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U.S SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB/A
AMENDMENT NO. 1
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM _______ TO
________.
COMMISSION FILE NO. 0-15501
BIKERS DREAM, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
CALIFORNIA 33-0140149
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1420 VILLAGE WAY, SANTA ANA, CALIFORNIA 92705
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 835-8464
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT: COMMON STOCK
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER
PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The issuer had revenues of $14,924,987 for the fiscal year ended December 31,
1997
The aggregate market value of the voting stock held by non-affiliates on March
31, 1998 was approximately $15,295,968 based on the average of the bid and asked
prices of the issuer's Common Stock in the over-the-counter market on such date
as reported by the OTC Bulletin Board. As of March 31, 1998, 2,538,844 shares of
the issuer's Common Stock were outstanding, 3 shares of the issuer's Series A
Preferred Stock and 6,481,385 shares of the issuer's Series B Preferred Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's report on Form 8-K dated January 6, 1997: Part II
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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NOTE TO AMENDMENT NO. 1
The Company hereby amends its Form 10-KSB, as filed with the Commission on
April 15, 1998 (the "Original Filing") solely for the purpose of filing certain
exhibits and directors' signatures which were inadvertently omitted from the
Original Filing. Accordingly, Exhibits 10.27 and 10.30, which were referenced
in, but not attached to, the Original Filing, are attached hereto, and the
signature page of the Original Filing is hereby amended by the revised
signature page appearing on page 6 hereof.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
a. List of Exhibits:
2.1 Agreement and Plan of Reorganization dated August 4, 1994 among HDL
Communications (now known as Bikers Dream, Inc.), Bikers Dream, Inc. and
the stockholders of Bikers Dream, Inc., as amended by agreements dated
November 11, 1994, February 3, 1995 and February 20, 1995.*
3.1 Articles of Incorporation, as amended, of Bikers Dream, Inc. (formerly
know as HDL Communications).*
3.1.1 Certificate of Amendment, Articles of Incorporation, June, 1996.****
3.1.2 Certificate of Correction of Certificate of Amendment of Articles of
Incorporation****
3.2 Certificate of Ownership of HDL Communications (now known as Bikers
Dream, Inc.)*
3.3 Bylaws, as amended, of Bikers Dreams, Inc.*
4.1 Certificate of Determination*****
10.1 Lease dated August 5, 1993 between the Company and McFadden Plaza.*
10.2 Lease dated November 1, 1994 between the Company and Valley View
Partnership.*
10.3 Lease dated February 8, 1995 between the Lily Company and Jim Kinnicutt
and Susan Rasmussen dba Bikers Dream of Sacramento.****
10.4 Lease dated October 30, 1996 between the Company and Inland
Industries.****
10.6 Consulting Agreement dated April 6, 1995 between the Company and Meyer,
Duffy & Associates.*
10.7 Consulting Agreement effective as of October 1, 1995 between the Company
and Meyer, Duffy & Associates.*
10.8 Amendment to Consulting Agreement and Stock Option Agreement dated
November 1, 1995, between the Company and Meyer Duffy & Associates.****
10.11 The 1995 Incentive Stock Option Plan of the Company, as amended.**+
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10.12 The 1995 Non-Qualified Stock Option Plan of the Company, as amended.**+
10.13 The 1995 Non-Qualified Directors' Stock Option Plan of the Company, as
amended.**+
10.16 Promissory Note and Security Agreement dated February 14, 1996 between
the Company and Green Tree Financial Servicing Corporation****
10.17 Promissory Note and Security Agreement dated December 28, 1995 between
the Company and Green Tree Financial Servicing Corporation.****
10.18 Form of Dealer Agreement between the Company and its dealers, and a
schedule identifying all dealer agreements to which the Company is a
party as of December 31, 1996 which are substantially identical to the
attached Dealer Agreement, except with respect to the parties thereto,
dates of execution and territory.****
10.20 Stock Option Agreement dated September 13, 1996 between the Company and
Mull Acres Investments, Inc.****
10.21 Asset Purchase Agreement dated January 30, 1997 among the Company, Ultra
Acquisition Corp. and Mull Acres Investments, Inc.***
10.22 Senior Subordinated Promissory Note of the Company dated January 30, 1997
payable to Mull Acres Investments, Inc. in the amount of $2,700,000.****
10.23 Security Agreement dated January 30, 1997 between the Company and Mull
Acres Investments, Inc.****
10.24 Lease dated February 12, 1996 between Mull Acres Investments, Inc. and
Lincoln Riverside Business Center.****
10.25 Lease dated October 11, 1996 between Mull Acres Investments, Inc. and
Lincoln Riverside Business Center.****
10.26 Note Conversion Agreement dated June 30, 1997 between the Company and
Mull Acres Investments, Inc.******
10.27 Employment Agreement dated August 31, 1997 between the Company and Herm
Rosenman.+
10.28 Addendum to Employment Agreement dated August 31, 1997 between the
Company and Herm Rosenman.+******
10.29 Stock Grant and Option Agreement dated December 24, 1997 between the
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Company and Herm Rosenman.+******
10.30 Loan Agreement dated November 17, 1997 between the Company and Sirrom
Capital Corporation dba Tandem Capital.
