmental agency or court suspending the
effectiveness of such
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registration statement for any reason, other than by reason of misstatements or
omissions made or not made in the registration statement in reliance upon and in
conformity with written information furnished to the Company by a Holder of
Registrable Securities specifically for use in the preparation of such
registration statement, or (iii) the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied, other than by reason of some act or
omission by any Holder of Registrable Securities participating in the offering.
Except as provided in Section 5.1(d)(i) above, whether or not the registration
becomes effective and closes, the Company will pay all registration expenses in
connection with any registration so initiated.
(e) If a registration requested pursuant to this Section 5.1
involves an underwritten offering, the underwriter or underwriters thereof shall
be selected by the holders of at least a majority (by a number of shares) of the
Registrable Securities as to which registration has been requested and shall be
reasonably acceptable to the Company.
(f) If a requested registration pursuant to this Section 5.1
involves an underwritten offering, and the managing underwriter shall advise the
Company (with a copy of any such notice to each holder of Registrable Securities
requesting registration) that, in its opinion, the number of securities
requested to be included in such registration (including securities proposed be
sold for the account of the Company) exceeds the number which can be sold in
such offering within a price range acceptable to the Initiating Holders, the
Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in such offering, (i) first, Registrable
Securities requested to be included in such registration by the holder or
holders of Registrable Securities, pro rata among such holders requesting such
registration on the basis of the number of such securities requested to be
included by such holders, (ii) second, all shares proposed to be included by the
Company in such registration and (iii) third, all shares other than Registrable
Shares (any such shares with respect to any registration, "Other Securities")
requested to be included in such registration by the holder or holders thereof.
(g) The Company may suspend any registration requested
pursuant to this Section 5.1 one time per registration for a single period of up
to 90 days upon notice to the holders of Registrable Securities whose Securities
are covered by the registration Statement requesting pursuant to this Section
5.1 that, in the good faith determination of the Board of Directors of the
Company, the registration and sale at such time of the Registrable Securities
requested to be so registered would not be in the best interests of the Company,
provided that notwithstanding such suspension, the Company shall continue to
diligently process the preparation of the documentation required for such
registration. No registration shall be requested pursuant to this Section 5.1
during the period from the date of the notice to the Warrant Securityholders
pursuant to Section 5.1 (a) of the Company's intention to register securities
until the expiration of the lockup period specified in Section 5.4(b), or, if
earlier, the date of the Company's notice pursuant to the proviso to the second
sentence of Section 5.2(a).
5.2 Incidental Registration.
(a) If the Company at any time proposes to register any of its
securities under the Securities Act (other than (x) by a registration on Form
S-4 or S-8 or any successor or similar forms) or (y) pursuant to Section 5.1 )
whether for its own account or for the account of the holder or holders of any
other Shares, it will each such time give prompt written notice to all holders
of Registrable Securities of its intention to do so and of such holders' rights
under this Section 5.2. Upon the written request of any such holder made within
20 days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
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Securities which the Company has been so requested to register, by inclusion of
such Registrable Securities in the registration statement which covers the
securities which the Company proposes to register; provided that if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason either not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any holder of Registrable Securities entitled to
request that such registration be effected as a registration under Section 5.1,
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities, for the same period as the
delay in registering such other securities. No registration effected under this
Section 5.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 5.1, nor shall any such registration
hereunder be deemed to have been effected pursuant to Section 5.1. The Company
will pay all Registration Expenses in connection with each registration of
Registrable Securities pursuant to this Section 5.2.
(b) If the Company at any time proposes to register any of its
securities under the Securities Act as contemplated by Section 5.2 and such
securities are to be distributed by or through one or more underwriters, the
Company will, if requested by any holder of Registrable Securities as provided
in this Section 5.2, use its best efforts to arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters, provided that if
the managing underwriter of such underwritten offering shall inform the Company
and holders of the Registrable Securities requesting such registration and all
other holders of any Other Securities in respect of such underwritten offering,
by letter of its belief that inclusion in such distribution of all or a
specified number of the securities proposed to be distributed by such
underwriters would interfere with the successful marketing of the securities
being distributed by such underwriters (such letter to state the basis of such
belief and the approximate number of such Registrable Securities and such Other
Securities which may be distributed without such effect), then the Company may,
upon written notice to all holders of such Registrable Securities and holders of
such Other Securities, reduce pro rata (if and to extent stated by such managing
underwriter to be necessary to eliminate such effect) first the number of Other
Securities that have been requested be included in such registration statement
and second the number of Registrable Securities that have been requested be
included in such registration statement so that the resultant aggregate number
of such Registrable Securities and Other Securities so included in such
registration, together with the number of securities to be included in the
registration for the account of the Company, shall be equal to the number of
shares stated in such managing underwriter's letter.
