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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
October 7, 1997
SafeGuard Health Enterprises, Inc.
----------------------------------------------------
(Exact Name of registrant as specified in its charter)
Delaware 0-12050 52-1528581
- ---------------- ------------- ---------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
505 North Euclid Street, P. O. Box 3210, Anaheim, California 92803-3210
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 778-1005
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Item 5. Other Events
On October 7, 1997, SafeGuard Health Enterprises, Inc., a Delaware
corporation ("Enterprises" or the "Company"), announced that it had consummated
a $32,500,000 private placement of eight (8) year Senior Notes. SBC Warburg
Dillon Read Inc. acted as agent in connection with the placement. The Company
will use the proceeds from the placement to repay all of its long-term
indebtedness and for general corporate purposes. In addition, the Company also
terminated its existing Credit Agreement with its existing lender.
The terms of the agreement pursuant to which the Notes were issued contain,
among other provisions, the interest rate of the notes, the final maturity date,
and certain financial covenants, including net worth and debt covenants.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Exhibit No. Exhibit Description:
99.1 Form of Note Purchase Agreement dated as of September 30,
1997, and Form of Promissory Note, without exhibits.
99.2 Press Release dated October 7, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
SAFEGUARD HEALTH ENTERPRISES, INC.
By: JOHN E. COX
-------------------------------
JOHN E. COX
President and Chief Operating Officer
DATE: October 17, 1997 By: RONALD I. BRENDZEL
-------------------------------
RONALD I. BRENDZEL
Senior Vice President and Secretary
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================================================================================
SAFEGUARD HEALTH ENTERPRISES, INC.
$32,500,000 7.91% SENIOR NOTES DUE SEPTEMBER 30, 2005
PPN: 786444 A* 0
________________________________________________________________________________
NOTE PURCHASE AGREEMENT
________________________________________________________________________________
Dated as of September 30 , 1997
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Page
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1. AUTHORIZATION; RANKING.............................................................. 1
1A. Authorization of Issue of the Notes..................................... 1
1B. Ranking................................................................. 1
2. PURCHASE AND SALE OF THE NOTES; CLOSING............................................. 1
2A. Purchase and Sale of the Notes.......................................... 1
2B. Closing................................................................. 1
3. CONDITIONS OF CLOSING............................................................... 2
3A. Opinion of Company Counsel.............................................. 2
3B. Opinion of Purchasers' Special Counsel.................................. 2
3C. Representations and Warranties; Compliance and Certificates............. 2
3D. Performance; No Default................................................. 2
3E. Compliance Certificates................................................. 2
3F. Purchase Permitted by Applicable Laws................................... 2
3G. Private Placement Numbers............................................... 3
3H. Sale of all Notes....................................................... 3
3I. Documents and Proceedings............................................... 3
3J. Consent of Other Persons................................................ 3
3K. Payment of Special Counsel Fees......................................... 3
3L. Changes in Corporate Structure.......................................... 3
4. PREPAYMENT, REPAYMENT AND REDEMPTION................................................. 3
4A. Optional Prepayment of Notes at Any Time................................ 3
4B. Scheduled Repayment of Notes............................................ 3
4C. Payments Pro Rata; Application of Payments.............................. 4
4D. Maturity; Surrender, Etc................................................ 4
4E. Retirement of Notes..................................................... 4
4F. Make-Whole Amount....................................................... 4
4G. Make Whole Amount....................................................... 5
5. AFFIRMATIVE COVENANTS................................................................ 5
5A. Financial and Other Reporting by the Company............................ 5
5B. Information Required by Rule 144A....................................... 7
5C. Inspection of Property.................................................. 8
5D. Corporate Existence, Etc................................................ 8
5E. Payment of Taxes and Claims............................................. 8
5F. Compliance with Laws, Etc............................................... 8
5G. Maintenance of Properties and Leases.................................... 9
5H. Insurance............................................................... 9
5I. Scope of Business....................................................... 9
5J. Use of Proceeds......................................................... 9
5K. Environmental Compliance................................................ 9
5L. Maintenance of Books and Records........................................ 10
6. NEGATIVE COVENANTS................................................................... 10
6A. Financial Covenants..................................................... 10
6A(1). Consolidated Net Worth.................................................. 10
6A(2). Interest Expense Coverage............................................... 10
</TABLE>
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<TABLE>
<C> <S> <C>
6A(3). Limitation on Consolidated Total Debt................................... 10
6A(4). Limitation on Priority Debt............................................. 11
6B. Restricted Payments and Restricted Investment........................... 11
6C. Liens and Other Restrictions............................................ 11
6C(1). Liens................................................................... 11
6C(2). Sale of Stock........................................................... 13
6C(3). Merger and Sale of Assets............................................... 13
6C(4). Subsidiary Dividend and Other Restrictions.............................. 15
6C(5). Transactions with Affiliates............................................ 15
6D. Compliance with ERISA................................................... 15
7. EVENTS OF DEFAULT.................................................................... 16
7A. Acceleration............................................................ 16
7B. Rescission of Acceleration.............................................. 18
7C. Notice of Acceleration or Rescission.................................... 18
7D. Other Remedies, No Waivers or Election of Remedies...................... 18
8. REPRESENTATIONS AND WARRANTIES....................................................... 19
8A. Organization, Etc....................................................... 19
8B. Stock Ownership......................................................... 19
8C. Financial Statements; Projections....................................... 19
8D. Actions Pending......................................................... 20
8E. Title to Properties..................................................... 20
8F. Tax Returns and Payments................................................ 20
8G. Conflicting Agreements and Other Matters................................ 21
8H. Offering of Notes....................................................... 21
8I. Regulation G, Etc....................................................... 21
8J. ERISA................................................................... 21
8K. Governmental and Other Consents......................................... 22
8L. Environmental Matters................................................... 22
8M. Labor Relations......................................................... 23
8N. Financial Condition..................................................... 23
8O. Disclosure.............................................................. 23
8P. Status Under Certain Federal Statutes................................... 23
8Q. Existing Indebtedness; Future Liens..................................... 23
8R. Compliance with Laws, Etc............................................... 23
9. REPRESENTATIONS OF THE PURCHASERS.................................................... 24
10. DEFINITIONS.......................................................................... 25
11. MISCELLANEOUS........................................................................ 33
11A. Payments............................................................ 33
11A(1). Payments in Respect of Notes........................................ 33
11A(2). No Deduction or Set-off............................................. 33
11A(3). Payments Due on Non-Business Days................................... 34
11B. Expenses............................................................ 34
11C. Consent to Amendments............................................... 34
11D. Persons Deemed Owners; Participations............................... 34
11E. Survival of Representations and Warranties; Entire Agreement........ 35
11F. Successors and Assigns.............................................. 35
11G. Confidential Information............................................ 35
11H. Notices............................................................. 36
11I. Descriptive Headings................................................ 36
11J. Solicitation of Holders............................................. 36
</TABLE>
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<TABLE>
<C> <S> <C>
11K. Reproduction of Documents........................................... 36
11L. Governing Law....................................................... 36
11M. Consent to Jurisdiction and Service and Waiver of Trial by Jury..... 37
11N. Counterparts........................................................ 37
11O. Registration, Transfer, Exchange and Replacement of Notes........... 37
11O(1). Registration........................................................ 37
11O(2). Transfer and Exchange............................................... 37
11O(3). Replacement......................................................... 38
11P. Compliance by Subsidiaries.......................................... 38
11Q. Severability........................................................ 38
11R. Termination......................................................... 38
11S. Construction........................................................ 38
11T. Substitution of Purchaser........................................... 38
</TABLE>
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Signature Page............................................... 39
SCHEDULES AND EXHIBITS
EXHIBIT A - Purchasers
EXHIBIT B - Form of Note
EXHIBIT C - Form of Opinion of Counsel to the Company
EXHIBIT D - Form of Opinion of Special Counsel
SCHEDULE 2B - Wiring Instructions
SCHEDULE 5J - Use of Proceeds
SCHEDULE 6B - Existing Investments
SCHEDULE 6C(1) - Existing Liens
SCHEDULE 6C(5) - Transactions with Affiliates
SCHEDULE 8A - Organization; Foreign Qualifications; Etc.
SCHEDULE 8B - Ownership of Stock
SCHEDULE 8C - Financial Statements
SCHEDULE 8K - Required Consents
SCHEDULE 8M - Environmental Matters
SCHEDULE 8Q - Existing Debt
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SAFEGUARD HEALTH ENTERPRISES, INC.
505 North Euclid Street
Anaheim, California 92801
As of September 30, 1997
To: The Purchasers Listed
on EXHIBIT A
Gentlemen:
The undersigned, SafeGuard Health Enterprises, Inc., a Delaware
corporation, (together with any surviving or acquiring entity in any merger or
consolidation permitted by PARAGRAPH 6C(3), the "COMPANY") agrees with you as
follows:
1. AUTHORIZATION; RANKING.
11. AUTHORIZATION OF ISSUE OF THE NOTES. The Company will authorize the issue
and sale of its 7.91% Senior Notes in the aggregate principal amount of
$32,500,000, to be dated the date of issue, to mature September 30, 2005, to
bear interest on the unpaid principal balance from the date of issue until the
principal shall have become due and payable at the rate of 7.91% per annum
(computed on the basis of a 360-day year of twelve 30-day months), payable semi-
annually in arrears, and to bear interest on overdue principal, overdue Make
Whole Amount and, to the extent permitted by law, overdue interest at the rate
of 9.91% per annum payable on demand, which notes shall be in the form of
EXHIBIT B (together with all notes issued in substitution, replacement or
exchange therefor in accordance with the terms of this Agreement, (the "NOTES").
Certain capitalized terms used in this Agreement are defined in PARAGRAPH 4F and
in PARAGRAPH 10; references to a "SCHEDULE" or an "EXHIBIT" are, unless
otherwise specified, to a SCHEDULE or an EXHIBIT attached to this Agreement.
12. RANKING. The Notes shall rank pari passu with each other, shall
constitute the direct senior obligations of the Company and shall rank not less
than pari passu in priority of payment with all other outstanding Debt of the
Company, present or future, except for Debt which is preferred as a result of
being secured (but only to the extent such security is not prohibited by
PARAGRAPH 6C(1) and then only to the extent of such security).
2. PURCHASE AND SALE OF THE NOTES; CLOSING.
21. PURCHASE AND SALE OF THE NOTES. Subject to the terms and conditions of
this Agreement, the Company shall sell to each of you (individually a
"PURCHASER" and collectively, the "PURCHASERS"), and each Purchaser shall
purchase from the Company, Notes of the principal amount specified below such
Purchaser's name in EXHIBIT A, at a price equal to 100% of such principal
amount, registered in such Purchaser's name or that of the Purchasers' nominee
or nominees as specified in EXHIBIT A. Notwithstanding the foregoing, each
Purchaser's obligations under this Agreement are several and not joint
obligations and no Purchaser shall have any obligation or liability for the
performance or non-performance by any other Purchaser of such other Purchaser's
obligations under this Agreement.
22. CLOSING. The purchase and sale of the Notes shall take place at the
offices of Sullivan & Worcester LLP, One Post Office Square, Boston,
Massachusetts 02109, at a closing (the "CLOSING") to be held on September 30,
1997 or on such other Business Day as the Purchasers and the Company may agree
(the "CLOSING DATE"). At the Closing, the Company will deliver to each Purchaser
the Notes to be purchased by it, against payment of the purchase price therefor
by transfer of immediately available funds to the Company in accordance with the
wiring instructions
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set forth on SCHEDULE 2B. If at the Closing, the Company fails to tender any
Notes to any Purchaser as provided in this PARAGRAPH 2B, or if any of the
conditions specified in PARAGRAPH 3 shall not have been fulfilled to a
Purchaser's satisfaction or waived by such Purchaser, such Purchaser may, at its
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights such Purchaser may have by reason of such failure or
non-fulfillment for reimbursement of its expenses or actual damages.
3. CONDITIONS OF CLOSING. Each Purchaser's obligation to purchase and pay for
its Notes is subject to the fulfillment to its satisfaction or its written
waiver, on or before the Closing Date, of the following conditions:
31. OPINION OF COMPANY COUNSEL. The Purchasers shall have received an
opinion, dated the Closing Date and addressed to them, from Gibson, Dunn &
Crutcher LLP, counsel to the Company, covering the matters set forth in EXHIBIT
C and such other matters as any Purchaser or Special Counsel may reasonably
request. To the extent that the opinion referred to in this PARAGRAPH 3A is
rendered in reliance upon the opinion of any other counsel, the Purchasers shall
have received a copy of the opinion of such other counsel, dated the Closing
Date and addressed to them, or a letter from such other counsel, dated the
Closing Date and addressed to them, authorizing them to rely on such other
counsel's opinion. The opinions of counsel to the Company and any such other
counsel shall be in form and substance reasonably satisfactory to the Purchasers
and Special Counsel.
32. OPINION OF PURCHASERS' SPECIAL COUNSEL. The Purchasers shall have
received from Special Counsel an opinion covering the matters set forth in
EXHIBIT D and such other matters incident to the transactions contemplated by
this Agreement as they may reasonably request.
33. REPRESENTATIONS AND WARRANTIES; COMPLIANCE AND CERTIFICATES. The
representations and warranties contained in PARAGRAPH 8 and in any other
Transaction Document shall be true and correct when made on and as of the
Closing Date after giving effect to the issue and sale of the Notes (and
application of the proceeds as contemplated by SCHEDULE 5J).
34. PERFORMANCE; NO DEFAULT. The Company shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to or at the Closing, and after giving
effect to the issue and sale of the Notes (and the application of the proceeds
thereof as contemplated by SCHEDULE 5J), no Default or Event of Default shall
have occurred and be continuing. The Company shall not have entered into any
transaction since the date of the most recent of the Financial Statements that
would have been prohibited by PARAGRAPHS 6B or 6C(5) had this Agreement been in
effect since such date.
35. COMPLIANCE CERTIFICATES.
(a) The Company shall have delivered to the Purchasers an Officers'
Certificate, dated the date of the Closing, certifying that the conditions
specified in PARAGRAPHS 3C and 3D have been fulfilled.
(b) The Company shall have delivered to the Purchasers a certificate
from its Secretary certifying as to its organizational documentation and the
resolutions and other proceedings relating to the authorization, execution and
delivery of the Transaction Documents.
36. PURCHASE PERMITTED BY APPLICABLE LAWS. On the date of the Closing, each
Purchaser's purchase of Notes shall (i) be permitted by the laws and regulations
of each jurisdiction to which it is subject, without recourse to provisions
(such as Section 1405(a)(8) of the New York Insurance Law) permitting limited
investments by insurance companies without restriction as to the character of
the particular investment, (ii) not violate any applicable law or regulation
(including, without limitation, Section 5 of the Securities Act or Regulation G,
T or X of the Board of Governors of the Federal Reserve System) and (iii) not
subject any Purchaser to any tax, penalty or
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liability under or pursuant to any applicable law or regulation, which law or
regulation was not in effect on the date hereof. If requested by a Purchaser,
such Purchaser shall have received an Officers' Certificate certifying as to
such matters of fact relating to the Company as a Purchaser may reasonably
specify to enable it to determine whether such purchase is so permitted.
37. PRIVATE PLACEMENT NUMBERS. A Private Placement Number shall have been
assigned to the Notes by Standard & Poor's CUSIP Service Bureau.
38. SALE OF ALL NOTES. The Company shall have sold to each other Purchaser,
and each other Purchaser shall have purchased, the Notes to be purchased by it
as set forth in EXHIBIT A.
39. DOCUMENTS AND PROCEEDINGS. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated by this Agreement
and all documents and transactions incident thereto shall be satisfactory in
substance and form to the Purchasers, and the Purchasers shall have received all
such counterpart originals or certified or other copies of such documents as
they may reasonably request.
310. CONSENT OF OTHER PERSONS. The Company shall have received the written
consent of all Persons listed on SCHEDULE 8K in form and substance satisfactory
to the Purchasers.
311. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions of
PARAGRAPH 11B, the Company shall have paid the reasonable fees, charges and
disbursements of Special Counsel (which may include a reasonable reserve for
anticipated fees and expenses) to the extent reflected in a statement of Special
Counsel rendered to the Company at or before the Closing.