21.1 List of subsidiaries.**
23.1 Consent of Independent Certified Public Accountants.******
27 Financial Data Schedule.******
* Incorporated by reference to the Company's Registration Statement on Form
SB-2 (Registration No. 33-92294) filed with the Commission on May 31,
1995 and Amendment No. 1 thereto filed with the Commission on October 16,
1995.
** Incorporated by reference to the Company's Form 10-KSB dated April 12,
1996 filed with the Commission on April 15, 1996.
*** Incorporated by reference to the Company's Form 8-K dated January 30,
1997 filed with the Commission on February 14, 1997.
**** Incorporated by reference to the Company's Form 10-KSB filed with the
Commission on April 15, 1997.
***** Incorporated by reference to the Company's Form 10-QSB filed with the
Commission on November 14, 1997.
****** Filed with the Company's Form 10-KSB filed with the Commission on
April 15, 1998, which Form is hereby amended.
+ A compensatory plan or arrangement.
b. Reports on Form 8-K
The Company filed the following reports on Form 8-K during the year ended
December 31, 1997:
1. Form 8-K dated January 6, 1997, reporting a change in
accountants.
2. Form 8-K dated February 14, 1997, reporting that
pursuant to an Asset Purchase Agreement between the
Company, the Company's wholly owned subsidiary, Ultra
Acquisition Corporation, a Nevada Corporation ("UAC")
and Mull Acres Investments, Inc. ("Mull Acres"), the
Company, through UAC, purchased from Mull Acres certain
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assets, including equipment and inventory, of Mull
Acres' Ultra Kustom Cycles and Ultra Kustom Parts
Divisions that had been used in connection with the
manufacture, distribution and sales of motorcycles and
motorcycle parts and accessories.
3. Form 8-K/A Amendment No. 1, dated April 15, 1997, to its
Form 8K Reports dated January 30, 1997, reporting (1)
the combined audited financial statements of Ultra
Bikers, LLC and Ultra Kustom cycles for the period of
inception (September 19, 1996) to December 31, 1996, and
(2) the pro forma financial statements of Bikers Dream,
Inc., Ultra Bikers, LLC and Ultra Kustom Cycles for the
year ended December 31, 1996.
4. Form 8-K dated September 29, 1997, announcing the conversion
of various promissory notes and secured notes into Series B
Preferred stock, setting the terms of the Series B Preferred
stock, announcing the appointment of Herm Rosenman as
President and CEO of the Company, and a balance sheet
amended as of 8/31/97 to reflect the conversion of the notes
to Series B Preferred stock.
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SIGNATURES
In accordance with Section 13 or 15(d)of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Bikers Dream, Inc.
Dated: April 16, 1998 By: /s/ HERM ROSENMAN
--------------------------------------------
Herm Rosenman, President/CEO
Dated: April 16, 1998 By: /s/ ANNE TODD
---------------------------------------------
Anne Todd, Corporate Secretary
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<S> <C>
/s/ HERM ROSENMAN April 16, 1998
- ----------------------------
Herm Rosenman
President, CEO and Director
/s/ ANNE TODD April 16, 1998
- ----------------------------
Anne Todd
Corporate Secretary, Principal
Financial Officer, and Controller
April 16, 1998
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Donald J. Duffy
Director
/s/ JOHN RUSSELL April 16, 1998
- ----------------------------
John Russell
Director
April 16, 1998
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Humbert Powell
Director
/s/ TERRENCE QUINN April 16, 1998
- ----------------------------
Terrence Quinn
Director
</TABLE>
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this amendment to be signed on its behalf by the undersigned, thereunto
duly authorized.