5.3 Registration Procedures.
(a) If and whenever the Company is required to effect the
registration of any Registrable Securities under the Securities Act as provided
in Section 5.1 or Section 5.2, the Company shall, as expeditiously as possible:
(i) prepare and (within the later of 45 days after the end
of the fiscal quarter of the Company within which requests for registration may
be given to the Company or the date the Company files its quarterly report on
Form 10-Q for such period provided that such 10-Q is filed on a timely basis
taking into account all possible extension periods, except in the case (A) where
requests for registration may be given in the Company's fourth fiscal quarter,
in which case the filing shall be within the later of 90 days after the end of
such quarter or the date the Company files its annual report on Form 1 0-K for
the fiscal
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year then ended, provided that such 1 0-K is filed on a timely basis taking into
account all possible extension periods, or (B) a registration pursuant to
Section 5.1, in which case the filing shall be made as soon as possible after
the initial request of an Initiating Holder of Registrable Securities or in any
event within sixty (60) days after such request), unless such request is made
during the Company's fourth fiscal quarter, in which case the filing shall be
within the later of 90 days after the end of such quarter or the date the
Company timely files its annual report on Form 10-K for the fiscal year then
ended, file with the Commission the requisite registration statement to effect
such registration (including such audited financial statements as may be
required by the Securities Act) and thereafter use its best efforts to cause
such registration statement to become and remain effective; provided further
that the Company may discontinue any registration of its securities which are
not Registrable Securities at any time prior to the effective date of the
registration statement relating thereto; and provided further that before filing
such registration statement or any amendments thereto, the Company will furnish
to the counsel selected by the holders of Registrable Securities which are to be
included in such registration copies of all such documents proposed to be filed'
which documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
until the earlier of (x) in the case of a registration pursuant to Section 5.1,
the expiration of 180 days after such registration statement becomes effective
(provided that if the registration statement is suspended pursuant to Section
5.1 (g), the registration statement shall be effective for 180 days after
suspension is ended), or (y) in the case of a registration pursuant to Section
5.2, the expiration of 120 days after such registration statement becomes
effective:
(iii) furnish to each seller of Registrable Securities
covered by such registration statement and each underwriter, if any, of the
securities being sold by such seller such number of conformed copies of such
registration statement and of each such amendment and of copies of the
prospectus contained in such registration statement supplement thereto (in each
case including all exhibits), such number (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such seller;
(iv) use its best efforts to reglster or qualify all
Registrable Securities and other securities covered by such registration
statement under blue sky or similar laws of such jurisdictions as any seller
thereof and any underwriter of the securities being sold by such seller shall
reasonably request, to keep such registrations or qualifications in effect for
so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such seller and
underwriter to consummate the disposition in such jurisdictions of the
securities owned by such seller except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified, to subject itself to taxation
in any such jurisdiction or to consent to general service of process in any such
jurisdiction;
(v) use its best effor ts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
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(vi) furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller and the underwriters, if any of
(A) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if
such registration is in connection with an underwritten
public offering, an opinion dated the date of the closing
under the underwriting agreement), reasonably satisfactory
in form and substance to such seller, and
(B) a "cold comfort" letter, dated the effective date of
such registration statement (and, if such registration is
in connection with an underwritten public offering, a
letter dated the date of the closing under the
underwriting agreement), signed by the independent public
accountants who have certified the Company' financial
statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the cold
comfort letter, with respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's counsel and in
cold comfort letters delivered to the underwriters in underwritten public
offerings of securities;
(vii) notify the holders of Registrable Securities and the
managing underwriter or underwriters, if any, promptly and confirm such advice
in writing promptly thereafter:
(A) when the registration statement, the prospectus or any
prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed,
and, with respect to the registration statement or any
post-effective amendment thereto, when the same has become
effective;
(B) of any request by the Commission for amendments or
supplements to the registration statement or the
prospectus or for additional information:
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration or the
initiation of any proceedings by any Person for that
purpose; and
(D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation or
threat of any proceeding for such purpose;
(viii) notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon the Company's