312. CHANGES IN CORPORATE STRUCTURE. The Company shall not have changed its
jurisdiction of incorporation or shall have been a party to any merger or
consolidation or shall have succeeded to all or any substantial part of the
liabilities of any other Person, at any time after the date of the most recent
of the Financial Statements.
4. PREPAYMENT, REPAYMENT AND REDEMPTION. The Notes may be prepaid only under
the circumstances set forth in PARAGRAPH 4A and shall be repaid in accordance
with PARAGRAPH 4B and upon any acceleration of final maturity as provided in
PARAGRAPH 7A.
41. OPTIONAL PREPAYMENT OF NOTES AT ANY TIME. The Company may prepay the
Notes in full at any time or in part from time to time (provided that any
partial prepayment shall be of at least $1,000,000 in aggregate principal amount
or a larger principal amount which is an integral multiple of $500,000), at 100%
of the principal amount so prepaid, plus interest accrued thereon to the
Settlement Date and the Make Whole Amount. The Company shall give each Holder
irrevocable written notice of any prepayment to be made pursuant to this
PARAGRAPH 4A at least 30 days, and not more than 60 days, prior to the
Settlement Date, (i) specifying the Settlement Date and the Called Principal of
the Notes held by each such Holder, (ii) stating that such prepayment is to be
made pursuant to this PARAGRAPH 4A, (iii) stating the amount of interest to be
paid on the Settlement Date with respect to such Called Principal and (iv)
providing an estimate of the Make Whole Amount payable on the Called Principal
of such Holder's Notes (calculated as if the date of such notice were the date
of prepayment) and setting forth the details of such computation. Not later than
the close of business on the second Business Day prior to the Settlement Date,
the Company shall deliver to the Holder of each Note being prepaid an Officers'
Certificate setting forth in detail the calculations used in determining whether
a Make Whole Amount is payable on such prepayment and the amount of such Make
Whole Amount.
42. SCHEDULED REPAYMENT OF NOTES. The Company shall on each September 30th
beginning September 30, 2001, repay $6,500,000 of the aggregate unpaid principal
amount of the Notes at 100% of the principal amount so repaid and shall on
September 30, 2005 repay in full all remaining principal, interest and Make
Whole Amount and any other amounts then outstanding under the Notes or this
Agreement.
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43. PAYMENTS PRO RATA; APPLICATION OF PAYMENTS. Upon any partial prepayment
of the Notes pursuant to PARAGRAPH 4A and any scheduled repayment of the Notes
pursuant to PARAGRAPH 4B, the principal amount so prepaid or repaid plus the
interest accrued thereon and the Make Whole Amount shall be allocated among the
Holders in proportion to the respective outstanding principal amounts of the
Notes then held by them. All partial prepayments of the Notes shall be applied
to the obligations of the Company to make the scheduled repayments on the Notes
required by PARAGRAPH 4B, by reducing each subsequently required repayment of
principal of the Notes in the same proportion as the aggregate unpaid principal
amount of the Notes is reduced as a result of such prepayment.
44. MATURITY; SURRENDER, ETC. In the case of each prepayment of Notes
pursuant PARAGRAPH 4A, the principal amount of each Note to be prepaid shall
mature and become due and payable on the Settlement Date, together with interest
on such principal amount accrued to such date and the applicable Make-Whole
Amount. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and Make-
Whole Amount as aforesaid, interest on such principal amount shall cease to
accrue. Any Note paid or prepaid in full shall be surrendered to the Company and
cancelled and shall not be reissued, and no Note shall be issued in lieu of any
prepaid or repaid principal amount of any Note.
45. RETIREMENT OF NOTES. The Company shall not, and shall not permit any of
its Affiliates to, prepay or otherwise retire any Note in whole or in part,
prior to its stated maturity (other than by prepayment pursuant to PARAGRAPH 4A,
scheduled repayment pursuant to PARAGRAPH 4B or upon acceleration of final
maturity pursuant to PARAGRAPH 7A), or purchase or otherwise acquire, directly
or indirectly, any Note held by any Holder unless the Company or such Affiliate
shall have offered to prepay or otherwise retire, purchase, redeem or otherwise
acquire, as the case may be, the same proportion of the aggregate outstanding
principal amount of Notes held by each other Holder at the time outstanding upon
the same terms and conditions. Any such offer shall provide each Holder with
sufficient information to enable it to make an informed decision with respect to
such offer, and shall remain open for at least 5 Business Days. If the Required
Holders accept such offer, the Company shall promptly notify the remaining
Holders of such fact and the expiration date for the acceptance by Holders of
such offer shall be extended by the number of days necessary to give each such
Holder at least 5 Business Days from its receipt of such notice to accept such
offer. No Notes so prepaid or otherwise retired or purchased or otherwise
acquired by the Company or any of its Affiliates shall thereafter be reissued or
deemed to be outstanding for any purpose under this Agreement.
46. MAKE-WHOLE AMOUNT. The term "MAKE-WHOLE AMOUNT" means, with respect to
any Note, an amount equal to the excess, if any, of the Discounted Value of the
Remaining Scheduled Payments with respect to the Called Principal of such Note
over the amount of such Called Principal, provided that the Make-Whole Amount
--------
may in no event be less than zero. For the purposes of this PARAGRAPH 4 and
determining the Make-Whole Amount, the following terms have the following
meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to PARAGRAPH 4A or has become or
is declared to be immediately due and payable pursuant to PARAGRAPH 7A, as
the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
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"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, fifty (50) basis points over the yield to maturity implied by (i)
the yields reported, as of 10:00 A.M. (New York City time) on the second
Business Day preceding the Settlement Date with respect to such Called
Principal, on the display designated as "Page USD" on the Bloomberg
Financial Markets (or such other display as may replace Page USD on
Bloomberg Financial Markets) for actively traded U.S. Treasury securities
having a maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, or (ii) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported, for
the latest day for which such yields have been so reported as of the second
Business Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the actively traded
U.S. Treasury security with the duration closest to and greater than the
Remaining Average Life and (2) the actively traded U.S. Treasury security
with the duration closest to and less than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is in
--------
connection with a prepayment pursuant to PARAGRAPH 4A and is not a date on
which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to PARAGRAPH 7A.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
PARAGRAPH 4A or has become or is declared to be immediately due and payable
pursuant to PARAGRAPH 7A, as the context requires.
47. MAKE WHOLE AMOUNT. The Company acknowledges that the Make Whole Amount
due at any optional or required prepayment of Notes (including any prepayment
required pursuant to PARAGRAPH 7A) has been negotiated with the Purchasers to
provide a bargained for rate of return on the Purchasers' investment in the
Notes and is not a penalty.
5. AFFIRMATIVE COVENANTS. The Company covenants that for so long as any Note is
outstanding:
51. FINANCIAL AND OTHER REPORTING BY THE COMPANY. The Company will deliver
to each Holder:
(1) as soon as practicable, and in any event not more than 60 days after
the end of each quarter (except the fourth quarter of any fiscal year), the
unaudited
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consolidated balance sheet of the Consolidated Group as at the end of such
quarterly period and the related unaudited consolidated statements of
operations, cash flows and stockholders' equity of the Consolidated Group
for such period and for the fiscal year to date, setting forth, in each
case in comparative form, figures for the corresponding period(s) in the
preceding fiscal year, all in reasonable detail and in accordance with
GAAP, and certified by the chief financial officer of the Company as fairly
presenting the financial condition of the Consolidated Group as at the
dates indicated and the results of its operations and cash flows, in each
case for the periods indicated, in conformity with GAAP (except as
disclosed in such certificate) with any changes in accounting policies
discussed in reasonable detail, subject to changes resulting from normal
year-end adjustments;
(2) as soon as practicable, and in any event not more than 120 days
after the end of each fiscal year of the Company, the consolidated balance
sheet of the Consolidated Group as of the end of such year and the related
consolidated statements of operations, cash flows and stockholders' equity
of the Consolidated Group for such year, and setting forth in each case in
comparative form, corresponding figures for the preceding fiscal year, all
in reasonable detail and in accordance with GAAP, and accompanied (A) by an
opinion thereon of the Approved Auditor, which opinion shall be without
limitation as to the scope of the audit and shall state that such financial
statements present fairly in all material respects the consolidated
financial condition of the Consolidated Group as at the dates indicated and
the results of their consolidated operations and cash flows for the periods
indicated in conformity with GAAP (except as otherwise specified in such
report) and that the audit by such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards and provides a reasonable basis for such opinion and (B)
a certificate of the Approved Auditor stating that they have reviewed this
Agreement and stating further whether, in making their audit, they have
become aware of any condition or event that then constitutes a Default or
an Event of Default, and, if they are aware that any such condition or
event then exists, specifying the nature and period of the existence
thereof (it being understood that the Approved Auditor shall not be liable,
directly or indirectly, for any failure to obtain knowledge of any Default
or Event of Default unless the Approved Auditor should have obtained
knowledge thereof in making an audit in accordance with generally accepted
auditing standards or did not make such an audit);
(3) together with each delivery of financial statements of the
Consolidated Group pursuant to SUBPARAGRAPHS (I) and (II) of this PARAGRAPH
5A, a certificate of the chief financial officer of the Company (acting in
such capacity) (A) stating that the signer has reviewed the terms of the
Transaction Documents and has made, or caused to be made under the signer's
supervision, a review in reasonable detail of the transactions and
condition of the Consolidated Group during the fiscal period covered by
such financial statements and that such review has not disclosed the
existence during or at the end of such fiscal period, and that after
reasonable investigation the signer has no knowledge of the existence as at
the date of such certificate, of any condition or event which constitutes a
Default or Event of Default or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what
action the Company has taken or is taking or proposes to take with respect
thereto and (B) demonstrating (if applicable, with computations in
reasonable detail) compliance by the Company with the provisions of
PARAGRAPHS 6A, 6B and 6C(3)(vi);
(4) promptly, and in any event within 5 days, after (A) any Senior
Officer obtains knowledge of the existence of any Default or Event of
Default, (B) any Holder giving notice to the Company or taking any other
action with respect to a claimed Default or Event of Default under this
Agreement or (C) any Person giving any notice to the Company or taking any
other action with respect to a claimed default or event or condition of the
type referred to in SUBPARAGRAPH (iii) of PARAGRAPH 7A, an Officers'
Certificate specifying the nature and period of existence of any such
condition or event, or specifying the notice
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given or action taken by such Holder or Person and the nature of such
claimed Default, Event of Default, event or condition, and what action the
Company has taken, is taking or proposes to take with respect thereto;
(5) promptly, and in any event within 5 days after any Senior Officer
obtains knowledge of any of the following, a written notice setting forth
the nature thereof and the action, if any, that the Company or any ERISA
Affiliate proposes to take with respect thereto:
(1) with respect to any Plan, any reportable event, as defined in
section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
(2) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or
(3) any event, transaction or condition that could result in the
incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of
the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then existing,
is reasonably expected to have a Material Adverse Effect;
(6) for so long as the Company shall have public stockholders or
debtholders, (a) promptly after transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as the Company
shall send or make available to such stockholders or debtholders and copies
of all registration statements (with exhibits), prospectuses and all
periodic reports which it files with the SEC or any stock exchange and of
all press releases and other statements made available generally by the
Company to the public concerning material developments and (b) promptly
after receipt thereof, copies of any reports, statements and notices the
Company may receive in accordance with Section 13(d) or 14(d) of the
Exchange Act or the rules and regulations of any stock exchange;
(7) promptly, and in any event with 5 days, after any Senior Officer
obtains knowledge of the institution of any litigation involving claims
against the Company or any Subsidiary which would be required by GAAP to be
disclosed in the Consolidated Group's financial statements or which
involves uninsured claims of $5,000,000 or more, an Officers' Certificate
specifying the nature of such litigation and what action the Company or
such Subsidiary has taken, is taking or proposes to take with respect
thereto; and
(8) with reasonable promptness, such other information and data
relating to the business, operations, affairs, financial condition, assets
or properties of the Consolidated Group or the Company or relating to the
ability of the Company to perform its obligations under the Transaction
Documents as may from time to time be reasonably requested by any Purchaser
or any other Holder of Notes representing at least 10% of the aggregate
principal amount of the Notes then outstanding.
52. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the request of
any Holder, provide to such Holder, and any Qualified Institutional Buyer
designated by such Holder, such financial and other information as such Holder
may reasonably determine to be necessary in
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order to permit compliance with the information requirements of Rule 144A in
connection with a resale or proposed resale of any Note.
53. INSPECTION OF PROPERTY. The Company shall permit the representatives of
any Holder that is an Institutional Investor:
(i) if no Default or Event of Default then exists, at the expense
of such Holder and upon reasonable prior written notice to the Company
and during regular business hours, to visit the principal executive
office of the Company, to discuss the affairs, finances and accounts
of the Consolidated Group with the officers of the Company and, with
the consent of the Company, which consent will not be unreasonably
withheld or delayed, the independent public accountants of the
Consolidated Group and, with the consent of the Company, which consent
will not be unreasonably withheld or delayed, to visit the offices of
any Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
(ii) if a Default or Event of Default then exists, at the expense
of the Company, to visit and inspect any of the offices or properties
of the Company or any Subsidiary, to examine all their respective
books of account, records, reports and other papers, to make copies
and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the
Company and its Subsidiaries), all at such times and as often as may
be requested.
54. CORPORATE EXISTENCE, ETC. Except as otherwise specifically permitted by
this Agreement, the Company and each Subsidiary will at all times preserve and
keep in full force and effect its corporate existence, and rights and franchises
material to its business, and qualify and maintain its qualification to do
business and good standing in any jurisdiction, except in each case where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
55. PAYMENT OF TAXES AND CLAIMS.
(i) The Company and each Subsidiary will file all Tax returns required to
be filed by it in any jurisdiction and pay all Taxes shown to be due and payable
on such returns and all other Taxes imposed upon it or any of its properties or
assets or in respect of any of its franchises, business, income, sales and
services, or profits when the same become due and payable, but in any event
before any penalty or interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
which have become due and payable and which have or might become a Lien upon any
of their properties or assets, provided, that no such Tax or claim need be paid
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if (a) it is being contested in good faith by appropriate proceedings promptly
initiated and diligently conducted and if such reserves or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor,
and (b) the failure to pay such Tax or claim could not reasonably be expected,
if such contest were adversely determined, individually or in the aggregate to
have a Material Adverse Effect (provided no financial liability which has been
adequately reserved for pursuant to CLAUSE (a) above shall be deemed to have a
Material Adverse Effect).
(ii) Neither the Company nor any Subsidiary will consent to or permit the
filing of or be a party to any consolidated income tax return on its behalf with
any Person (other than a consolidated return that includes solely the
Consolidated Group).
56. COMPLIANCE WITH LAWS, ETC. The Company and each Subsidiary will comply
with the requirements of all applicable laws, rules, regulations and orders of
any Governmental Authority (including, without limitation, the Occupational
Safety and Health Act of 1970, as amended, ERISA
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and any Environmental Laws), and will obtain and maintain in effect all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of its properties or to the conduct of
its businesses, in each case to the extent necessary to reasonably ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failure to obtain or maintain in effect such licenses, permits, franchises
and other governmental authorizations do not, and are not reasonably expected
to, individually or in the aggregate, have a Material Adverse Effect.
57. MAINTENANCE OF PROPERTIES AND LEASES. The Company and each Subsidiary
will (i) maintain, in good repair and working order and condition (other than
ordinary wear and tear) all their properties so that the business carried on in
connection therewith may be properly conducted at all times and from time to
time make or cause to be made all appropriate repairs, renewals, replacements,
additions and improvements thereof as needed; provided, nothing in this
PARAGRAPH 5G shall prohibit the Company or any Subsidiary from discontinuing the
operation or maintenance of any of its properties if such discontinuance is
desirable in the conduct of its business and the Company has concluded that such
discontinuance could not reasonably be expected to result in a Material Adverse
Effect and (ii) comply in all material respects with the provisions of all
leases or licenses under which it leases or licenses any such properties to the
extent necessary to reasonably ensure that any such non-compliance with such
leases or licenses could not reasonably be expected to have a Material Adverse
Effect.