Bikers Dream, Inc.
Dated: April 16, 1998 By: /s/ Herm Rosenman
-------------------------------
Herm Rosenman, President/CEO
Dated: April 16, 1998 By: /s/ Anne Todd
-------------------------------
Anne Todd, Corporate Secretary
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EXHIBIT 10.27
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of August 31, 1997, by and between Ultra Acquisition,
Inc., a Nevada corporation, and its affiliated companies (collectively, the
"Company" or the "Corporate Group"), and Herm Rosenman, an individual, residing
at 111 Marquez Place, #309, Pacific Palisades, California 90272 ("Executive").
W I T N E S S E T H:
WHEREAS, the Company is in the business of manufacturing, retailing,
selling, distributing, and servicing of heavyweight motorcycles, parts, and
accessories (the "Business");
WHEREAS, the Company wishes to avail itself of the advice and services of
Executive, and Executive wishes to be employed by the Company;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth herein, the parties hereto agree as follows:
1. Retention and Term. Subject to the terms and conditions of this
Agreement, the Company agrees to employ Executive, and Executive hereby accepts
employment by the Company, as its President and Chief Executive Officer
commencing on the date hereof and continuing for a period of three (3) years
(the "Term"), unless extended or earlier terminated pursuant to this Agreement.
2. Duties:
(a) During the Term, Executive shall render his services to the Company as
President and Chief Executive Officer, and shall have such powers and shall
perform such duties as usually pertain to the office of Chief Executive Officer
and as may reasonably be requested by the Company commensurate with his position
and consistent with the requirements of this Agreement. Executive shall report
directly to the Boards of Directors and all other executives of the Company
shall report to him, Executive shall also be elected to each of the Boards of
Directors of the Corporate Group.
(b) Executive agrees to devote his full working time and efforts to the
business and affairs of the Corporate Group, and hold such offices in members of
the Corporate Group to which he shall accept, such acceptance not to be
unreasonably withheld and to which from time to time he may be elected or
appointed, provided that they are of the same general character and of at least
the same degree of responsibility as the offices in the Company which he shall
hold pursuant to the terms of this Agreement.
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3. Compensation.
(a) Salary. During the Term, the Company shall pay to Executive a total
salary of $625,000, payable in monthly installments of $17,361.11.
Notwithstanding the foregoing, the Company may at its sole discretion withhold
full payment of the monthly salary installments in amounts not to exceed:
(i) $7,361.11 each month for the months of September and October
1997;
(ii) $4,361.11 each month for the months of November and December
1997;
(iii) $2,361.11 each month during the year of 1998,
provided, however, that the balance so withheld under subsections (i), (ii) and
(iii) shall be payable on a pro rata basis throughout the remainder of the Term
commencing January 1999.
(b) Adjustment of Salary. The Board of Directors may annually review
Executive's salary to be paid pursuant to Section 3(a) hereof and, based upon
such factors as the Board of Directors may choose to consider, may increase such
salary, in the Board of Director's sole discretion, but may not, without
Executive's written consent, reduce such salary below that in effect from time
to time hereunder.
(c) Bonus. Executive shall be eligible to participate in such bonus plans
applicable to executive officers of the Company as may be established by the
Board of Directors from time to time, pursuant to the terms of such plans.
4. Benefits.
(a) Executive shall be entitled to family health and hospitalization
benefits without a waiting period. In addition, Executive shall be entitled to
disability and such other benefits as are made available from time to time to
any executive employee of the Company. The Company's Director & Officer
Liabilities Insurance shall be extended to the Executive.
(b) Executive shall be entitled to reimbursement for all normal and
reasonable travel, entertainment and other expenses necessarily incurred by him
in the performance of his duties hereunder, and the Company shall continue to
provide Executive with his current automobile to be used for business purposes,
in each case in accordance with Internal Revenue Service guidelines. Executive
shall submit on a timely basis such itemized accounts of such expenses, together
with such vouchers or receipts for individual expense items, as the Company may
from time to time require under its established policies and procedures.