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and promptly prepare
and furnish to such seller and each underwriter, if any, a reasonable number of
copies of a supplement to or an amendment of such
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prospectus as may be necessary so that. as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing;
(ix) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the registration statement at the
earliest possible moment;
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar quarter after the effective date
of such registration statement, which earnings statement shall satisfy the
provisions of Section I 1 (a) of the Securities Act;
(xi) make available for inspection by a representative of
the holders of Registrable Securities participating in the offering, any
underwriter participating in any disposition pursuant to the registration and
any attorney or accountant retained by such selling holders or underwriter
(each, an "Inspector"), all financial and other records, pertinent corporate
documents and properties of the Company (the "Records"), and cause the Company'
officers, directors and employees to supply all information reasonably requested
by any such Inspector in connection with such registration; provided that the
Company shall not be required to comply with this subdivision if there is a
reasonable likelihood, in the judgment of the Company, that such delivery could
result in the loss of any attorney-client privilege related thereto; and
provided further that Records which the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors (other than to any holder of Registrable Securities
participating in the offering, and if disclosed to any such holder shall not be
disclosed by such holder) unless (x) such Records have become generally
available to the public or (y) the disclosure of such Records may be necessary
or appropriate (A) to comply with any law, rule, regulation or order applicable
to any such Inspectors or holder of Registrable Securities, (B) in response to
any subpoena or other legal process or (C) in connection with any litigation to
which such Inspectors or any holder of Registrable Securities is a party
(provided that the Company is provided with reasonable notice of such proposed
disclosure and a reasonable opportunity to seek a protective order or other
appropriate remedy with respect to such Records);
(xii) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
Registration Statement;
(xiii) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities exchange on
which any of the Common Stock is then listed and, if not so listed, to be listed
on the NASD automated quotation system and, if listed on theNASD automated
quotation system, use its best efforts to secure designation of all such
Registrable securities covered by such registration statement as a NASDAQ
"national market system security" within the meaning of Rule 1 1 Aa2- 1 of the
Securities and Exchange Commission or, failing that. to secure NASDAQ
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the NASD; and
(xiv) use its best efforts to provide a CUSIP number for
the Registrable Securities, not later than the effective date of the
registration. The Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish the Company with such
information
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regarding such seller and the distribution of such Registrable Securities as the
Company may from time to time reasonably request in writing for purposes of
preparing the relevant registration statement and amendments and supplements
thereto.
(b) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in of Section
5.3(a) (viii), such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by of Section 5.3(a) (viii). In
the event the Company shall give any such notice, the periods specified in of
Section 5.3(a) (ii) shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received such notice to the date on which
each such seller has received the copies of the supplemented or amended
prospectus contemplated by of Section 5.3(a)(viii).
(c) If any such registration or comparable statement refers to
any holder of Registrable Securities by name or otherwise as the holder of any
securities of the Company, then such holder shall have the right to require, in
the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such holder.
5.4 Underwritten Offerings.
(a) If requested by the underwriters for any underwritten
offering by holders of Registrable Securities pursuant to a registration
requested pursuant to Section 5.1, the Company will enter into an underwriting
agreement with such underwriters for such offering, such agreement to be
reasonably satisfactory in substance and form to the Company, each such holder
and the underwriters, and to contain such representations and warranties by the
Company and such other terms as are generally prevailing in agreements of this
type, including, without limitation, indemnities to the effect and to the extent
provided in Section 5.5. The holders of the Registrable Securities will
cooperate with the Company in the negotiation of the underwriting agreement.
(b) Each Holder of Registrable Securities agrees by
acquisition of its Registrable Securities not to sell, make any short sale of,
loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of any equity securities of the Company,
during the ten days prior to and the 90 days after the effective date of any
registration statement filed pursuant to Section 5.1 or Section 5.2 which
involves an underwritten offering, except as part of such registered
underwritten offering, whether or not such Holder participates in such offering,
and except as otherwise permitted by the managing underwriter of such registered
underwritten (if any). Each Holder of Registrable Securities agrees that the
Company may instruct its transfer agent to place stop transfer notations in its
records to enforce this Section 5.4(b).