58. INSURANCE. The Company and each Subsidiary will maintain, with
financially sound and reputable insurers, rated at least A or A+ by A.M. Best,
insurance with respect to its properties and business of such types and in such
forms and amounts (including deductibles, co-insurance and self-insurance if
adequate reserves are maintained with respect thereto) and against such risks as
is reasonable and prudent in the circumstances and as are customarily insured
against by Persons of established reputation engaged in the same or similar
business and similarly situated.
59. SCOPE OF BUSINESS. Neither the Company nor any Subsidiary will engage
to a substantial extent in any business other than the businesses described in
the Memorandum and businesses reasonably related thereto or in furtherance
thereof.
510. USE OF PROCEEDS. The Company will use the proceeds of the sale of the
Notes only as designated on SCHEDULE 5J and not for any purpose which would
violate any applicable law or governmental regulation or which is otherwise
prohibited under PARAGRAPH 8I.
511. ENVIRONMENTAL COMPLIANCE. The Company and each Subsidiary will (i)
obtain and maintain all permits, licenses, and other authorizations that are
required of it under all Environmental Laws other than those which the failure
to obtain or maintain, individually or in the aggregate, could not reasonably be
expected to have, a Material Adverse Effect, and (ii) comply with all terms and
conditions of all such permits, licenses, and authorizations and with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables contained in all Environmental Laws or in
any regulation, ordinance or code applicable to it and any, plan, order, decree,
judgment, injunction, notice, or demand letter issued, entered, promulgated, or
approved thereunder directly applicable to it, except to the extent of any
noncompliance which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, and (iii) operate all property owned
or leased by it such that no claim or obligation, including a clean-up
obligation, which individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect shall arise under any Environmental Law, and
if any claim is made against it or any such obligation shall arise under any
Environmental Law, it shall at its own cost and expense, timely satisfy such
claim or obligation, provided no such claim or obligation need be satisfied for
so long as (A) it is being contested in good faith by appropriate proceedings
promptly initiated and diligently conducted and (B) such reserves or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor.
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512. MAINTENANCE OF BOOKS AND RECORDS. The Company and each Subsidiary will:
(i) keep proper records and books of account with respect to its business
activities in which proper entries are made in the ordinary course of all
dealings or transactions of or in relation to its business and affairs; (ii) set
up on its books adequate reserves with respect to all Taxes, assessments,
charges, levies and claims; and (iii) set up on its books reserves against
doubtful accounts receivable, advances and all other proper reserves (including
reserves for depreciation, obsolescence or amortization of its property). All
determinations pursuant to this PARAGRAPH 5L shall be made in accordance with,
or as required by, GAAP in order to fairly reflect all of the Consolidated
Group's financial transactions. Notwithstanding the foregoing, the Company and
its Subsidiaries may make adjustments and changes in the manner in which their
books and records are kept, provided, that:
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(a) all such adjustments and changes shall be required or permitted by
GAAP, but need not conform with the prior accounting practice of the
Company or such Subsidiary or its predecessor;
(b) each Holder shall be given written notice of all such changes or
adjustments together with the financial statements required by PARAGRAPH
5A(i) for the quarter in which such change occurred, and together with the
financial statements required by PARAGRAPH 5A(ii), a year-end listing and
description of all such changes and adjustments and the effect thereof by
the chief financial officer of the Company; and
(c) the financial covenants and ratios set forth in PARAGRAPH 6A shall
continue to be calculated without regard to such adjustments or changes
unless and until the Required Holders have consented thereto, which consent
shall not be unreasonably withheld or delayed and which shall be deemed
granted if not objected to in writing by the Required Holders within 30
days after notice is given by the Company with respect to such change
pursuant to SUBPARAGRAPH (B) above.
6. NEGATIVE COVENANTS. The Company covenants that for so long as any Note is
outstanding:
61. FINANCIAL COVENANTS.
61(1). CONSOLIDATED NET WORTH. Consolidated Net Worth shall not, as of
the last day of any fiscal quarter ending on or after the Closing Date, be less
than $30,000,000 plus, if such amount is greater than zero, an amount equal to
the sum of 50% of Consolidated Net Income for the period since December 31, 1996
taken as a single accounting period.
61(2). INTEREST EXPENSE COVERAGE. As of the last day of any fiscal
quarter ending on or after the Closing Date, the ratio of (A) Consolidated EBITA
to (B) Consolidated Interest Expense, for the four most recently ended fiscal
quarters taken as a single accounting period, shall not be less than:
2.00 to 1.00 through December 31, 1998;
2.25 to 1.00 from January 1, 1999 through December 31, 2000; and
2.50 to 1.00 thereafter.
61(3). LIMITATION ON CONSOLIDATED TOTAL DEBT. Neither the Company nor
any Subsidiary shall incur, create, issue, assume, guarantee or otherwise become
liable in respect of any Debt after the Closing Date unless (i) no Default or
Event of Default exists immediately before or immediately after the incurrence
of such Debt or could otherwise reasonably be expected to result therefrom; and
(ii) immediately after the incurrence of such Debt, the ratio of (A)
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Consolidated Total Debt less the Debt (but not in excess of $17,500,000) then
represented by the Subordinated Notes to (B) Consolidated Total Capitalization
does not exceed 60%. 11(1).
For the purposes of this PARAGRAPH 6A(3): (i) the outstanding Debt of any
Person who becomes a Subsidiary after the Closing Date shall be deemed to have
been incurred at the time it becomes a Subsidiary; (ii) if any outstanding Debt
of the Company owned by a Subsidiary or any outstanding Debt of a Subsidiary
owned by the Company or another Subsidiary is sold or otherwise transferred to a
Person who is not the Company or a Subsidiary, such Debt shall be deemed to have
been incurred on the date of such sale or transfer; and (iii) any Debt which is
extended, renewed or refunded after the Closing Date shall be deemed incurred on
the date of such extension, renewal or refunding.
61(4). LIMITATION ON PRIORITY DEBT. Neither the Company nor any
Subsidiary shall incur, create, issue, assume, guarantee or otherwise become
liable in respect of any Priority Debt after the Closing Date unless (i) no
Default or Event of Default exists immediately before or immediately after the
incurrence of such Priority Debt or could otherwise reasonably be anticipated to
result therefrom; and (ii) immediately after the incurrence of such Priority
Debt, the aggregate amount of Priority Debt does not exceed the greater of (A)
15% of Consolidated Net Worth as of the most recent fiscal quarter end or (B)
the lesser of (x) $8,000,000 or (y) 25% of Consolidated Net Worth determined as
of the most recent fiscal quarter end.
For the purposes of this PARAGRAPH 6A(4): (i) the outstanding Priority
Debt of any Person who becomes a Subsidiary after the Closing Date shall be
deemed to have been incurred at the time it becomes a Subsidiary; (ii) if any
outstanding Priority Debt of the Company owned by a Subsidiary or any
outstanding Priority Debt of a Subsidiary owned by the Company or another
Subsidiary is sold or otherwise transferred to a Person who is not the Company
or a Subsidiary, such Priority Debt shall be deemed to have been incurred on the
date of such sale or transfer; and (iii) any Priority Debt which is extended,
renewed or refunded after the Closing Date shall be deemed incurred on the date
of such extension, renewal or refunding.
62. RESTRICTED PAYMENTS AND RESTRICTED INVESTMENT. Neither the Company nor
any Subsidiary shall make, declare or incur any liability to make any Restricted
Payments or any Restricted Investment after the Closing Date unless (i)
immediately after giving effect thereto, the aggregate amount of all Restricted
Payments made or declared by the Company and its Subsidiaries since December 31,
1996 plus the aggregate value of all Restricted Investments at such time would
not exceed the sum of (A) $5,000,000 plus (B) 50% of Consolidated Net Income for
the period since December 31, 1996 (but not less than zero) plus (C) the Net
Proceeds of Eligible Capital Stock received by the Company after December 31,
1996 and (ii) no Event of Default or Default exists immediately before or
immediately after making or declaring such Restricted Payment or Restricted
Investment or could otherwise be reasonably expected to result therefrom.
For the purpose of this PARAGRAPH 6B, the value of a Restricted Investment
which constitutes a liability (contingent or otherwise) shall be the maximum
amount of such liability.
63. LIENS AND OTHER RESTRICTIONS. Neither the Company nor any Subsidiary
shall
63(1). LIENS. Create, assume or suffer to exist any Lien on its
properties or assets, whether now owned or hereafter acquired, or upon any
income or profits therefrom or proceeds of dispositions thereof, or transfer any
property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its general creditors, except for:
(1) Liens, and other charges incidental to the conduct of its business,
or the ownership of its property (including charges for Taxes or otherwise
arising by operation of law, mechanics', carriers', workers', repairmen's,
warehousers' or other similar Liens), which are not incurred in connection
with the borrowing of money or the securing of Debt, provided that, in each
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case, the obligation secured is not overdue or is being contested in
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good faith by appropriate actions or procedures promptly instituted and
diligently conducted and such reserves as shall be required by GAAP shall
have been made therefor, but only so long as no foreclosure, distraint,
sale or similar proceedings have been commenced with respect thereto
(unless the same shall have been fully bonded or otherwise effectively
stayed);
(2) Liens arising as a result of any judicial proceedings with respect
to which the Company or such Subsidiary shall then, in good faith and by
appropriate actions and procedures promptly instituted and diligently
conducted, be prosecuting appeal or other proceedings for review and Liens
arising from judgments or decrees not constituting a Default or Event of
Default unless, in either case, such Lien remains undischarged, unstayed
pending appeal, unbonded or undismissed for a period of 60 consecutive days
and provided, in either case, such reserves as shall be required by GAAP
--------
shall have been made therefor and such Liens in the aggregate do not have a
Material Adverse Effect;
(3) deposits or pledges to secure workers' compensation, unemployment
insurance, old age benefits or other social security obligations or
retirement benefits;
(4) Liens arising out of deposits in connection with, or given to secure
the performance of, bids, tenders, trade contracts not for the payment of
money, or leases, or to secure statutory obligations or surety or appeal
bonds, performance bonds or other pledges or deposits for purposes of like
nature in the ordinary course of business but only so long as no
foreclosure, distraint, sale or similar proceedings have been commenced
with respect thereto (unless the same shall have been fully bonded or
otherwise effectively stayed);
(5) minor survey exceptions or encumbrances, easements or reservations,
or rights of others for rights-of-way, utilities and other similar
purposes, or zoning or other restrictions as to the use of real properties,
which are necessary for the conduct of its activities or which customarily
exist on properties of Persons engaged in similar activities and similarly
situated and which do not in the aggregate have a Material Adverse Effect
or materially impair the use of such real properties in the operation of
its business;
(6) Liens on any properties or assets of a Subsidiary in favor of the
Company or a Wholly-Owned Subsidiary and Liens, if any, securing the Notes;
(7) Liens existing as of the Closing and set forth on SCHEDULE 6C(1);
(8) Liens securing Priority Debt incurred after the Closing Date if the
Priority Debt secured thereby is not otherwise prohibited by PARAGRAPH
6A(4);
(9) Liens on property acquired, constructed or improved by it after the
Closing Date; provided, that each such Lien (a) is confined solely to the
--------
property so acquired, improvements thereto and proceeds thereof, (b)
secures only the purchase price for, or cost of construction or
improvements of, such property and the Debt secured by such Lien does not
exceed the lesser of the fair market value or the purchase price or cost of
construction or improvement, (c) the Debt secured by such Lien is incurred
at the time of the acquisition, construction or improvement or within 180
days following such date, (d) no Event of Default or Default exists
immediately before or immediately after the creation of such Lien or would
otherwise reasonably be anticipated to result therefrom and (e) after
giving effect thereto, the financial tests set forth in PARAGRAPH 6A,
calculated on the basis of the most recently available financial
information, would be satisfied;
(10) Liens on the assets of any Person (other than the Company or an
existing Subsidiary) existing at the time such assets are acquired by the
Company or a Subsidiary, whether by merger, consolidation, purchase of
assets or otherwise, so long as such (a)
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Liens are not created, incurred or assumed in contemplation of such assets
being acquired by it; (b) no Default or Event of Default exists immediately
before or immediately after the incurrence of such Liens or could
reasonably be anticipated to result therefrom; (c) after giving effect to
such acquisition and the Debt secured by such Lien, the financial tests set
forth in PARAGRAPH 6A, calculated on the basis of the most recently
available financial information, would be satisfied, and (d) such Liens do
not extend to any other assets of the Consolidated Group;
(11) any Lien resulting from renewing, extending or refinancing any Liens
permitted by CLAUSES (vi), (vii), (ix) or (x) above, provided that (a) the
principal amount of the Debt secured thereby is not increased or the
maturity thereof accelerated, (b) such Lien does not extend to any other
property, and (c) immediately after such extension, renewal or refunding,
no Default or Event of Default would exist or could be reasonably
anticipated to result therefrom; and
(12) Liens securing other Debt of the Company if (a) such Debt is pari
passu with the Notes, (b) such Debt is not otherwise prohibited by
PARAGRAPH 6A(3), and (c) the Notes are equally and ratably secured thereby.
63(2). SALE OF STOCK. No Subsidiary shall issue, sell or otherwise
dispose of, or part with control of, any of its own Equity Interest (other than
directors' qualifying shares) either directly or indirectly by the issuance of
rights, options for securities convertible into or exchangeable for its Equity
Interest and neither the Company nor any Subsidiary shall sell, transfer or
otherwise dispose of any outstanding Equity Interest of another Subsidiary other
than: (i) to the Company or a Wholly-Owned Subsidiary; or (ii) if in connection
with such sale, transfer or other disposition, the entire Investment (whether
represented by Equity Interest, Debt, claims or otherwise) of the Company and
its Subsidiaries in such Subsidiary is sold, transferred or otherwise disposed
of to a Person other than another Member or an Affiliate, and the Subsidiary
being disposed of has no continuing Investment in any other Subsidiary not being
simultaneously disposed of or in the Company.
63(3). MERGER AND SALE OF ASSETS. Merge or consolidate with any other
Person or sell, lease or transfer or otherwise dispose of its respective assets
to any Person or Persons, except that:
(1) any Subsidiary may merge or consolidate with or sell, lease,
transfer or otherwise dispose of all or any of its assets to the Company or
a Wholly-Owned Subsidiary (provided, that the Company or such Wholly-Owned
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Subsidiary shall be the continuing or surviving corporation in the case of
a merger or consolidation and, in any case, the acquiring or surviving
entity is a corporation organized under the laws of, and having its
principal place of business in, a state of the United States of America or
the District of Columbia) and upon any such sale, transfer or other
disposition, such Subsidiary may liquidate and dissolve;
(2) the Company may merge or consolidate with or convey, transfer or
lease all or substantially all of its assets in a single integrated
transaction to, any other corporation, limited liability company or limited
partnership; provided, that (a) in the case of a merger or consolidation,
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the Company shall be the continuing or surviving corporation or (b) the
successor or acquiring Person (1) shall be solvent and organized under the
laws of any state of the United States of America or the District of
Columbia; (2) shall expressly assume in writing all of the obligations and
covenants of the Company under the Transaction Documents; and (3) shall
provide the Holders the written opinion of counsel satisfactory in form and
substance to the Holders confirming that the assumption of such obligations
by such successor or acquiring Person is duly authorized and constitutes
its legal, valid and binding obligation of such corporation or limited
partnership, enforceable (subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and
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subject, as to enforceability, to general principles of equity regardless
of whether enforcement is sought in a proceeding in equity or at law) in
accordance with its terms, provided, that in either case, immediately after
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and giving effect thereto, on a pro forma basis, based on the most recently
available financial information, the financial tests set forth in PARAGRAPH
6A would be satisfied;
(3) the Company and any Subsidiary may sell or lease, as lessor,
inventory in the ordinary course of its business;
(4) the Company and any Subsidiary may dispose of equipment or other
assets which have become obsolete or otherwise no longer useful or required
for the conduct of its business, provided such dispositions do not,
individually or in the aggregate, constitute a liquidation of all or
substantially all of the Company's or any Subsidiary's assets;
(5) the Company may sell its existing headquarters located at 505 North
Euclid Street, Anaheim, California and may sell, as described in the
Memorandum, the assets of its remaining general dental practice groups; and
(6) in addition to the matters set forth above, the Company and any
Subsidiary may sell, transfer or otherwise dispose of some or all of its
respective properties or assets in a transaction not otherwise permitted
pursuant to this PARAGRAPH 6C(3) for fair and adequate consideration (a
"DISPOSITION"), and if such Disposition is a Disposition of all or
substantially all of the assets of a Subsidiary, such Subsidiary may
thereafter liquidate and dissolve; provided, that immediately after and
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giving effect to any such Disposition, the greater of (a) the aggregate
book value of each property and asset so sold (each an "ASSET SOLD" and
collectively, the "ASSETS SOLD"), as reflected on the most recent
consolidated balance sheet of the Consolidated Group furnished to the
Holders pursuant to PARAGRAPH 5A prior to the date of Disposition of such
Asset Sold, or (b) the aggregate net proceeds (with any non-cash proceeds
being valued at its fair market value) of the Assets Sold (1) during the
immediately preceding twelve months, less the aggregate amount of
Qualifying Reinvestments, did not exceed more than 15% of Consolidated
Total Assets as reflected on the most recent consolidated balance sheet of
the Consolidated Group delivered to the Holders pursuant to PARAGRAPH 5A or
(2) since the Closing Date, less the aggregate amount of Qualifying
Reinvestments, did not exceed more than 30% of Consolidated Total Assets as
reflected on the most recent consolidated balance sheet of the Consolidated
Group delivered to the Holders pursuant to PARAGRAPH 5A;
provided, that, in each case other than the sale or lease of inventory pursuant
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to SUBPARAGRAPH (iii) above or disposition of assets pursuant to SUBPARAGRAPH
(iv) above, no Default or Event of Default exists immediately before or
immediately after giving effect to such sale, transfer or disposition of
properties or assets or such merger or consolidation nor would any Default or
Event of Default reasonably be expected to result therefrom and in the case of a
sale, transfer or other disposition of outstanding Equity Interest of a
Subsidiary pursuant to SUBPARAGRAPH (vi) above, such sale, transfer or other
disposition otherwise satisfies the requirements of PARAGRAPH 6C(2).