(c) Executive shall be entitled to three non-consecutive weeks' vacation
each calendar year during the Term; provided, however, that Executive shall not
take more than one week's vacation at any given time without approval of the
Board of Directors. No additional compensation shall be paid to Executive for
any vacation not taken in respect of any calendar
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year, and Executive shall not be entitled to carry over into any succeeding
year any vacation time unused in the prior year.
(d) As an additional benefit to Executive during the Term, the Company
shall provide to Executive, at the Company's expense, with a motorcycle
manufactured by the Company for his personal use. At the conclusion of the
Term, title of such motorcycle shall be transferred to Executive; provided,
however, that Executive shall have served the full three-year period of the
Term.
(e) The Company shall pay Executive for any period during the Term in
which he is unable fully to perform his duties hereunder because of physical or
mental disability or incapacity, an amount equal to the compensation due him
for such period pursuant to Section 3(a), less the aggregate amount of all
income disability benefits which for such period he may receive or to which he
may be entitled by reason of (i) any group health insurance plan paid for by
the Company which is intended to function as a salary replacement plan, (ii)
any applicable compulsory state disability law, (iii) the Federal Social
Security Act, (iv) any applicable workmen's compensation law or similar law and
(v) any other plan towards which the Company or any member, parent, subsidiary
or affiliate of the Company (including any predecessor of any thereof) has
contributed or for which it has made payroll deductions, such as group accident
or health policies, other than those which reimburse for actual medical
expenses.
5. Termination on Death. If Executive dies during the Term, this
Agreement shall thereupon immediately terminate.
6. Termination for Certain Causes. In the event of Executive's (a)
malfeasance, gross neglect or willful misconduct in the performance of his
duties under this Agreement, (b) failure to perform substantially his
obligations under this Agreement (other than by reason of death or disability
contemplated by Section 4(c) or 5) or (c) act of fraud, gross dishonesty or
harassment against the Company or any of its employees, which default under
clause (a) or (b) (if susceptible to cure) continues uncured 30 days after
written notice thereof from the Company to Executive, this Agreement and
Executive's employment hereunder may be terminated by the Company without
notice except as contemplated by this sentence.
7. Payments Upon a Change in Control.
(a) On the date of any termination of Executive's employment hereunder
arising pursuant to a Change in Control (as hereinafter defined), if there
exists no basis for termination pursuant to Section 6 of this Agreement, the
Company shall pay to Executive an amount equal to eighteen (18) months
salary, as determined according to the amount paid to Executive at the time of
termination, payable on a monthly basis.
(b) A "Change in Control" shall occur when:
(i) any person (as such term is used in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934 as in effect on the date hereof,
herein called the
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"Act") other than a person beneficially owning (as such term is used in
Section 13(d)(1) of the Act) 15% or more of the voting securities of the
Company on August 31, 1997, or any person substantially all of the equity of
which is owned by the persons who beneficially owned the voting securities
of the Company on August 31, 1997, becomes the beneficial owner, directly
or indirectly, of securities representing at least 25% of the combined
voting power of the then outstanding securities of the Company;
(ii) during any period of twenty-four consecutive months (whether
commencing before or after the date of this Agreement), individuals who at
the beginning of such period constituted the Company's Board of Directors
cease for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election, of each new director (A) was
approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period or (B) was
pursuant to an agreement the same or substantially similar to any
arrangement pursuant to which such new director's predecessor was nominated;
(iii) unless theretofore approved by a vote of at least two-thirds of
the Continuing Directors (as hereinafter defined), there is the approval by
the stockholders of the Company of any merger or consolidation, or any
sale, lease, exchange, mortgage, pledge, transfer or other disposition (in
one transaction or a series of transactions) of any assets of the Company
or any subsidiary with or to (A) any Interested Stockholder (as hereinafter
defined) or (B) any other person which is, or after such transaction would
be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or
(iv) there is the approval by the stockholders of the Company of any
plan or proposal for the Company to be Acquired (as hereinafter defined) or
for the liquidation or dissolution of the Company.
(c) The Company shall be considered to be "Acquired" only if the owners of
their respective voting securities immediately prior to the effective date of
any sale, reorganization, merger, consolidation, liquidation or similar
transaction will not own immediately thereafter, as a result of having owned
such voting securities, securities representing a majority of the combined
voting power of the then outstanding securities of the Company or the entity
that then owns, directly or indirectly, the Company or all or substantially all
its assets.