(c) The Company agrees (x) not to sell, make any short sale
of, loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of its equity securities or securities
convertible into or exchangeable or exercisable for any of such securities
during the ten days prior to and the 90 days after the effective date of any
registration statement filed pursuant to Section 5.1 or Section 5.2 which
involves an underwritten offering, except (i) as part of such registered
offering, (ii) pursuant to registration statements on Form S-4 or S-8 or any
successor or similar forms thereto or (iii) as otherwise permitted by the
managing underwriter of such registered offering (if any), and (y) to use all
reasonable efforts to cause each holder of its equity securities or any
securities convertible into or exchangeable or
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exercisable for any of such securities, in each case purchased from the Company
at any time after the date of this Agreement (other than in a public offering)
to agree not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose of
such securities during such period except as part of such registered
underwritten offering; provided that no Holder of Registrable Securities
included in any registered underwritten offering shall be required to make any
representations or warranties to the Company or the underwriters other than
representations and warranties regarding such holder and such holder's intended
method of distribution.
(d) No Person may participate in any registered underwritten
offering hereunder unless such Person (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the Person or a majority of the
Persons entitled to approve such arrangements and (ii) completes and executes
all agreements, questionnaires, indemnities and other documents (other than
powers of attorney) required under the terms of such underwriting arrangements.
5.5 Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Holder of Registrable Securities whose Registrable Securities are covered by any
registration statement, its directors and officers and each other Person, if
any, who controls such Holder within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which any such
indemnified party may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse each such indemnified
party for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, liability, action or
proceeding; provided that the Company shall not be liable in any such case to
the extent that any such loss, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
specifically for use in the preparation thereof. In addition, the Company shall
indemnify any underwriter of such offering and each other Person, if any, who
controls any such underwriter within the meaning of the Securities Act in
substantially the same manner and to substantially the same extent as the
indemnity herein provided to each indemnified party. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such holder or any such director, officer, underwriter or controlling person and
shall survive the transfer of such securities by such holder.
(b) Each prospective seller of Registrable Securities
hereunder shall indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 5.5) the Company, each
director of the Company, each officer of the Company and each other person, if
any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereof,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such seller specifically for use in the
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preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Any such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Company or any such director, of ficer or controlling person
and shall survive the transfer of such securities by such seller. The amount
payable by any prospective seller of Registrable Securities with respect to the
indemnification set forth in this Section 5.5 (b) in connection with any
offering of securities will not exceed the amount of net proceeds received by
such prospective seller pursuant to such offering.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action or proceeding involving a claim referred to in
this Section 5.5, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party, give written notice to the latter of
the commencement of such action; provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying party
of its obligations under this Section 5.5, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly, notified. to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. No
indemnified party shall consent to entry of any j udgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) If the indemnification provided for in this Section 5.5 is
unavailable to an indemnified party in respect of any expense, loss, damage or
liability referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such expense, loss, claim,
damage or liability (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Holder or
underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and, of the Holder or underwriter,
as the case may be, on the other in connection with the statements or omissions
which resulted in such expense, loss, damage or liability, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Holder or underwriter, as the case may be, on the other
in connection with the distribution of the Registrable Securities shall be
deemed to be in the same proportion as the total net proceeds received by the
Company from the initial sale of the Registrable Securities by the Company to
the purchaser bear to the gain realized by the selling Holder or the
underwriting discounts and commissions received by the underwriter, as the case
may be. The relative fault of the Company on the one hand and of the Holder or
underwriter, as the case may be, on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission to state a material fact relates to information
supplied by the Company, by the Holder or by the underwriter and parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided that the foregoing contribution
agreement shall not inure to the benefit of any indemnified party if
indemnification would be
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unavailable to such indemnified party by reason of the proviso contained in the
first sentence of Section 5.5 (a), and in no event shall the obligation of any
indemnifying party to contribute under this Section 5.5 (d) exceed the amount
that such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for under Section 5.5 (a) or
Section 5.5 (b) had been available under the circumstances.
The Company and the holders of Registrable Securities agree
that it would not be just and equitable if contribution pursuant to this Section
5.5 (d) were determined by pro rata allocation (even if the Holders and any
underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph and Section 5.5 (c). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.5 (d), no
holder of Registrable Securities or underwriter shall be required to contribute
any amount in excess of the amount by which (i) in the case of any such holder,
the net proceeds received by such holder from the sale of Registrable Securities
or (ii) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 1 1 (f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5.6 Rule 144. If the Company shall have filed a registration statement
pursuant to Section 12 of the Exchange Act or a registration statement pursuant
to the Securities Act, the Company will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder and will take such further action as any
Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
ARTICLE VI - DEFINITIONS
The following terms, as used in this Warrant, have the following
meanings:
"Affiliate" has the meaning set forth in the Loan Agreement.