For purposes of SUBPARAGRAPH (vi) of this PARAGRAPH 6C(3), a "QUALIFYING
REINVESTMENT" is the use of the proceeds, or of funds expended in anticipation
of the proceeds, of Assets Sold not more than twelve months after the date of a
Disposition, to (a) purchase (x) assets usable in any business permitted to be
conducted by PARAGRAPH 5I, or (y) either (1) all of the outstanding capital
stock or other equity interests of a Person which, immediately after such
purchase, is a Wholly-Owned Subsidiary of the Company and is engaged in a
business permitted to be conducted by PARAGRAPH 5I, or (2) all or substantially
all of the assets and business of a Person which is engaged in any business
permitted to be conducted by PARAGRAPH 5I; provided, that if the Assets Sold are
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subject to a Lien securing the Notes at the time of sale or other disposition,
the assets, equipment, real property, improvements, capital stock or other
equity interests purchased with the proceeds of such Assets Sold shall not
constitute Qualifying Reinvestments unless promptly made subject to a
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Lien securing the Notes with the same priority and otherwise substantially the
same terms and conditions as the Liens on the Assets Sold or (b) to make an
optional prepayment of the Notes pursuant to PARAGRAPH 4A(1) or to prepay any
other Debt ranking at least pari passu with the Notes.
63(4). SUBSIDIARY DIVIDEND AND OTHER RESTRICTIONS. Except for this
Agreement, enter into, or be otherwise subject to, any contract or agreement
(including its charter) which limits the amount of, or otherwise imposes
restrictions on the payment of, dividends by, or distributions on any securities
of, any Subsidiary of the Company.
63(5). TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE
6C(5), directly or indirectly, engage in any transaction or group of
transactions (including, without limitation, the purchase, sale or exchange of
assets or the payment of salary, bonuses and other compensation for services
rendered) with any Affiliate, except in the ordinary course of business pursuant
to the reasonable requirements of its business and upon commercially reasonable
terms which are no less favorable to it than those which might be obtained at
arms' length with a Person not an Affiliate.
64. COMPLIANCE WITH ERISA. The Company, its Subsidiaries and any ERISA
Affiliate shall not:
(1) engage in any transaction in connection with which the Company or
any Subsidiary or any ERISA Affiliate could be subject to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, terminate or withdraw from any Plan (other than a
Multiemployer Plan) in a manner, or take any other action with respect to
any such Plan (including, without limitation, a substantial cessation of
business operations or an amendment of a Plan within the meaning of Section
4041(e) of ERISA, which could result in any liability to the PBGC, to a
Plan, to a Plan participant, to the Department of Labor or to a trustee
appointed under Section 4042(b) or (c) of ERISA), incur any liability to
the PBGC or a Plan on account of a withdrawal from or a termination of a
Plan under Section 4063 or 4064 of ERISA, incur any liability for post-
retirement benefits under any and all welfare benefit plans (as defined in
Section 3(1) of ERISA), fail to make full payment when due of all amounts
which, under the provisions of any Plan or applicable law, it is required
to pay as contributions thereto, or permit to exist any accumulated funding
deficiency, whether or not waived, with respect to any Plan (other than a
Multiemployer Plan) other than such penalties, taxes, liabilities, failures
or deficiencies which individually and in the aggregate do not, and are not
reasonably expected to have in the future, a Material Adverse Effect;
(2) at any time permit the termination of any defined benefit pension
plan intended to be qualified under Section 401(a) and Section 501(a) of
the Code unless such plan is funded so that the value of all benefit
liabilities upon the termination date does not exceed the then current
value of all assets in such plan by an amount the payment of which would
have a Material Adverse Effect; or
(3) at any time permit the aggregate complete or partial withdrawal
liability under Title IV of ERISA with respect to Multiemployer Plans
incurred by the Consolidated Group and any ERISA Affiliate, or the
aggregate liability under Title IV of ERISA incurred by the Consolidated
Group and any ERISA Affiliate, to exceed an amount the payment of which
would have a Material Adverse Effect.
For the purposes of SUBPARAGRAPH (iii) of this PARAGRAPH 6D, the amount of the
withdrawal liability of the Consolidated Group and ERISA Affiliates at any date
shall be the aggregate present value of the amounts claimed to have been
incurred less any portion thereof as to which the Company reasonably believes,
after appropriate consideration of possible adjustments arising under subtitle E
of Title IV of ERISA, that neither the Company nor any Subsidiary or ERISA
Affiliate will have any liability, provided, that the Company shall promptly
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obtain written advice from independent actuarial consultants supporting such
determination. The Company will (x) once in each calendar year, beginning in
1998, request and obtain a current statement of withdrawal liability from each
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Multiemployer Plan to which the Company or any Subsidiary or any ERISA Affiliate
is or has been obligated to contribute and (y) transmit a copy of such statement
to each Holder, within 15 days after the Company receives the same. As used in
this PARAGRAPH 6D, the term "accumulated funding deficiency" has the meaning
specified in section 302 of ERISA and section 412 of the Code, the terms
"present value" and "current value" have the meanings specified in section 3 of
ERISA, the term "benefit liabilities" has the meaning specified in section
4001(a)(16) of ERISA and the term "amount of unfunded liabilities" has the
meaning specified in section 4001(18) of ERISA.
7. EVENTS OF DEFAULT.
71. ACCELERATION. If any of the following events shall occur or conditions
shall exist and be continuing for any reason whatsoever, and whether such
occurrence or condition shall be voluntary or involuntary or come about or be
effected by operation of law or otherwise, such occurrence or condition and
continuance shall constitute an "EVENT OF DEFAULT":
(1) the Company defaults in the payment of any principal of any Note or
Make Whole Amount when the same shall become due and payable, whether by
the terms thereof or otherwise as provided by the terms of this Agreement;
or
(2) the Company defaults in the payment of interest on any Note, whether
by the terms thereof or otherwise as provided by the terms of this
Agreement or in the payment of any Expense or any other amount due under
any Note or this Agreement and such default shall continue for 5 Business
Days after the same shall become due and payable; or
(3) with respect to any Debt, other than the Debt represented by the
Notes, the Company or any Subsidiary (a) defaults (whether as primary
obligor or guarantor or surety) in any payment of principal of, premium or
make whole amount, if any, or interest on any such Debt, the outstanding
principal amount of which exceeds $5,000,000 in the aggregate, beyond any
period of grace provided with respect thereto, or (b) fails to perform or
observe any other agreement, term or condition contained in any agreement
under which such Debt is created (or if any other event thereunder or under
any such agreement shall occur and be continuing) and the effect of such
default, failure or other event is to cause, or to permit the holder or
holders of such Debt (or a trustee on behalf of such holder or holders) to
cause, such Debt to become due or to be required to be redeemed or
repurchased prior to any stated maturity or regularly scheduled dates of
payment); or
(4) any representation or warranty made by the Company or any Subsidiary
in any Transaction Document or in any writing furnished pursuant to a
Transaction Document shall be false, incorrect or misleading in any
material respect on the date as of which made; or
(5) the Company or any Subsidiary fails to perform or observe any
covenant contained in PARAGRAPH 5D, 5J, 6A, 6B or 6C and such failure shall
not be remedied within 10 Business Days; or
(6) the Company or any Subsidiary fails to perform or observe any other
agreement, term or condition of any of the Transaction Documents applicable
to it and such failure shall not be remedied within 30 days after (a) the
date on which a Senior Officer of the Company first obtains knowledge of
such default, or (b) the date on which written notice thereof is given to
the Company by any Holder; or
(7) the Company voluntarily or involuntarily suspends or discontinues
operation or liquidates all or substantially all of its assets; or
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(8) the Company or any Subsidiary (a) is generally not paying, or admits
in writing that it is not able to pay, its debts as such debts become due
or otherwise becomes insolvent; or (b) files, or consents by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction; or (c) makes an assignment for the benefit of its creditors;
or (d) consents to the appointment of a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect to any
substantial part of its property; or (e) takes corporate action for the
purpose of any of the foregoing; or
(9) a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation, dissolution or winding up of the
Company or any Subsidiary or for the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property to take advantage of any
bankruptcy or insolvency law of any jurisdiction (each a "BANKRUPTCY
PETITION") is filed against the Company or any Subsidiary without the
consent or other acquiescence of the Company or such Subsidiary and such
Bankruptcy Petition is not dismissed within 60 days or any holder or
holders of a Lien or Liens on all or substantially all of the assets of the
Company or any Subsidiary, takes or take any action to foreclose on such
Lien and such action remains unstayed and in effect for 60 days; or
(10) a Governmental Authority enters an order appointing a custodian,
receiver, trustee or other officer with similar powers with respect to the
Company or any Subsidiary or with respect to any substantial part of the
property of the Company or any Subsidiary or constituting an order for
relief or approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any Subsidiary
without the consent of the Company or such Subsidiary and such order
remains unstayed and in effect for 60 days; or
(11) a final judgment or judgments for the payment of money aggregating
in excess of $5,000,000 (net of insurance proceeds provided the insurer has
confirmed in writing its acceptance of liability therefor) is rendered
against the Company or any Subsidiary and within 60 days thereof such
judgment or judgments are not bonded or discharged or execution thereof
stayed pending appeal, or within 60 days after the expiration of any such
stay, such judgment or judgments are not discharged; or
(12) if (a) any Plan shall fail to satisfy the minimum funding standards
of ERISA or the Code for any year or part thereof or a waiver of such
standards or extension of any amortization period is sought or granted
under section 412 of the Code, (b) a notice of intent to terminate (other
than a notice of a "standard termination" as defined in Section 4041(b) of
ERISA) any Plan shall have been or is reasonably expected to be filed with
the PBGC or the PBGC shall have instituted proceedings under ERISA section
4042 to terminate or appoint a trustee to administer any Plan or the PBGC
shall have notified the Company, any Subsidiary or any ERISA Affiliate that
a Plan may become a subject of any such proceedings, (c) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of section
4001(a)(18) of ERISA) under all Plans, determined in accordance with Title
IV of ERISA, shall exceed $5,000,000, (d) the Company, any Subsidiary or
any ERISA Affiliate shall have incurred or is reasonably expected to incur
any liability pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans, (e) the
Company, any Subsidiary or any ERISA Affiliate withdraws from any
Multiemployer Plan, or (f) the Company, or any Subsidiary establishes or
amends any employee welfare benefit plan that provides post-employment
welfare benefits in a manner that would increase the liability of the
Company or such Subsidiary thereunder; and any such event or events
described in clauses (i) through (vi) above, either individually or
together with any other such event or events, results in a Material Adverse
Effect. As used
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in this CLAUSE (XII), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such
terms in Section 3 of ERISA; or
and (a) upon the occurrence of an Event of Default specified in SUBPARAGRAPH
(viii) (other than an Event of Default described in CLAUSE (a) of subparagraph
(viii) or described in clause (e) of subparagraph (viii) by virtue of the fact
that CLAUSE (E) encompasses CLAUSE (A) of SUBPARAGRAPH (viii)) or (ix) or (x) of
this PARAGRAPH 7A, each Note at the time outstanding shall automatically become
due and payable at 100% of the principal amount thereof together with all
interest accrued thereon and the Make Whole Amount, without presentment, demand,
protest or notice of any kind, all of which are expressly waived by the Company;
(b) upon the occurrence of any other Event of Default, the Required Holders may
at their option declare each Note to be, and each Note shall thereupon be
immediately due and payable at 100% of the principal amount thereof together
with all interest accrued thereon and the Make Whole Amount, without
presentment, demand, protest or notice of any kind, all of which are expressly
waived by the Company; and (c) upon the occurrence of an Event of Default
specified in SUBPARAGRAPHS (i) or (ii) of this PARAGRAPH 7A, at the option of
any Holder, whether or not the Required Holders have declared each Note to be
due and payable pursuant to the immediately preceding CLAUSE (B), each Note held
by such Holder at the time outstanding shall become immediately due and payable
at 100% of the principal amount thereof together with interest accrued thereon
and Make Whole Amount, without presentment, demand, protest or notice of any
kind, all of which are expressly waived by the Company.
72. RESCISSION OF ACCELERATION. At any time after any Note shall have been
declared immediately due and payable pursuant to CLAUSE (b) or (c) of PARAGRAPH
7A, the Required Holders may, by written notice to the Company, rescind and
annul any such declaration with respect to the Notes if (i) the Company shall
have paid all interest, principal and Make Whole Amount payable with respect to
any Note which have become due otherwise than by reason of such declaration,
including any interest on any such overdue interest, principal and the Make
Whole Amount, at the amount specified therein or otherwise in this Agreement,
(ii) the Company shall not have paid any amounts which have become due solely by
reason of such declaration, (iii) all Events of Default and Defaults, other than
non-payment of amounts which have become due solely by reason of such
declaration, shall have been cured or waived pursuant to PARAGRAPH 11C, and (iv)
no judgment or decree shall have been entered for the payment of any amounts due
pursuant to the Transaction Documents solely by reason of such declaration. No
such rescission or annulment shall extend to or affect any subsequent Default or
Event of Default or impair any right arising therefrom.
73. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to CLAUSE (b) or (c) of PARAGRAPH
7A, or any such declaration under PARAGRAPH 7A shall be rescinded and annulled
pursuant to PARAGRAPH 7B, the Company shall forthwith give written notice
thereof to each other Holder at the time outstanding, provided, the failure to
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give such notice shall not affect the validity of any such declaration,
rescission or annulment.
74. OTHER REMEDIES, NO WAIVERS OR ELECTION OF REMEDIES. If any one or more
Events of Default shall occur and be continuing, irrespective of whether any
Notes have become or have been declared immediately due and payable, any Holder
may proceed to protect and enforce its rights under the Transaction Documents by
exercising such remedies as are available to such Holder in respect thereof
under applicable law, either by suit in equity or by action at law or by any
other appropriate proceeding, whether for specific performance of any covenant
or other agreement contained in any Transaction Document or in aid of the
exercise of any power granted in a Transaction Document, in such order as the
Holder may determine in its sole discretion. No remedy conferred in a
Transaction Document upon any Holder is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise. No course of dealing or failure or
delay by any Holder in exercising any right, power or remedy under a Transaction
Document or any other document executed in connection therewith shall operate as
a waiver thereof or otherwise prejudice such Holder's rights, powers or
remedies, nor
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shall any single or partial exercise of any such right or remedy preclude any
other right or remedy hereunder or thereunder.
8. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants that:
81. ORGANIZATION, ETC.
(i) The Company and each Subsidiary is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization and is
qualified and in good standing in each jurisdiction in which it is required to
be qualified to do business (other than those jurisdictions in which the failure
to be so qualified, individually and in the aggregate, could not reasonably be
expected to have a Material Adverse Effect) and has all requisite corporate
power and authority to own, operate and lease its property and to carry on its
business as now being conducted and which it proposes to conduct. The Company
has all requisite power and authority to execute, deliver and perform each
Transaction Document and to issue and sell the Notes. SCHEDULE 8A correctly
identifies the correct legal name, the jurisdiction of organization, the
jurisdictions in which qualified to do business, the officers and directors of
each Subsidiary and identifies those Subsidiaries which are "significant
subsidiaries" within the meaning of Regulation S-X under the Exchange Act.
(ii) Each Transaction Document has been duly authorized by all necessary
corporate action on the part of the Company and has been (or will have been as
of the Closing Date) duly executed and delivered by an authorized officer of the
Company and constitutes (or will constitute upon execution thereof by the
Company) the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
82. STOCK OWNERSHIP.
(i) All of the outstanding capital stock, or other equity interest,
of each Subsidiary is validly issued, fully paid and non-assessable and is
now owned and will be owned immediately prior to the Closing, of record and
beneficially, in the amounts and by the Persons as set forth in SCHEDULE
8B, free and clear of any Lien of any kind, except as set forth in SCHEDULE
8B.
(ii) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement and customary
limitations imposed by corporate laws and statutes) restricting the ability
of such Subsidiary to pay dividends out of profits or make any other
similar distributions of profits to the Company or to any other Subsidiary
of the Company.
(iii) Except as set forth in SCHEDULE 8B, no Subsidiary has any
outstanding rights, options, warrants or other agreements which would
require it to issue any additional shares of its capital stock after the
Closing Date.
83. FINANCIAL STATEMENTS; PROJECTIONS.
(i) The Company has furnished the Purchasers with the financial
statements listed on SCHEDULE 8C of the Consolidated Group which
collectively are referred to in this Agreement as the "FINANCIAL
STATEMENTS". The Financial Statements fairly present in all material
respects the financial condition of the Consolidated Group and the results
of its operations and cash flows for the respective periods specified
thereby. The Financial Statements have been prepared in accordance with
GAAP, consistently applied throughout the periods involved except as set
forth in the notes thereto. Since June 30, 1997, there
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have been no developments or changes affecting the business, assets,
liabilities or condition (financial or otherwise) of the Company or any
Subsidiary which has had or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
(ii) The assumptions and limitations listed in the preparation of
projected financial information contained in the Memorandum (the
"PROJECTIONS"), were reasonable when made and continue to be reasonable.
The Projections have a reasonable basis, were prepared by executive and
financial officers of the Company in good faith and represent the good
faith opinion of the Company as to the projected results of the operations
of the Consolidated Group, subject to the assumptions and limitations set
forth therein. No events or facts have, to the knowledge of the Company,
occurred or been discovered by any Senior Officer since the preparation of
the Projections that would cause the Projections, taken as a whole, not to
be reasonably attainable. The Consolidated Group does not have, and will
not have on the Closing Date, any material obligations (whether accrued,
matured, contingent or otherwise) that are not reflected in the Projections
or arise from the Transaction Documents.
84. ACTIONS PENDING. There are no actions, suits, investigations or
proceedings pending, or to the knowledge of the Company threatened, against the
Company or any Subsidiary, or any of their properties or rights, by or before
any court, arbitrator or administrative body or other Governmental Authority
other than those which individually and in the aggregate do not and are not
reasonably expected to have a Material Adverse Effect.
85. TITLE TO PROPERTIES.
(i) The Company and each Subsidiary has good and marketable title to the
real estate of which it is the record owner and the Company or a Subsidiary
has good title to all of the properties and assets reflected in the most
recent balance sheet for the Consolidated Group included in the Financial
Statements or purported to have been acquired by them after such date
(other than properties and assets disposed of since such date in the
ordinary course of business), subject to no Lien of any kind except Liens
permitted by PARAGRAPH 6C(1);
(ii) The Company and each Subsidiary enjoys peaceful and undisturbed
possession under all leases necessary in any material respect for the
conduct of its businesses and all such leases are valid and subsisting and
are in full force and effect; and
(iii) The Company and each Subsidiary owns or has the right to use
(under agreements or licenses which are in full force and effect) all
Intellectual Property necessary for it to conduct its business as currently
conducted, without any known conflict with the rights of others. Neither
the Company nor any Subsidiary to its knowledge is infringing upon any
Intellectual Property owned by any other Person and there is no violation
by any Person of any right of the Company or any Subsidiary with respect to
any Intellectual Property owned or used by the Company or any Subsidiary
which is Material.
86. TAX RETURNS AND PAYMENTS. The Company and each Subsidiary has filed all
Federal, State, local and foreign income tax returns, franchise tax returns,
real and personal property tax returns and other tax returns required by law to
be filed by or on its behalf, or with respect to its properties or assets, and
all Taxes, assessments and other governmental charges imposed upon the Company
and any Subsidiary and the Company's or any Subsidiary's properties, assets,
income or franchises which are due and payable have been paid, other than those
presently being contested in good faith by appropriate proceedings diligently
conducted and for which such reserves or other appropriate provisions, if any,
as may be required by GAAP have been made and those the amount of which,
individually and in the aggregate, are not Material. The charges, accruals and
reserves on the books of the Consolidated Group in respect of Taxes for all
fiscal periods are adequate and the
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Company knows of no unpaid assessment on the Company or any Subsidiary for
additional Taxes for any period or any basis for any such assessment that
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect. No charges or Taxes will be imposed by any Governmental
Authority on the Company or any Subsidiary on the execution, delivery or
enforcement of the Transaction Documents and the issue and sale of the Notes.
11.
87. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor any
Subsidiary is in violation of any term of its charter or by-laws or other
organizational documents, or in violation or breach of any term of any agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation (including any Environmental Law) to
which it is a party or to which it is subject which default or violation,
individually or in the aggregate, has or could reasonably be expected to have, a
Material Adverse Effect. Subject to obtaining the consents described on SCHEDULE
8K, the execution and delivery of the Transaction Documents and the offering,
issuance and sale of the Notes and fulfillment of and compliance with the terms
and provisions of the Transaction Documents do not and will not (i) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company or any Subsidiary
under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, corporate charter or by-laws or similar organizational
documentation, or any other agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of their
respective properties are bound or affected, (ii) conflict with or result in a
breach of any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority applicable
to the Company or any Subsidiary or (iii) violate any provision of any statute
or other rule or regulation of any Governmental Authority applicable to the
Company or any Subsidiary.
88. OFFERING OF NOTES. Neither the Company nor any agent acting on its
behalf has, directly or indirectly, offered the Notes for sale to, or solicited
any offers to buy any of the Notes from, or otherwise approached or negotiated
with respect thereto with, any Person other than the Purchasers and not more
than five Institutional Investors, each of which has been offered the Notes at a
private sale for investment. Neither the Company nor any agent acting on its
behalf has taken or will take any action which would subject the issuance or
sale of the Notes to the provisions of Section 5 of the Securities Act or to the
registration provisions of any securities or Blue Sky law of any applicable
jurisdiction. As of the Closing Date, the Notes will not be of the same class as
securities of the Company listed on a national securities exchange registered
under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system, within the meaning of Rule 144A.
89. REGULATION G, ETC. None of the proceeds of the sale of the Notes will be
used, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying any margin stock within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System (12 CFR
Part 207) or for the purpose of buying or carrying or trading in any securities
under such circumstances as to involve the Company in a violation of Regulation
X of such Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of such Board (12 CFR 220). Margin stock does not constitute
more than 10% of the value of the assets of the Consolidated Group or of the
Company and the Company has no present intention that margin stock will
constitute more than 10% of the value of its or the Consolidated Group's assets.
As used in this PARAGRAPH 8I, the terms "margin stock" and "purpose of buying or
carrying" shall have the meanings assigned to them in said Regulation G.
810. ERISA.
(1) The Company, each Subsidiary and each ERISA Affiliate has operated
and administered each Plan operated and administered by it in compliance
with all applicable laws except for such instances of noncompliance as have
not resulted in and are not reasonably expected to result in a Material
Adverse Effect. Neither the Company, any Subsidiary nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA
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or the penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in Section 3 of ERISA), and no event, transaction
or condition has occurred or exists that could reasonably be expected to
result in the incurrence of any such liability by the Company, any
Subsidiary or any ERISA Affiliate, or in the imposition of any Lien on any
of the rights, properties or assets of the Company, any Subsidiary or any
ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to
such penalty or excise tax provisions or to Section 401(a)(29) or 412 of
the Code, other than such liabilities or Liens as individually or in the
aggregate could not reasonably be expected to have a Material Adverse
Effect.
(2) The present value of the aggregate benefit liabilities under each of
the Plans (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most recent
actuarial valuation report, did not exceed the aggregate current value of
the assets of such Plan allocable to such benefit liabilities. The term
"benefit liabilities" has the meaning specified in section 4001 of ERISA
and the terms "current value" and "present value" have the meaning
specified in Section 3 of ERISA.
(3) The Company, its Subsidiaries and its ERISA Affiliates have not
incurred withdrawal liabilities (and are not subject to contingent
withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate could reasonably
be expected to have a Material Adverse Effect.
(4) The expected postretirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance
with Financial Accounting Standards Board Statement No. 106, without regard
to liabilities attributable to continuation coverage mandated by section
498B of the Code) of the Consolidated Group is not Material.
(5) The execution and delivery of the Transaction Documents, the issuance
and sale of the Notes and the consummation of the transactions contemplated
by the Agreement will not involve a transaction which is subject to the
prohibitions of Section 406 of ERISA or in connection with which a Tax
could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The
representation in the preceding sentence is made in reliance upon and
subject to the accuracy of the Purchasers' representations in PARAGRAPH
9(ii) as to the source of the funds to be used to pay the purchase price of
the Notes.
811. GOVERNMENTAL AND OTHER CONSENTS. Except as set forth on SCHEDULE 8K, no
consent, approval or authorization of, or registration, filing or declaration
with, any Governmental Authority or any other Person (including without
limitation, any creditor, lessor, or stockholder of the Company or any
Subsidiary) is required in connection with the execution, delivery or
performance by the Company of this Agreement or the other Transaction Documents
or the Company's offer, issuance and sale of the Notes.
812. ENVIRONMENTAL MATTERS. To the knowledge of the Company, there are no
claims and the Company has not received any notice of any claim, and no
proceeding has been instituted raising any claim, against the Company or any
Subsidiary or any real properties now or formerly owned, leased or operated by
the Company or any Subsidiary or other assets, alleging any damage to the
environment or violation of any Environment Laws, except, as could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. Except as otherwise disclosed in SCHEDULE 8L:
(1) to the knowledge of the Company, there are no facts which would give
rise to any claim, public or private, of violation of Environmental Laws or
damage to the environment emanating from, occurring on or in any way
related to real properties now or formerly owned, leased or operated by the
Company or any Subsidiary or relating to the
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Company's or any Subsidiary's other assets or their use, except, as could
not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect;
(2) neither the Company nor any Subsidiary has stored any Hazardous
Materials on real properties now or formerly owned, leased or operated by
the Company or any Subsidiary or disposed of any Hazardous Materials in
violation of any Environmental Laws, except as could not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse
Effect; and
(3) all buildings and operations conducted on all real properties now
owned, leased or operated by the Company or any Subsidiary are in
compliance with applicable Environmental Laws, except where such failure to
comply could not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect.
813. LABOR RELATIONS. There is not now pending, or to the knowledge of the
Company, threatened, any strike, work stoppage, work slow down, or material
grievance or other material dispute between the Company or any Subsidiary and
any bargaining unit or significant number of the Company's or such Subsidiary's
employees.
814. FINANCIAL CONDITION. After giving effect to the transactions
contemplated hereby, (i) the aggregate present fair saleable value of the assets
of the Company will be greater than the amount that will be required to pay the
probable liabilities of the Company on its debts, including contingent
liabilities, as they become absolute and mature; (ii) the Company has (and has
no reason to believe that it will not have) sufficient capital for the conduct
of its business; and (iii) the Company does not intend to incur, or believe it
has incurred, debts beyond its ability to pay as they mature.
815. DISCLOSURE. The Transaction Documents, the Memorandum, the Financial
Statements and the other documents, certificates and statements furnished to the
Purchasers by or on behalf of the Company or any Subsidiary in connection
herewith do not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances under which they were made, not
misleading. To the knowledge of the Company, there is no fact with respect to
its business which is reasonably expected to have a Material Adverse Effect and
which has not been described in this Agreement or otherwise disclosed in writing
to the Purchasers by the Company.
816. STATUS UNDER CERTAIN FEDERAL STATUTES. Neither the Company nor any
Subsidiary is subject to regulation under the Investment Company Act of 1940, as
amended, the Public Utility Holding Company Act of 1935, as amended, the
Interstate Commerce Act, as amended, or the Federal Power Act, as amended.
Neither the sale of the Notes hereunder nor the use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto.
817. EXISTING INDEBTEDNESS; FUTURE LIENS. SCHEDULE 8Q sets forth a complete
and correct list of all outstanding Debt which individually or in the aggregate
to any single lender or group of lenders in a related transaction is in excess
of $100,000 of the Company and each Subsidiary as of the Closing Date. Neither
the Company nor any Subsidiary is in default and no waiver of default is
currently in effect, in the payment of any principal or interest on any such
Debt of the Company and each Subsidiary and no event or condition exists with
respect to any such Debt of the Company and each Subsidiary that would permit
(or that with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Debt to become due and payable before its stated maturity
or before its regularly scheduled dates of payment. Neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by PARAGRAPH 6C(1).
As of the Closing Date, after the application of
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the proceeds of the Notes as set forth in PARAGRAPH 5J, the ratio of
Consolidated Total Debt to Consolidated Total Capitalization and the ratio of
Priority Debt to Consolidated Net Worth will not exceed the ratios set forth
therefor, respectively, in PARAGRAPHS 6A(3) and 6A(4).
818. COMPLIANCE WITH LAWS, ETC. The Company and each Subsidiary are in
compliance with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority (including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, ERISA and any
Environmental Laws), and has in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
its properties or to the conduct of its businesses, in each case to the extent
necessary to reasonably ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failure to have in effect such licenses,
permits, franchises and other governmental authorizations do not, and could not
reasonably expected to, individually and in the aggregate, have a Material
Adverse Effect.
9. REPRESENTATIONS OF THE PURCHASERS. Each Purchaser represents that:
(1) It is purchasing its Notes for its own account or for one or more
separate accounts maintained by it or for the account of one or more
pension or trust funds, in each case for investment and not with a view to
the distribution thereof or with any present intention of distributing or
selling any of its Notes, provided that the disposition of such Purchaser's
property shall at all times be within its control, subject to compliance
with applicable law. The Company acknowledges that a Purchaser's sale of
all or a portion of its Notes to one or more Qualified Institutional Buyers
in compliance with Rule 144A would not be a breach of this representation.