(d) "Interested Stockholder" shall mean any person (other than the Company,
any subsidiary thereof, any person owning any voting securities of the Company
on August 31, 1997 or any person substantially all of the equity of which is
owned by the persons who beneficially owned the voting securities of the Company
on August 31, 1997) who or which:
(i) is the beneficial owner, directly or indirectly, of securities
representing 10% or more of the combined voting power of the then
outstanding securities of the Company;
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(ii) is an Affiliate of the Company, and at any time within the two
year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of securities representing 10% or more of
the combined voting power of the then outstanding securities of the Company;
(iii) is an assignee of or has otherwise succeeded to any voting
securities of the Company which were at any time within the two year period
immediately prior to the date in question beneficially owned by an
Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of
1933.
(e) "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Act.
(f) "Continuing Director" means any member of the Company's Board of
Directors who is unaffiliated with the Interested Stockholder and was a member
of the Board prior to the time that the Interested Stockholder became an
Interested Stockholder and any successor or a Continuing Director who is
unaffiliated with the Interested Stockholder and is recommended to succeed a
Continuing Director by a vote of at least two-thirds of the Continuing Directors
then on the Board.
8. Confidentiality.
(a) Executive understands and acknowledges that, as a result of Executive's
employment with the predecessor of the Company, he shall necessarily become
informed of, and shall have access to, confidential information of the Company,
including, without limitation, inventions, trade secrets, technical information,
know-how, plans, specifications, marketing plans and information, pricing
information, identity of customers and prospective customers and identity of
suppliers, and that such information, even though it may have been or may be
developed or otherwise acquired by Executive, is the exclusive property of the
Company to be held by Executive in a fiduciary capacity and solely for the
Company's benefit. Executive shall not at any time, either during or subsequent
to his employment hereunder, reveal, report, publish, transfer or otherwise
disclose to any person, Company or other entity, or use, any of the Company's
confidential information which Executive, in the exercise of reasonable
diligence, knows to be confidential, without the written consent of the members
of the Company (other than Executive), except for use on behalf of the Company
in connection with the Business, and except for such information which legally
and legitimately is or becomes of general public knowledge from authorized
sources other than Executive.
(b) Upon the termination of his employment with the Company for any reason,
Executive shall promptly deliver to the Company all drawings, manuals, letters,
notes, notebooks, reports and copies thereof and all other materials, including,
without limitation, those of a secret or confidential nature, relating to the
Business which are in Executive's possession or
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control. The Company shall reimburse Executive for any packing or moving costs
reasonably incurred by Executive in connection with the foregoing delivery.
(c) For purposes of this Section 8 and Sections 9 and 10, the term
"Company" includes the Company, any predecessor company, and any of their
respective affiliates (including, without limitation, distributors, licensees,
subsidiaries and joint ventures).
9. Developments.
(a) Executive shall disclose promptly and fully, in writing whenever
possible, to the Company and to its designated representatives and agents, all
ideas, devices, inventions, improvements, developments, computer software,
product marks and designations, technical information and know-how, whether or
not patentable, copyrightable or otherwise protectable relating in any way to
the Business (referred to together herein as "Developments"), which Executive
conceived or made or may conceive or make, whether solely or jointly with
others:
(i) while Executive is or has been employed with the Company or any
of its predecessors, whether during or out of the usual hours of work; and
(ii) within one year after termination of Executive's employment with
the Company.
All of such Developments required to be disclosed to the Company are referred to
herein as the "Proprietary Developments." Executive agrees that all of
Executive's right, title and interest in and to the Proprietary Developments
shall be deemed to be held by Executive in a fiduciary capacity and solely for
the Company's benefit, shall be the sole and exclusive property of the Company
and shall be subject to the confidentiality provisions of this Agreement as
confidential information of the Company.
(b) Executive, when requested to do so, either during or after his
employment with the Company, shall, for no additional compensation (except as
contemplated by Section 7(d)):
(i) assign and convey to the Company in writing Executive's entire
right, title and interest in and to the Proprietary Developments to the
extent not owned by the Company as a matter of law from the time of their
creation;
(ii) execute, acknowledge and deliver all such instruments of
assignment, transfer and conveyance, and any such further instruments and
documents, in form and substance satisfactory to the Company, as the
Company shall reasonably deem necessary or advisable to evidence the
vesting in the Company of all right, title and interest of Executive in and
to the Proprietary Developments;
(iii) assist the Company and its designated representatives and agents
in preparing patent, copyright or other applications, domestic and foreign,
covering the
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same, and sign and deliver all such applications and assignments hereof to
the Company; and
(iv) generally give all information and testimony, sign all papers and
do all things which may be needed or reasonably requested by the Company to
the end that the Company may obtain, extend, reissue, maintain and enforce
United States and foreign patents or copyrights or other rights or
registrations covering the Proprietary Developments.