"Appraisal Notice" has the meaning set forth in Section 3.2(a).
"Appraiser" has the meaning set forth in Section 3.2(b).
"Appraiser Determination" has the meaning set forth in Section 3.2(b).
"Business Day" means any day excluding Saturday, Sunday and any day on
which banking
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institutions located in New York are authorized by law or other governmental
action to be closed, unless there shall have been an offering of Common Stock
registered under the Securities Act, in which case "Business Day" means (a) if
Common Stock is listed or admitted to trading on a national securities exchange,
a day on which the principal national securities exchange on which the Common
Stock is listed or admitted to trading is open for business or (b) if Common
Stock is not so listed or admitted to trading, a day on which the New York Stock
Exchange is open for business.
"Capital Stock" means and include any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including without limitation, shares of preferred or preference
stock, (ii) all partnership interests (whether general or limited) in any Person
which is a partnership, (iii) all membership interests or limited liability
company interests in any limited liability company and (iv) all equity ownership
interests in any Person of any other type.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock" has the meaning ascribed to such term in the first
paragraph of this Warrant.
"Company" has the meaning set forth in the first paragraph of this
Warrant.
"Company Determination" has the meaning set forth in Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor Federal statute, and the rules and regulations of the
Commission (or its successor) thereunder, all as the same shall he in effect nt
the time.
"Expiration Date" has the meaning set forth in the first paragraph of
this Warrant.
"Fair Market Value" of:
(i) a share of common stock as of any date of
determination means:
(A) if the common stock is traded on an exchange or is quoted
on the NASDAQ National Market System, then the average of the
closing or last sale prices, respectively, reported for the 5
trading days ended immediately preceding the determination
date, provided, however, that if the date of determination is
either the Closing Date, or a date of determination for
computation of Fair Market Value accordance with Section 4.1
(b)(i /), then the Fair Market Value of a share of common
stock shall be the average of the closing or last sale prices,
respectively, reported for the 20 trading days ended
immediately preceding the Closing Date or such determination
date; or
(B) if the common stock is not traded on an exchange or on the
NASDAQ National Market System but is traded in the
over-the-counter market, then the mean of the average of the
closing bid and asked prices reported for the 5 trading days
ended immediately
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preceding the determination date, provided, however, that if
the date of determination is either the Closing Date, or a
date of determination for computation of Fair Market Value in
accordance with Section 4.1 (b)(iv), then the Fair Market
Value of a share of common stock shall be the mean of the
average of the closing bid and asked prices reported for the
20 trading days ended immediately preceding the Closing Date
or such determination date; or
(C) in all other circumstances, the fair market value per
share of the common stock as determined in good faith by the
Board of Directors of the Company, or otherwise in accordance
with Section 3.2 hereof;
(ii) the business or property or services in question as of
any date of determination, means the amount determined in good faith by the
Board of Directors of the Company or otherwise in accordance with Section 3.2
hereof; or
(iii) the Company as of any date of determination shall be the
Fair Market Value of a share of Common Stock determined as provided in clause
(i) above multiplied by the number of shares of Common Stock then outstanding.
"Holder" has the meaning set forth in the first paragraph of this
Warrant.
"Holder Determination" has the meaning set forth in Section 3.2(c).
"Initiating Holder" has the meaning set forth in Section 5.1 hereof.
"IPO" means an initial public offering of the Common Stock in a primary
offering pursuant to a Registration Statement on Form S- 1.
"Issuance Date" has the meaning set forth in Section 1.5.
'Loan Agreement" has the meaning set forth in the second paragraph of
this Warrant.
'NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Objecting Holder" has the meaning set forth in Section 3.2(a).
"Other Securities" has the meaning set forth in Section 5.1.
"Person" means any natural person, corporation, limited liability
company, limited partnership, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust or other organization, whether or not a legal entity, and any government
agency or political subdivision thereof.
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<PAGE>
"Public Sale" means any sale of Capital Stock to the public pursuant to
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 (or any
successor provision then in effect) adopted under the Securities Act.