(2) With respect to each source of funds to be used by it to pay the
purchase price of its Notes (respectively, the "SOURCE"), at least one of
the following statements is accurate as of the Closing Date:
(A) The Source is an "insurance company general account" within
the meaning of Department of Labor Prohibited Transaction Exemption
("PTE") 95-60 (issued July 12, 1995) and there is no "employee benefit
plan" (within the meaning of Section 3(3) of ERISA or Section
4975(e)(1) of the Code and treating as a single plan all plans
maintained by the same employer or employee organization) with respect
to which the amount of the general account reserves and liabilities
for all contracts held by or on behalf of such plan exceed ten percent
(10%) of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth
in the NAIC Annual Statement filed with the state of domicile of the
Purchaser; or
(B) The Source is either (1) an insurance company pooled
separate account and the purchase is exempt in accordance with PTE 90-
1 (issued January 29, 1990), or (2) a bank collective investment fund,
within the meaning of PTE 91-38 (issued July 21, 1991) and, except as
such Purchaser has disclosed to the Company in writing pursuant to
this CLAUSE (B), no employee benefit plan or group of plans maintained
by the same employer or employee organization beneficially owns more
than 10% of all assets allocated to such pooled separate account or
collective investment fund; or
(C) The Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained
by the same employer or by an affiliate (within the meaning of Section
V(c)(1) of the QPAM Exemption) of such employer or by the same
employee
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organization and managed by such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions of Part I(c) and (g) of
the QPAM Exemption are satisfied, neither the QPAM nor a person
controlling or controlled by the QPAM (applying the definition of
"control" in Section V(e) of the QPAM Exemption) owns a 5% or more
interest in the Company and (i) the identity of such QPAM and (ii) the
names of all employee benefit plans whose assets are included in such
investment fund have been disclosed to the Company in writing pursuant
to this CLAUSE (C); or
(D) The Source is a "governmental plan" as defined in Title I,
Section 3(32) of ERISA; or
(E) The Source is one or more plans or a separate account or
trust fund comprised of one or more plans each of which has been
identified to the Company in writing pursuant to this CLAUSE (E); or
(F) The Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this PARAGRAPH 9, the terms "plan" and "plans" have the meaning
assigned to such terms in Title I, Section 3(3) of ERISA.
10. DEFINITIONS. For the purposes of this Agreement, the following terms shall
have the respective meanings specified with respect thereto:
"AFFILIATE" means, at any time and as to any Person, any other Person
(including in the case of a Member, another Member) directly or indirectly (i)
controlling, controlled by, or under common control with, such Person or (ii)
beneficially owning or holding, directly or indirectly, 10% or more of the
Equity Interest or Voting Stock of such Person, or (iii) of which such Person
beneficially owns or holds, directly or indirectly, 10% or more of the Equity
Interest or Voting Stock of such other Person, as well as, in the case of an
individual, such individual's spouse, issue, parents, siblings and issue of
siblings (in each case by blood, adoption or marriage). A Person shall be
deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"AGREEMENT" means this Note Purchase Agreement as it may from time to time
be amended in accordance with PARAGRAPH 11C.
"APPROVED AUDITOR" means Deloitte & Touche, Arthur Anderson & Co., Coopers
& Lybrand, Ernst & Young, KPMG, Peat Marwick or Price Waterhouse or any
successor to any of them.
"ASSET SOLD" or "ASSETS SOLD" has the meaning specified in PARAGRAPH
6C(3)(VI).
"BANKRUPTCY PETITION" has the meaning specified in PARAGRAPH 7A(IX).
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on
which commercial banks in New York, New York are required or authorized to be
closed.
"CAPITALIZED LEASE" means any lease of property (whether real, personal or
mixed), as to which the lessee is required, in accordance with GAAP, to
recognize, concurrently, the acquisition of an asset and the incurrence of a
liability.
"CAPITALIZED LEASE OBLIGATION" means any rental obligation under a
Capitalized Lease, taken at the amount thereof that is accounted for as
indebtedness (net of interest expense) in accordance with GAAP.
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"CLOSING" and "CLOSING DATE" have the meanings specified in PARAGRAPH 2B.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time and the rules and regulations promulgated thereunder as from time to time
in effect.
"COMPANY" has the meaning specified in the FIRST PARAGRAPH of this
Agreement.
"CONFIDENTIAL INFORMATION" has the meaning specified in PARAGRAPH 11G.
"CONSOLIDATED EBITA" means for any period the amount of which is to be
determined, Consolidated Net Income for such period plus (but only to the extent
such amounts were deducted in the computation of Consolidated Net Income) (i)
Consolidated Interest Expense, (ii) income tax expense (including deferred
income tax expense) and (iii) amortization expense of the Consolidated Group for
such period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED GROUP" means the Company and each of its Subsidiaries and if
the context so requires, the Company and its Subsidiaries, taken as a whole.
"CONSOLIDATED INTEREST EXPENSE" means for any period the amount of which is
to be determined, the aggregate interest charges of the Consolidated Group
(including without limitation that portion of any obligation under Capitalized
Leases allocable to interest expense) on any Debt for such period (without
regard to any limitation on the payment thereof) as determined in accordance
with GAAP.
"CONSOLIDATED NET INCOME" means for any period the amount of which is to be
determined, the Net Income of the Consolidated Group determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED NET WORTH" means as of any date the amount of which is to be
determined, Consolidated Total Assets minus total Liabilities of the
Consolidated Group determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TOTAL ASSETS" means, as of any date the amount of which is to
be determined, the total assets of the Consolidated Group determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED TOTAL CAPITALIZATION" means, as of any date the amount of
which is to be determined, Consolidated Net Worth plus (but only to the extent
such amount was deducted in the computation of Consolidated Net Worth)
Consolidated Total Debt for such period.
"CONSOLIDATED TOTAL DEBT" means, as of any date the amount of which is to
be determined, all Debt of the Consolidated Group determined on a consolidated
basis in accordance with GAAP.
"DEBT" means, as applied to any Person without duplication, (i) obligations
of such Person for borrowed money, (ii) obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) obligations of such
Person to pay the deferred purchase price of property or services (other than
current Trade Payables to be paid in accordance with customary practices), (iv)
Capitalized Lease Obligations of such Person, (v) obligations of such Person to
reimburse any other Person in respect of amounts paid under a letter of credit
or similar instrument, (vi) obligations with respect to Interest Rate Agreements
and currency swaps and similar obligations requiring such Person to make
payments, whether periodically or upon the happening of a contingency, except
that if any agreement relating to such obligations provides for the netting of
amounts payable by and to such Person thereunder, or if any such agreement
provides for the simultaneous payment of amounts by and to such Person, then, in
each such case, the amount of such obligations shall be the net amount thereof,
(vii) any obligations secured by (or for which the holder of such obligation has
an existing right, contingent or otherwise, to be secured by) a Lien on any
asset of such
26
<PAGE>
Person, whether or not such obligation is assumed by such Person, the amount of
such obligation being deemed to be the lesser of the fair market value of such
asset or the amount of the obligation so secured, (viii) any recourse
obligations of such Person in connection with a sale of receivables, (ix)
Guaranties by such Person of Debt of others, and (x) any outstanding Preferred
Stock of a Subsidiary of such Person (other than Preferred Stock owned
beneficially and of record by such Person or a Wholly-Owned Subsidiary of such
Person) and any outstanding Redeemable Preferred Stock of such Person.
"DEFAULT" means any occurrence or condition which with the giving of notice
or the passage of time, or both, and remaining uncured after the expiration of
any applicable grace period would be an Event of Default.
"DISPOSITION" has the meaning specified in PARAGRAPH 6C(3)(VI).
"ENVIRONMENTAL LAWS" means any and all Federal, state and local statutes,
laws, regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"EQUITY INTEREST" means as to any Person, the capital stock or other equity
or beneficial interest in such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder,
as from time to time in effect.
"ERISA AFFILIATE", for Plan purposes, means, with respect to any Person,
any trade or business, whether or not incorporated, which, is treated as a
single employer together with such Person under section 414 of the Code.
"EVENT OF DEFAULT" has the meaning specified in PARAGRAPH 7A.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time and the rules and regulations promulgated thereunder, as from time
to time in effect.
"EXPENSES" has the meaning specified in PARAGRAPH 11B.
"FINANCIAL STATEMENTS" has the meaning specified in PARAGRAPH 8C.
"FOREIGN TAXES" has the meaning specified in PARAGRAPH 11A.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"GOVERNMENTAL AUTHORITY" means (a) the governments of (i) the United States
of America and its states and political subdivisions, and (ii) any other
jurisdiction in which the Company or any Subsidiary conducts all or any part of
its business, or which asserts jurisdiction over any properties of the Company
or any Subsidiary, and (b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to, any such
government or jurisdiction.
"GUARANTY", as applied to any Person, means any direct or indirect
liability, contingent or otherwise, of such Person with respect to any Debt of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in the
ordinary course of business) or discounted or sold with recourse by such Person,
or in respect of which such Person is otherwise directly or indirectly liable,
including, without limitation,
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<PAGE>
any such obligation in effect guaranteed by such Person through any agreement
(contingent or otherwise) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to advance to or provide funds for the
payment or discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise), or to maintain the working
capital, equity capital, net worth, solvency or any balance sheet or other
financial condition of the obligor of such obligation, or to make payment for
any securities, products, materials or supplies or for any transportation or
services without regard to the non-delivery or nonfurnishing thereof, or that
any agreements relating thereto will be complied with, or that the holders of
such obligation will be protected against loss in respect thereof. The amount of
any Guaranty shall be deemed to be equal to the lower of (a) the amount of the
obligation guaranteed and (b) the maximum amount for which such Person may be
contingently liable pursuant to the terms of the instrument evidencing such
Guaranty, unless such guaranteed obligation and the amount for which such Person
may be liable are not stated or determinable, in which case the amount of such
Guaranty shall be the maximum reasonably anticipated liability for which such
Person is contingently liable in respect thereof as determined by such Person in
good faith (but in any event not less than the amount which is, or would
otherwise be required, in accordance with GAAP, to be reflected in such Person's
balance sheet or the notes thereto) as the amount of such obligation.
"HAZARDOUS MATERIALS", at any time, shall mean any substance: the presence
of which at such time requires notification, investigation, monitoring or
remediation under any Environmental Law; which at such time is defined as a
"hazardous waste", "hazardous material", "hazardous substance", "toxic
substance", "pollutant" or "contaminant" under any Environmental Law, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.) and any applicable local statutes
-- ---
and the regulations promulgated thereunder; or without limitation, which
contains gasoline, diesel fuel or other petroleum products, asbestos or
polychlorinated biphenyls.
"HOLDER" means any Person at the time shown as the holder of a Note on the
register referred to in PARAGRAPH 110.
"INSTITUTIONAL INVESTOR" means any bank, savings institution, trust
company, insurance company, investment company, pension or profit sharing trust
or other financial institution or institutional buyer, regardless of legal form.
"INTANGIBLES" means all Intellectual Property, goodwill and all other
assets or property classified as intangibles in accordance with GAAP.
"INTELLECTUAL PROPERTY" means all patents, copyrights, trademarks, trade
names, service marks or other intellectual or industrial property rights.
"INTEREST RATE AGREEMENT" means, with respect to any Person, any one or
more of the following agreements entered into by such Person with one or more
financial institutions: interest rate protection agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements)
and/or other types of interest rate hedging agreements obligating such Person to
make payments, whether periodically or upon the happening of a contingency. The
amount of the obligation under any Interest Rate Agreement shall be the amount
determined in respect thereof as of the end of the then most recently ended
fiscal quarter of such Person, based on the assumption that such Interest Rate
Agreement had terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such Interest Rate Agreement
provides for the netting of amounts payable by and to such Person thereunder or
if any such agreement provides for the simultaneous payment of amounts by and to
such Person, then in each such case, the amount of such obligation shall be the
net amount so determined.
"INVESTMENT" means as to any Person (the "Investor"), (i) any loan or
advance or extension of credit by the Investor to or for the benefit of another
Person; (ii) the incurrence, assumption or guarantee by the Investor of, or
grant of credit support by the Investor for, any financial obligation
28
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of another Person to the extent such financial obligation does not otherwise
constitute Debt of the Investor; or (iii) the ownership, purchase or acquisition
or other investment by the Investor in any stock, obligations or securities of,
or any other Equity Interest in (including without limitation any Equity
Interest in any partnership, association, joint venture or other organization,
whether or not a legal entity) any other Person, or (iv) any capital
contribution by the Investor to any other Person.
"KNOWLEDGE OF THE COMPANY" means the actual knowledge of any Senior Officer
of the Company.
"LIABILITIES" means, with respect to any Person, all obligations of such
Person which, in accordance with GAAP, would be shown on the liabilities side of
the balance sheet of such Person, including without limitation, all Trade
Payables.
"LIEN" means any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on the common law, statute, court decision or contract, and including,
without limitation, any mortgage, pledge, security interest, lease, encumbrance,
lien, purchase option, call or right, or charge of any kind (including any
agreement to give or permit any of the foregoing), any conditional sale or other
title retention agreement, any Capitalized Lease, and the filing of, or
agreement to give or permit the filing on its behalf, of any financing statement
under the Uniform Commercial Code or personal property security interest
legislation of any jurisdiction.
"MATERIAL" means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Company or the
Consolidated Group taken as a whole.
"MATERIAL ADVERSE EFFECT" means, (i) any material adverse effect on the
Company's business, assets, liabilities, financial condition or results of
operations, (ii) any material adverse effect on the Consolidated Group's
business, assets, liabilities, financial condition or results of operations
taken as a whole, and (iii) any adverse effect, WHETHER OR NOT MATERIAL, on the
binding nature, validity or enforceability of any Transaction Document as the
obligation of any party thereto and (iv) any material adverse effect on the
ability of the Company to perform its obligations under any Transaction Document
applicable to it or on the ability of any Subsidiary to comply with the
provisions of the Transaction Documents.
"MEMORANDUM" means the Confidential Private Placement Memorandum dated
August, 1997 prepared by Dillon, Read & Co., Inc. on the basis of information
supplied by the Company.
"MULTIEMPLOYER PLAN" means any plan which is a "multiemployer plan" as such
term is defined in section 4001(a)(3) of ERISA.
"NAIC" means the National Association of Insurance Commissioners.
"NET INCOME" means as to any Person, for any period for which the amount
thereof is to be determined, gross revenues of such Person less all operating
and non-operating expenses of such Person including all charges of a proper
character (including current and deferred Taxes on income, provision for Taxes
on unremitted foreign earnings which are included in gross revenues,
amortization, depreciation and current additions to reserves), but not including
in gross revenues any gains (net of expenses and Taxes applicable thereto) in
excess of losses resulting from the sale, conversion or other disposition of
assets (other than inventory in the ordinary course of such Person's business),
any earnings or losses attributable to any other Person, any gains arising from
transactions of a non-recurring and material nature, any gains arising from the
sale or discontinuation of operations, any gains resulting from the write-up of
assets, any equity of such Person in the unremitted earnings of any other
corporation or any earnings of any other Person acquired by such Person through
purchase, merger or consolidation or otherwise, earned prior to acquisition, all
determined in accordance with GAAP.
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"NET PROCEEDS OF ELIGIBLE CAPITAL STOCK" means the net cash proceeds (net
of all costs and out-of-pocket expenses including underwriting and brokerage
fees and expenses) from sales, after December 31, 1996, of (i) any class or
series of the Equity Interest of the Company other than Redeemable Preferred
Stock; (ii) any warrants, options or similar rights (other than any Debt) to
purchase or convertible into shares of Equity Interest of the Company other than
Redeemable Preferred Stock; and (iii) Debt (including Redeemable Preferred
Stock) convertible into any class or series of Equity Interest of the Company
other than Redeemable Preferred Stock if such Debt has then been so converted,
provided, the net cash proceeds from the sale of such Debt shall be increased by
- --------
any amount paid to the Company to convert such Debt and reduced by the aggregate
amount of interest or dividends paid on such Debt through the date of
conversion.
"NOTES" has the meaning specified in PARAGRAPH 1A.
"OFFICERS' CERTIFICATE" means a certificate signed in the name of the
Company by any two Senior Officers.
"PBGC" means the Pension Benefit Guaranty Corporation or any other
Governmental Authority succeeding to any of its functions.
"PERSON" means and includes an individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust and any other form of
business organization (whether or not a legal entity), or any Governmental
Authorities.
"PLAN" means an "employee pension benefit plan" (as defined in Section 3 of
ERISA) which is or within the preceding five years has been established or
maintained, or to which contributions are or have been made, by the Company or
any Subsidiary or any ERISA Affiliate, or for which the Consolidated Group or
any ERISA Affiliate may have any liability.
"PREFERRED STOCK" means as to any Person, any Redeemable Preferred Stock
and any other class or series of Equity Interest of such Person that has a
priority as to the payment of any dividends or distributions over the holders of
the most junior class of Equity Interest of such Person.
"PRIORITY DEBT" means, without duplication, (i) all Debt of the Company
secured by any Lien (other than Liens otherwise permitted pursuant to PARAGRAPH
6C(1)(XII)) on any property owned by the Company or any Subsidiary and (ii) all
Debt of the Subsidiaries (other than Debt owed solely to the Company or a
Wholly-Owned Subsidiary).
"PROJECTIONS" has the meaning specified in PARAGRAPH 8C.
"PURCHASER" and "PURCHASERS" have the meaning specified in PARAGRAPH 2A.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued
by the United States Department of Labor on March 13, 1984 as corrected October
10, 1985.
"QUALIFIED INSTITUTIONAL BUYER" means a qualified institutional buyer, as
defined in Rule 144A.
"REDEEMABLE PREFERRED STOCK" means any class or series of Equity Interest
which has fixed payment or redemption obligations due and payable prior to the
final scheduled due date for the repayment of principal of the Notes or is
redeemable at the option of the holder, unless such fixed payment obligations or
repurchase obligations on exercise of such redemption option can be satisfied,
at the election of the issuer, through the issuance of shares of its most junior
class of Equity Interest.
"REQUIRED HOLDERS" means the Holder or Holders of more than 50% of the
aggregate principal amount of the Notes at the time outstanding.
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"RESTRICTED INVESTMENTS" means any Investment other than:
(1) prime commercial paper maturing not more than 270 days from the date
of issuance, having as at the date of acquisition a rating or at least A-1 (or
the existing equivalent) from Standard & Poor's Ratings Group or at least P-1
(or then existing equivalent) from Moody's Investors Service, Inc. and issued by
a corporation organized in any state of the United States of America, Canada,
any European economic community country or Japan;
(2) securities issued or directly and fully and unconditionally
guaranteed or insured by the United States of America or any agency thereof
backed by the full faith and credit of the United States of America other than
derivative securities such as mortgage-backed "IOS" or "POS" and mortgage pass-
through certificates and similar investments;
(3) time deposits, or certificates of deposit denominated in United
States dollars maturing within one year from the date of acquisition issued by
commercial banks which are (a) members of the Federal Reserve System and
chartered under the laws of the United States of America or any state or the
District of Columbia, whose long-term certificates of deposit and long-term
unsecured debt is rated at least A (or then existing equivalent) by Standard &
Poor's Ratings Group, Duff & Phelps Credit Rating Co. or Fitch Investors'
Service Incorporated and at least A-2 (or then existing equivalent) by Moody's
Investors Service, Inc. and having capital and surplus in excess of
$1,000,000,000 or (b) organized under the laws of Canada, any European Economic
Community country or Japan or any other country whose commercial paper is rated
an A-1 or better by Standard & Poor's Ratings Group or P-1 or better by Moody's
Investors Service, Inc. or whose long term debt is rated AA or better by
Standard & Poor's Ratings Group or Aa2 or better by Moody's Investors Service,
Inc. and has capital, surplus and undivided profits aggregating at least
$1,000,000,000;
(4) Investments in master note or deposit arrangements with securities
of the types described in (i) through (iii) above;
(5) Investments in money market programs of investment companies
registered as such with the Securities and Exchange Commission which, at the
time of acquisition, is rated (or if such money market programs are not rated,
the substantial majority of the underlying investments of such investment
company are rated) A-1 or better by Standard & Poor's Ratings Group or P-1 or
better by Moody's Investors Service, Inc. or provided that such money market
programs invest only in Investments of the types described in (i) through (iii)
above;
(6) Investments in repurchase agreements having terms of not more than
365 days, with a bank, trust company or other financial institution whose long-
term unsecured debt, at the time of acquisition of such Investment, is rated A
or better by Standard & Poor's Ratings Group, Duff & Phelps Credit Rating Co. or
Fitch Investors' Service Incorporated, or A2 or better by Moody's Investors
Service, Inc.;
(7) Investments of the types decribed in (i), (iii) and (vi) above but
of a longer duration than as set forth in such clauses if such Investment is
otherwise required to be made in order to comply with an applicable law, rule,
regulation or reserve requiremnt of a Governmental Authority;
(8) Investments in (a) Interest Rate Agreements designed to protect the
Company or any Subsidiary against fluctuations in interest rates in respect of
Debt incurred or to be incurred by the Company or any Subsidiary, which
obligations do not exceed the aggregate principal amount of such Debt, or (b)
Interest Rate Agreements to protect the Company or any Subsidiary against
fluctuations in the value of Investments in fixed-income securities which were
acquired in the ordinary course of business provided in either case (1) the
long-term senior unsecured Debt of the counterparty thereto is rated A- or
better by Standard & Poor's Ratings Group or A3 or better by Moody's Investors
Service, Inc. at the time the Investment is made and (2) the underlying Debt or
Investment being so protected is otherwise not prohibited by this Agreement;
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(9) Investments in existence on the Closing Date and set forth on
SCHEDULE 6B;
(10) Investments in joint ventures or minority equity positions of Person
engaged in the same business of the Company and its Subsidiaries provided if
after giving effect thereto, the aggregate amount so invested by the Company and
its Subsidiaries in such Investments after the Closing Date does not exceed at
any time, in the aggregate, $10,000,000;
(11) endorsement of negotiable instruments for collection and ownership
of accounts receivable acquired in the ordinary course of business;
(12) demand deposits in banks in the ordinary course of business (not for
investment purposes);
(13) Investments in the Company or a Subsidiary which at the time is a
Wholly-Owned Subsidiary; and
(14) Investments in any Person that concurrently with such Investment
becomes a Wholly-Owned Subsidiary provided no Default or Event of Default exists
immediately before or immediately after such Investment or would reasonably be
expected to result therefrom.
"RESTRICTED PAYMENTS" means
(i) the declaration, payment or making, directly or indirectly, of any
dividend, payment or other distribution on or in respect of any Equity Interest
of the Company or any Subsidiary (other than the payment of a dividend, payment
or other distribution to the Company or Wholly-Owned Subsidiary or payments
solely in common stock of the Company) or the setting apart of any funds or
property therefor, or
(ii) the making of any payment on account of the purchase, redemption,
retirement or other acquisition, direct or indirect, of any Equity Interest of
the Company or any Subsidiary (other than any such Equity Interest owned by the
Company or a Wholly-Owned Subsidiary) including without limitation, the
forgiveness or foreclosure by the issuer of any Debt secured by a pledge of such
capital stock or owed to the Company or any Subsidiary by a holder of Equity
Interest of the Company or a Subsidiary, or
(iii) or any payment, repayment, redemption, retirement, repurchase or
other acquisition, direct or indirect, by the Company or any Subsidiary of, on
account of, or in respect of, any Subordinated Debt (or any installment thereof)
prior to the regularly scheduled maturity date thereof (as in effect on the date
such Debt was originally incurred) or during the continuance of any Default or
after the occurrence of an Event of Default.
"RULE 144A" means Rule 144A promulgated under the Securities Act and
including any successor rule thereto, as such rule may be amended from time to
time.
"SEC" means the United States Securities and Exchange Commission, or any
Governmental Authority succeeding to the functions of such Commission in the
administration of the Securities Act and/or the Exchange Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations promulgated thereunder, as from time to time
in effect.
"SENIOR OFFICER" means the Chairman of the Board, the President, Chief
Executive Officer, any Senior Vice President, Chief Financial Officer, Treasurer
or principal Accounting Officer of the Company or any other individual, whether
or not an officer, who performs similar functions, on behalf of the Company.
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"SPECIAL COUNSEL" means the law firm of Sullivan & Worcester or such other
firm of legal counsel as the Purchasers may from time to time designate as their
Special Counsel for the purposes of this Agreement or any matters related
hereto.
"SUBSIDIARY" means, as to any Person, any corporation, association or other
business entity in which such Person and/or one or more of its Subsidiaries
collectively owns more than 50% of the Voting Stock of such entity, and any
partnership or joint venture if more than a 50% interest in the profits or
capital thereof is collectively owned by such Person and/or one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person and/or one or more of
its Subsidiaries).
"SUBORDINATED NOTES" means notes of the Company of up to $17,500,000 in
aggregate principal amount which (i) are convertible into common stock of the
Company; (ii) are unsecured; (iii) have a final maturity and, as of the date of
issue, an average remaining life, longer than the final maturity and then
average remaining life of the Notes; and (iv) are otherwise subordinated to the
Notes on terms and conditions reasonably satisfactory to the Required Holders.
"TAXES" means any and all present or future taxes, assessments, stamps,
duties, fees, levies, imposts, deductions, withholdings or other governmental
charges of any nature whatsoever and any liabilities with respect thereto,
including any surcharge, penalties, additions to tax, fines or interest thereon,
now or hereafter imposed, levied, collected, withheld or assessed by any
government or taxing authority of any country or political subdivision of any
country, or any international taxing authority.
"TRADE PAYABLES" means amounts payable to suppliers of goods and services
in the ordinary course of a Person's business.
"TRANSACTION DOCUMENTS" means this Agreement and the Notes.
"TRANSFEREE" means any direct or indirect transferee of all or any part of
the Notes.
"VOTING STOCK" means any securities of any class of a Person whose holders
are entitled under ordinary circumstances to vote for the election of directors
of such Person (or Persons performing similar functions) (irrespective of
whether at the time securities of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).
"WHOLLY-OWNED SUBSIDIARY" means any Subsidiary of the Company all of the
voting power of all classes of the Voting Stock and all of the beneficial
ownership of which is owned directly or indirectly by the Company through one or
more other Wholly-Owned Subsidiaries.
11. MISCELLANEOUS.
111. PAYMENTS.
111(1). PAYMENTS IN RESPECT OF NOTES. The Company agrees that, so long
as a Purchaser shall hold any Notes, all payments in respect of such Notes,
required by the terms thereof or otherwise by this Agreement, will be made in
compliance with the applicable terms thereof or hereof and by wire transfer to
such Purchaser of immediately available funds for credit to the account or
accounts as specified in the EXHIBIT A for such Purchaser, or such other account
or accounts in the United States as a Purchaser may designate in writing,
notwithstanding any contrary provision in this Agreement or the Notes, with
respect to the place of payment. Each Purchaser agrees that, before disposing of
any Note, it will make a notation thereon (or on a schedule attached thereto) of
all principal payments previously made and of the date to which interest has
been paid. The Company agrees to afford the benefits of this PARAGRAPH 11A to
any
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Holder which shall have made the same agreement in writing as the Purchasers
have made in this PARAGRAPH 11A.
111(2). NO DEDUCTION OR SET-OFF. The obligation of the Company to pay
principal, interest, dividends, Make Whole Amounts and any other amounts under
the Transaction Documents owed by the Company shall be absolute and
unconditional and shall not be affected by any circumstances, including without
limitation any set-off, counterclaim, recoupment, defense or other right which
the Company may have against a Purchaser or any Transferee for any reason
whatsoever. 11(1).
111(3). PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or Make-Whole
Amount or interest on any Note that is due on a date other than a Business Day
shall be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the interest payable on such next
succeeding Business Day.
112. EXPENSES. Whether or not the transactions provided for hereby shall be
consummated, the Company will pay on demand and save each Purchaser and its
Transferees harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions and in connection with any
subsequent modification of, or consent under, the Transaction Documents, whether
or not such transactions are consummated or modification shall be effected or
consent granted ("EXPENSES"), including (i) the reasonable fees and expenses of
Special Counsel and its agents and of any other special or local counsel or
other special advisers engaged and reasonably required by the Purchasers in
connection with the transactions contemplated by this Agreement; provided the
Company shall not be liable for the fees and expenses of more than one Special
Counsel in any single matter, (ii) the costs of obtaining the private placement
number from Standard & Poor's Ratings Group for the Notes (iii) the costs and
expenses, including reasonable attorneys' fees and the fees of any other special
or financial advisers, incurred in enforcing and defending and, during the
continuance of a Default or after the occurrence of an Event of Default,
monitoring or evaluating any rights under the Transaction Documents (including,
without limitation, any costs, expenses or fees incurred in connection with
perfecting or maintaining perfection of any Lien hereafter existing in favor of
the Purchasers or any of their Transferees as security for the obligations of
the Company under the Transaction Documents or maintaining or protecting the
collateral which is the subject of such Lien) or in responding to any subpoena
or other legal process issued in connection with the Transaction Documents or
the transactions provided for hereby or thereby or by reason of a Purchaser or
any Transferee having acquired any of its Notes, and (iv) the costs and expenses
incurred in connection with any bankruptcy or insolvency of the Company or any
Subsidiary or in connection with any workout or restructuring of any of the
transactions contemplated by the Transaction Documents. The Company will pay
and will save each Purchaser and its Transferees from all claims in respect of
any fees, costs or expenses, if any, of any brokers and finders not retained by
such Purchaser or Transferee. The obligations of the Company under this
PARAGRAPH 11B shall survive the transfer of any of its Notes or any interest
therein by a Purchaser or any Transferee and the payment of any Notes.
113. CONSENT TO AMENDMENTS. No Transaction Document may be amended, and the
Company may not take any action herein prohibited, or omit to perform any act
herein required to be performed by it, without the written consent of the
Required Holders, except that no decrease in the interest rate of, or Make Whole
Amount payable on, the Notes or change to the mandatory repayment of the Notes
as provided in PARAGRAPH 4B or any change to this PARAGRAPH 11C shall be made
without the written consent of all Holders. Each Holder at the time or
thereafter shall be bound by any amendment or waiver authorized by the Required
Holders in accordance with this PARAGRAPH 11C whether or not its Notes are
marked to reflect such amendment or waiver. No such amendment or waiver will
extend to or affect any obligation, covenant, agreement, Default or Event of
Default not expressly amended or waived or impair any right consequent thereon.
No course of
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dealing between the Company or any Subsidiary and any Holder nor any delay in
exercising any rights under any Transaction Document shall operate as a waiver
of any rights of any Holder.
114. PERSONS DEEMED OWNERS; PARTICIPATIONS. The Company may treat the Person
at the time shown on the register referenced in PARAGRAPH 11O in whose name any
Note, is issued as the owner and holder of such Note for the purpose of
receiving payment on or in respect of such Note and for all other purposes
whatsoever, and the Company shall not be affected by notice to the contrary.
Subject to the preceding sentence, a Holder may from time to time grant
participations in all or any part of its Notes to any Person on such terms and
conditions as may be determined by such Holder in its sole and absolute
discretion; provided that the Company shall not be obligated to make payments
other than as directed by a Holder pursuant to PARAGRAPH 11A.
115. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations, warranties and indemnities contained in any Transaction
Document or made in any other writing by or on behalf of the Company in
connection herewith shall survive the execution and delivery of such Transaction
Document or other writing, the transfer by a Purchaser of any Notes or portion
thereof or interest therein and the payment of any Notes and may be relied upon
by any Transferee as having been true when made, regardless of any investigation
made at any time by or on behalf of the Purchasers or any Transferee. All
statements contained in any certificate or other instrument delivered by or on
behalf of the Company or any Subsidiary pursuant to any Transaction Document
shall be deemed representations and warranties of the Company under this
Agreement and not of the individuals executing such certificates or other
instruments on behalf of the Company or such Subsidiary. Subject to the
preceding sentence, the Transaction Documents embody the entire agreement and
understanding between the Purchasers and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof and thereof.
116. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of such party
(including, without limitation, any Transferee) whether so expressed or not;
provided except as expressly permitted by this Agreement, the Company may not
- --------
delegate the performance of any of its obligations hereunder.