"Registrable Securities" means any Warrants or Warrant Shares until the
date (if any) on which such Warrant Shares shall have been transferred or
exchanged and new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
them shall not require registration or qualification of them under the
Securities Act or any similar state law then in force.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 5.1 through Section 5.5 hereof,
including (i) all registration, filing and NASD fees, (ii) all fees and expenses
of complying with federal and state securities or blue sky laws, (iii) all word
processing, duplicating and printing expenses, (iv) all messenger telephone and
delivery expenses, (v) the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special
audits and "cold comfort" letters required by or incident to such performance
and compliance, (vi) the fees and disbursements of any one counsel and any one
accountant retained by the holder or holders of more than 50% of the Registrable
Securities being registered, (or, in the case of any registration effected
pursuant to Section 5.1, as the Initiating Holders shall have selected to
represent all holders of the Registrable Securities being registered), (vii) the
fees and expenses of "qualified independent appraiser participating in an
offering pursuant to Section 3 of Schedule of the By laws of the NASD, (viii)
premiums and other costs of policies of insurance (if any) against liabilities
arising out of the public offering of the Registrable Securities being
registered if the Company desires such insurance (ix) fees and expenses of other
persons retrained by the Company, (x) internal expenses of the Company
(including without limitation, all salaries and expenses of of ficers and
employees of the Company performed legal or accounting duties), (xi) the expense
of any annual audit, (xii) the fees and expenses of listing on any securities
exchange, and (xiii) any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but not including underwriting discounts
and commissions and transfer taxes, if any, provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include (i) salaries of the Company personnel or general overhead expenses
of the Company, (ii) auditing fees, (iii) premiums or other expenses relating to
liability insurance required by underwriters of th~ Company or (iv) other
expenses for the preparation of financial statements or other data, to the
extent that any of the foregoing either is normally prepared by the Company in
the ordinary course of its business or would have been incurred by the Company
had no public offering taken place.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor Federal statute and the rules and regulations of the Securities and
Exchange Commission (or its successors) thereunder, all as the same shall be in
effect from time to time.
'Subsidiary" of any Person means any corporation, partnership, joint
venture, association or other business entity of which more than 50% of the
total voting power of shares of stock or other interests therein entitled to
vote in the election of members of the board of directors, partnership
committee. board of managers or trustees or other managerial body thereof is at
the time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of such
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Person or a combination thereof. Unless otherwise specified, "Subsidiary" means
a Subsidiary of the Company and "Subsidiaries" means all Subsidiaries of the
Company.
"Vested Shares" has the meaning set forth in the fourth paragraph of
this Warrant.
"Warrant" means the Warrant(s) to purchase Common Stock issued by the
Company in connection with the Loan Agreement.
"Warrant Securityholder" means at any time any Warrantholder or any
holder of Warrant Shares.
"Warrant Shares" means (i) any shares of Common Stock or other
securities issued upon the exercise of any Warrants and (ii) any securities
issued with respect to any of such shares or other securities referred to in
clause (i) upon the conversion thereof into other securities or by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise;
provided that any of such securities shall cease to be Warrant Shares when such
securities shall have (x) been disposed of pursuant to a Public Sale or (y)
ceased to be outstanding.
"Warrantholder" means a holder of a Warrant.
All references herein to "days" shall mean calendar days unless
otherwise specified.
ARTICLE VII - MISCELLANEOUS
7.1 Notices. Notices and other communications provided for herein must
be in writing and may be given by mail, courier, confirmed telex or facsimile
transmission and shall, unless otherwise expressly required, be deemed given
when received or, if mailed, four Business Days after being deposited in the
United States mail with postage prepaid and properly addressed. In the case of
the Company, such notices shall be addressed to it as follows:
Finantra Capital, Inc
Attention: Robert D. Press, Chairman
Westside Corporate Center
150 S. Pine Island Road. Suite 500
Plantation, FL 33324
Facsimile: (954) 577-9883
With a copy to: Maynard J. Hellman, Esq.
Westside Corporate Center
150 S. Pine Island Road, Suite 500
Plantation, FL 33324
Facsimile: (954) 577-9883
In the case of the Holder, such notices and communications shall be
addressed to its address as shown on the books maintained by the Company, unless
the Holder shall notify the Company that
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notices and communications should be sent to a different address (or telex or
facsimile number), in which case such notices and communications shall be sent
to the address (or telex or facsimile number) specified by the Holder.