117. CONFIDENTIAL INFORMATION. For the purposes of this paragraph,
"CONFIDENTIAL INFORMATION" means information delivered to a Purchaser by or on
behalf of the Company or a Subsidiary in connection with the transactions
contemplated by or otherwise pursuant to this Agreement, whether in the past,
present or future, that is proprietary in nature and that was clearly marked or
labeled or otherwise adequately identified when received by the Purchaser as
being confidential information of the Company or a Subsidiary, provided that
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such term does not include information that (a) was publicly known or otherwise
known to the Purchaser prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by the Purchaser, (c)
otherwise becomes known to the Purchaser other than through disclosure by the
Company, any Subsidiary or any of their directors, officers or employees or (d)
constitutes financial statements delivered to the Purchaser under PARAGRAPH 5A
that are otherwise publicly available. Each Purchaser will maintain the
confidentiality of such Confidential Information in accordance with the
procedures adopted by it in good faith to protect confidential information of
third parties delivered to it. Notwithstanding the foregoing, a Purchaser may
deliver copies of any Confidential Information to such Purchaser's and its
Subsidiaries' directors, officers, employees, and to its agents and professional
consultants who in the ordinary course performance of their duties to or for the
benefit of the Purchaser have a need to have access to such information, any
other Purchaser, any Person to whom such Purchaser offers to sell any of its
Notes or any part thereof or to whom such Purchaser sells or offers to sell a
participation in all or any part of its Notes (provided such Person has entered
into a confidentiality agreement with respect to such information substantially
on the terms of this PARAGRAPH 11G), any federal or state regulatory authority
having jurisdiction over such Purchaser, any Person from which a Purchaser
offers to purchase any security of the Company (provided such Person has entered
into a confidentiality agreement with respect to such information substantially
on the terms of this PARAGRAPH 11G), the NAIC or any regulatory agency
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which generally require access to information about a Purchaser's investment
portfolio or any similar organization, Standard & Poor's Ratings Group (and any
other rating agency) or any other Person to which such delivery or disclosure
may be necessary or appropriate (a) in compliance with any law, rule, regulation
or order applicable to such Purchaser, (b) in response to any subpoena or other
legal process, (c) in connection with any litigation to which such Purchaser is
a party relating to the transactions contemplated by this Agreement, or (d) if
an Event of Default has occurred and is continuing, to the extent that such
Purchaser determines disclosure is necessary or appropriate in the enforcement
of or for the protection of its rights and remedies under the Transaction
Documents. Each Holder, by its acceptance thereof, will be deemed to have agreed
to be bound by and to be entitled to the benefits of this PARAGRAPH 11G as
though it were a party to this Agreement.
118. NOTICES. All notices and other written communications provided for
hereunder shall be given in writing and delivered in person or sent by
recognized overnight delivery service (with charges prepaid) or by facsimile
transmission, if the original of such facsimile transmission is sent on the same
day by a recognized overnight delivery service (with charges prepaid) and (i) if
to a Purchaser or its nominee, addressed to such Person at the address or fax
number specified for such communications to such Purchaser in EXHIBIT A, or at
such other address or fax number as such Person shall have specified to the
Company in writing, (ii) if to any other Holder, addressed to such other Holder
at such address or fax number as is specified for such Holder in the Note
register referenced in PARAGRAPH 11O and (iii) if to the Company, addressed to
it at 505 North Euclid Street, Anaheim, California 92801, Attention: President,
Fax No.: (714) 758-4383, or at such other address or fax number as the Company
shall have specified to each Holder in writing given in accordance with this
PARAGRAPH 11H. Notice given in accordance with this PARAGRAPH 11H shall be
effective upon the earlier of the date of delivery or the second Business Day at
the place of delivery after dispatch.
119. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
1110. SOLICITATION OF HOLDERS. The Company will provide each Holder with
sufficient information, sufficiently far in advance of the date a decision is
required, to enable such Holder to make an informed and considered decision with
respect to any proposed amendment, waiver or consent requested under any
Transaction Document. The Company will deliver executed or true and correct
copies of each such amendment, waiver or consent effected to each Holder
promptly following the date on which it is executed and delivered by, or
receives the consent or approval of, the Required Holders. Neither the Company
nor any Subsidiary will directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee,
expense (other than such Holder's Expenses) or otherwise, or grant any security,
to any Holder for or in connection with any consent by such Holder in its
capacity as a Holder to any waiver or amendment of any of the terms of the
Transaction Documents unless such remuneration is concurrently paid, on the same
terms, ratably to all Holders even if such Holder did not consent to the waiver
or amendment.
1111. REPRODUCTION OF DOCUMENTS. Any Transaction Document and all related
documents, including (a) consents, waivers and modifications which may
subsequently be executed, (b) documents received by the Purchasers on the
purchase of the Notes (except the Notes) and (c) financial statements,
certificates and other information previously or subsequently furnished to the
Purchasers, may be reproduced by the Purchasers by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process and the Purchasers may destroy any original document so reproduced. The
Company agrees and stipulates that any such reproduction shall, to the extent
permitted by applicable law, be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original is in
existence and whether or not the reproduction was made by a Purchaser in the
regular course of business, and to the extent not prohibited by applicable law,
that any enlargement, facsimile or further reproduction of the reproduction
shall likewise be admissible in evidence. This PARAGRAPH 11K shall not prohibit
the
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Company or any Holder from contesting any such reproduction to the same
extent that it could contest the original, or from introducing evidence to
demonstrate the inaccuracy of any such reproduction.
1112. GOVERNING LAW. THIS AGREEMENT IS TO BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY LAWS OR RULES RELATING TO
CONFLICTS OF LAWS THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK).
1113. CONSENT TO JURISDICTION AND SERVICE AND WAIVER OF TRIAL BY JURY. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY HEREBY ABSOLUTELY AND
IRREVOCABLY CONSENTS AND SUBMITS TO THE EXCLUSIVE PERSONAL JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF ANY FEDERAL COURT LOCATED IN SAID
JURISDICTION IN CONNECTION WITH ANY ACTIONS OR PROCEEDINGS BROUGHT AGAINST IT BY
ANY HOLDER ARISING OUT OF OR RELATING TO ANY OF THE TRANSACTION DOCUMENTS AND
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY HEREBY
WAIVES AND AGREES NOT TO ASSERT IN ANY SUCH ACTION OR PROCEEDING, IN EACH CASE,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (A) IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, (B) IT IS IMMUNE FROM
ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT
TO IT OR ITS PROPERTY, (C) ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, OR (D) SUCH TRANSACTION DOCUMENT MAY NOT BE ENFORCED IN OR
BY ANY SUCH COURT. IN ANY SUCH ACTION OR PROCEEDING, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE COMPANY HEREBY ABSOLUTELY AND IRREVOCABLY
WAIVES TRIAL BY JURY AND PERSONAL IN HAND SERVICE OF ANY SUMMONS, COMPLAINT,
DECLARATION OR OTHER PROCESS AND HEREBY ABSOLUTELY AND IRREVOCABLY AGREES THAT
THE SERVICE MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, DIRECTED TO IT AT ITS ADDRESS SET FORTH IN OR FURNISHED PURSUANT TO
THE PROVISIONS OF THIS AGREEMENT, OR BY ANY OTHER MANNER PROVIDED BY LAW.
ANYTHING HEREINBEFORE TO THE CONTRARY NOTWITHSTANDING, ANY HOLDER MAY SUE THE
COMPANY IN ANY OTHER APPROPRIATE JURISDICTION AND ANY PARTY MAY SUE ANY OTHER
PARTY ON A JUDGMENT RENDERED BY ANY COURT PURSUANT TO THE PROVISIONS OF THE
FIRST SENTENCE OF THIS PARAGRAPH 11M IN THE COURTS OF ANY COUNTRY, STATE OF THE
UNITED STATES OR PLACE WHERE SUCH OTHER PARTY OR ANY OF ITS PROPERTY OR ASSETS
MAY BE FOUND OR IN ANY OTHER APPROPRIATE JURISDICTION.
1114. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
1115. REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF NOTES.
1115(1). REGISTRATION. The Notes are to be issued and are transferable
in whole or in part as registered Notes without coupons in denominations of at
least $1,000,000, except as may be necessary to reflect any remaining principal
amount less than $1,000,000 and may be exchanged for one or more Notes of any
authorized denomination and like aggregate outstanding principal amount. The
Company shall keep at the principal executive office of the Company a register
in which the Company shall record the registrations of the Notes and the names
and addresses of the Holders from time to time and all transfers thereof. The
Company shall provide any Holder, promptly upon request, a complete and correct
copy of the names and addresses of the then Holders.
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1115(2). TRANSFER AND EXCHANGE. Upon surrender of a Note to the Company for
registration of transfer or exchange endorsed or accompanied by a written
instrument of transfer duly executed by the registered Holder or its attorney
duly authorized in writing and accompanied by the address for notices, the
Company shall at its expense (except as provided below), execute and deliver one
or more replacement Notes of like tenor and aggregate principal amount,
registered in the name of such Transferee or Transferees. Each new Note will
bear interest from the date to which interest shall have been paid on the
surrendered Note or the date of surrender if no interest shall have been paid
thereon. The Company may require payment of a sum sufficient to cover any stamp
tax or governmental charge imposed in respect of any such transfer.
1115(3). REPLACEMENT. Upon receipt of written notice from a Holder of the
loss, theft, destruction or mutilation of a Note and, in the case of any such
loss, theft or destruction, upon receipt of an indemnification agreement of such
Holder (and, in the case of a Holder which is not a Qualified Institutional
Buyer, with such security as may be reasonably requested by the Company)
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Note, the Company will make and deliver a new
Note, at its expense, of like tenor and aggregate principal amount, in lieu of
the lost, stolen, destroyed or mutilated Note, and each new Note will bear
interest from the date to which interest shall have been paid on such lost,
stolen, destroyed or mutilated Note or if no interest has been paid thereon, the
date of such lost, stolen, destroyed or mutilated Note.
1116. COMPLIANCE BY SUBSIDIARIES. The Company, as the shareholder of its
Subsidiaries, shall cause such meetings to be held, votes to be cast,
resolutions to be passed, by-laws to be made and confirmed, documents to be
executed and all other things and acts to be done to ensure that, at all times,
the provisions of this Agreement relating to its Subsidiaries are complied with.
1117. SEVERABILITY. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative, illegal or
unenforceable as applied to any particular case in any jurisdiction because of
the conflict of such provision with any constitution or statute or rule of
public policy or for any other reason, such circumstance shall not have the
effect of rendering the provision or provisions in question invalid,
inoperative, illegal or unenforceable in any other jurisdiction or in any other
case or circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative, illegal or unenforceable to the extent that such
other provisions are not themselves actually in conflict with such constitution,
statute or rule of public policy, but this Agreement shall be reformed and
construed in any such jurisdiction or case as if such invalid, inoperative,
illegal or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
1118. TERMINATION. This Agreement and the rights of the Holders and the
obligations of the Company hereunder shall not terminate until each of the
Notes, including all principal, interest, including interest on overdue interest
and Make Whole Amount has been indefeasibly paid in full and all Expenses and
all other amounts owed to any Purchaser or any Holder pursuant to the terms of
any Transaction Document has been indefeasibly paid in full.
1119. CONSTRUCTION. Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
1120. SUBSTITUTION OF PURCHASER. Each Purchaser has the right to substitute
any one of its Affiliates as the purchaser of the Notes that it has agreed to
purchase hereunder, by written notice to the Company, which notice shall be
signed by such Purchaser and its Affiliate, shall contain such Affiliate's
agreement to be bound by this Agreement and shall contain a confirmation by such
38
<PAGE>
Affiliate of the accuracy with respect to it of the representations set forth in
PARAGRAPH 9. In the event that such Affiliate is so substituted as a Purchaser
hereunder and such Affiliate thereafter transfers to the original Purchaser all
of the Notes then held by such Affiliate, upon receipt by the Company of notice
of such transfer, such Purchaser shall have all the rights of a Holder.
[SIGNATURES FOLLOW ON PAGE 39]
39
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement, executed under
seal between you and the Company.
Very truly yours,
SAFEGUARD HEALTH ENTERPRISES, INC.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
The foregoing Agreement is hereby
accepted as of the date first above written.
PURCHASERS
By:
---------------------------
Name:
Title:
40
<PAGE>
FORM OF PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, OR (B) IF SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE
RULES AND REGULATIONS IN EFFECT THEREUNDER AND ANY APPLICABLE STATE SECURITIES
LAWS.
SAFEGUARD HEALTH ENTERPRISES, INC.
7.91% Senior Note
due September 30, 2005
No. _____ ___________, 1997
$________ PPN: 786444 A * O
FOR VALUE RECEIVED, the undersigned, SafeGuard Health Enterprises, Inc.
(the "Company") hereby promises to pay to
------------------------------------,
or its registered assigns (the "Holder"), the principal sum of
---------------
Dollars ($ ), with interest (computed on the basis of a 360-day year
-------------
of twelve 30-day months) on the principal amount from time to time unpaid and
not yet due at the rate of 7.91% per annum from the date hereof. Such interest
shall be due and payable semi-annually in arrears on the 30th day of
each March and September. Installments of principal, each in an amount equal to
------------------ Dollars ($ ), shall be due and payable on each
------------
September 30 of each calendar year commencing September 30, 2001 through
September 30, 2005. All unpaid principal and interest and Make-Whole Amount
thereon shall be due and payable in any event on September 30, 2005. Any overdue
principal, overdue Make Whole Amount and, to the extent permitted by applicable
law, overdue interest, shall bear interest at the rate of 9.91% per annum,
whether overdue by acceleration or otherwise.
This note (this "Note") is one of the 7.91% Senior Notes issued in the
original aggregate principal amount of $32,500,000 by the Company (the "Notes")
pursuant to, and is subject to, a Note Purchase Agreement dated as of
September 30, 1997 between the Company and
-----------------------------------,
as amended from time to time (the "Agreement"). Capitalized terms used in this
Note and not defined herein have the meanings given therefor in the Agreement.
The Holder is entitled, equally and ratably with the holders of all the other
Notes, to the benefits of the Agreement.
All dollar amounts in this Note refer to United States dollars. Payments
of principal, Make Whole Amount and interest are to be made at the place and in
the manner specified by the Purchaser of this Note in Exhibit A to the Agreement
or at such other place or manner as the Holder shall designate to the Company in
writing in accordance with the Agreement, in lawful money of the United States
of America. If any payment of principal, Make Whole Amount or interest on or in
respect of this Note becomes due and payable on any day which is not a
Business Day, the payment shall be due and payable on the next succeeding
Business Day.
<PAGE>
This Note is a registered note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer in accordance with the
Agreement, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company shall not be affected by any notice to
the contrary.
This Note may be declared or may otherwise become due and payable prior to
its expressed maturity in the events, on the terms, with the Make Whole Amount
and in the manner and amounts as provided in the Agreement.
This Note is not subject to prepayment or redemption at the option of the
Company prior to its expressed maturity except on the terms, with the Make Whole
Amount and in the manner and amounts as provided in the Agreement.
The Company and every maker, endorser and guarantor hereof or of the debt
evidenced by this Note waive presentment, demand, notice protest, and all other
demands, notices of intention to accelerate the maturity of this Note and notice
of acceleration and all other notices (other than notices expressly required by
the Agreement) and suretyship defenses generally, in connection with the
delivery, acceptance, performance, default or enforcement of or under this Note.
THIS NOTE IS TO BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ANY LAWS OR RULES RELATING TO CONFLICTS OF LAWS THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK).
WITNESS: SAFEGUARD HEALTH ENTERPRISES, INC.
- ---------------------- By:-------------------------------
Name:
Title:
By:-------------------------------
Name:
Title:
-2-
<PAGE>
CONTACTS: Thomas C. Tekulve
Chief Financial Officer
(714) 758-4381
Gary S. Maier/Roger S. Pondel
Pondel Parsons & Wilkinson
(310) 207-9300
FOR IMMEDIATE RELEASE
SAFEGUARD HEALTH ENTERPRISES, INC. COMPLETES PRIVATE PLACEMENT
Anaheim, California - October 7, 1997 - SafeGuard Health Enterprises, Inc.
(NASDAQ-NMS:SFGD) today announced that it has completed a private placement of
$32.5 million in long-term debt consisting of 8-year senior notes. The
transaction was managed by SBC Warburg Dillon Read Inc.
Steven J. Baileys, D.D.S., chairman and chief executive officer, stated, "The
private placement enables the company to eliminate its existing term credit
agreement and replace the company's other long-term debt at a more favorable
interest rate."
SafeGuard is a multifaceted specialized health care marketing company providing
benefits to over 1,157,000 members in 27 states and the District of Columbia.
The company offers a variety of managed and indemnity dental care programs, as
well as vision and life insurance products. In addition, SafeGuard provides
administrative and preferred provider organization services. SafeGuard
contracts with more than 4,900 client organizations and provides benefits
through nearly 14,000 contracting providers. The company's sales force sells
its various products through a network of independent brokers, agents and
consultants.