7.2 Waivers: Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on the Company in any case shall entitle the
Company to any other or future notice or demand in similar or other
circumstances. The rights and remedies ofthe Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and the Warrantholders holding Warrants
entitling such holders to purchase a majority of the Common Stock subject to
purchase upon exercise of all the outstanding Warrants (exclusive of Warrants
then owned by the Company or any Subsidiary or Affiliate of the Company);
provided, however, that no such amendment, modification or waiver shall, without
the written consent of the holders of all Warrants at the time outstanding, (a)
change the number of shares of Common Stock subject to purchase upon exercise of
this Warrant, the Exercise Price or provisions for payment thereof or (b) amend,
modify or waive the provisions of this Section 7.2 or Articles III, IV, Section
1.5 or the definition of Fair Market Value in Article VI and (ii) no amendment,
modification or waiver shall, without the written consent of the holders of a
majority of Registrable Shares, amend, modify or waive the provisions of Article
V.
Any such amendment, modification or waiver effected pursuant to and in
accordance with the provisions of this Section shall be binding upon the holders
of all Warrants and Warrant Shares, upon each future holder thereof and upon the
Company. In the event of any such amendment, modification or waiver, the Company
shall give prompt notice thereof to all holders of Warrants and Warrant Shares
and, if appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
7.3 Governing Law. THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW).
7.4 Transfer: Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company or the Holder shall bind its successors and assigns, whether so
expressed or not. This Warrant and all of the Holder's rights hereunder, shall
be transferable and assignable by the Holder hereof in whole, or from time to
time in part, to any other Person, subject to the restrictions on
transferability contained herein and under the applicable securities laws, and
the provisions of this Warrant shall be binding upon and inure to the benefit of
the Holder hereof and its successors and assigns.
7.5 Severability. In case any one or more of the provisions contained
in this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of
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the invalid, illegal or unenforceable provisions.
7.6 Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
7.7 Right to Specific Performance. The Company acknowledges and agrees
that in the event of any breach of the foregoing covenants and agreements, the
Holder would be irreparably harmed and could not be made whole only by the award
of monetary damages. Accordingly, the Company agrees that the Holder, in
addition to any other remedy to which the Holder may be entitled at law or
equity, will be entitled to seek and obtain an award of specific performance of
any of the foregoing covenants and agreements.
7.8 CONSENT TO JURISDICTION. THE COMPANY HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO HOLDER'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS WARRANT
SHALL BE LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS WARRANT.
7.9 WAIVER OF JURY TRIAL. THE COMPANY AND HOLDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS WARRANT. THE COMPANY AND HOLDER ACKNOWLEDGE THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS
RELIED ON THE WAIVER IN ENTERING INTO THIS WARRANT AND THAT EACH WILL CONTINUE
TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE COMPANY AND HOLDER
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers "hereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
FINANTRA CAPITAL, INC.
[Seal]
By:
- - -------------------------------- ----------------------------------
Name: Robert D. Press
Title: Vice President
Accepted as of the date and year
first above written:
BHC INTERIM FUNDING L.P.
By: BHCGP, L.L.C., its General Partner
By: BHC Investors, L.L.C., its Managing Member
By:
---------------------------------------
Name: Steven H. Brooks
Title: Manager
Address: BHC Interim Funding L.P.
444 Madison Avenue
New York, NY 10022
Telephone: 212-753-1991
Telecopier: 212-763-7730
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SUBSCRIPTION FORM
(To Be Executed by the Registered Holder If He Desires to Exercise the
Warrant)
TO: Finantra CaPital. Inc
The undersigned hereby exercises the right to purchase shares of Common
Stock, no par value per share, covered by the attached Warrant in accordance
with the terms and conditions thereof, and herewith makes payment of the Warrant
Price for such shares in full.
--------------------------------
Signature
--------------------------------
Address
--------------------------------
Dated:
----------------------------
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ASSIGNMENT
(To Be Executed by the Registered Holder If He Desires to Exercise the
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _____________ the right to purchase shares of Common Stock of Finantra
Capital. Inc., evidenced by the within Warrant, and does hereby irrevocably
constitute and appoint [____________] Attorney to transfer the said Warrant on
the books of the Company, with full power of substitution.
--------------------------------
Signature
--------------------------------
Address
--------------------------------
Dated:
----------------------------
In the Presence of:
- - ----------------------------------
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