(c) Executive hereby irrevocably nominates and appoints the Company
as his attorney-in-fact to sign and deliver all such papers, and perform all
such acts, mentioned in this Section 9, in the event of Executive's absence,
unavailability, refusal or death, such nomination and appointment hereby being
granted with full authority in the premises, and such authority to be deemed
coupled with a valuable interest vested in the Company.
(d) The Company shall bear all expenses which it causes to be
incurred in obtaining, extending, reissuing, maintaining and enforcing such
patents, copyrights or other rights or registrations and investing and
perfecting title thereto in the Company, and shall pay Executive for any time
which it may require of him therefor subsequent to the termination of his
employment with the Company, such payment to be at an hourly rate equivalent to
that at which Executive is or was paid (at his then-current or, if no longer
employed by the Company, most recent, salary) during his employment with the
Company.
(e) In the event of the unenforceability of all or part of the
foregoing provisions of this Section 9, as determined by a court of competent
jurisdiction, Executive hereby transfers and assigns to the Company such lesser
interests in the Proprietary Developments, including, without limitation, any
and all United States and foreign patent rights and copyrights therein and
renewals thereof, as may be determined by such a court to be a reasonable grant
of interests under the circumstances, but, in any event, and without limitation,
Executive shall be deemed to have granted to the Company not less than an
irrevocable, non-exclusive license, with the right to sub-license others, to
manufacture, use, lease and sell the Proprietary Developments which have not
been assigned to the Company under the provisions of this Section 9, without
payment of any royalty.
(f) Executive shall permit the use in a commercially reasonable
manner of his name as likeness in connection with any use of, or other dealings
by the Company in respect of, any Proprietary Developments during and after the
period of his employment hereunder.
10. Non-Competition. Executive agrees that, for the period commencing on
the date hereof and ending two (2) years after the termination of his employment
with the Company for any reason, he shall not, anywhere in the United States of
America (or for such lesser area or such lesser period as may be determined by a
court of competent jurisdiction to be a reasonable limitation on the competitive
activity of Executive), directly or indirectly:
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(i) engage, as an independent contractor or otherwise, in
any activity for or on behalf of any person or entity in a line of
business competitive with the Business or any aspect thereof, including
any foreign person or entity that has a significant distribution system
within the United States of America, or engage in any manner in the
Business;
(ii) except for the benefit of the Company, solicit or
attempt to solicit business of entities who were customers of the company
at any time within the prior two years (including prospective customers
solicited by the Company) for products or services the same or similar to
those offered, sold, produced or under development by the company, or
dealt in by Executive, during his employment therewith;
(iii) interfere with the company, the Business or the conduct
thereof by the Company, or otherwise divert or attempt to divert from the
Company any business whatsoever;
(iv) solicit or attempt to solicit for any business endeavor
any employee of the Company;
(v) use the name of the Company or any name used by the
Company, or any name similar to any thereof; or
(vi) render any services as an officer, director, employee,
partner, consultant or otherwise to, or have any interest as a member,
stockholder, partner, lender or otherwise in, any person which is engaged
in activities which, if performed by Executive, would violate this
Section 10.
11. Remedies and Survival. Because the Company does not
have an adequate remedy at law to protect its interest in its trade secrets,
privileged, proprietary or confidential information and similar commercial
assets, including, without limitation, any Proprietary Developments, or its
business from Executive's competition, the Company shall be entitled to
injunctive relief, in addition to such other remedies and relief that would, in
the event of a breach of the provisions of Sections 8, 9 or 10, be available
to the Company. The provisions of Sections 8, 9 and 10 and this Section 11
shall survive any termination of Executive's employment with the Company.
12. Indemnification. Executive shall indemnify, defend and
hold harmless the Company from and against, and reimburse the Company for, any
loss, damage, liability (including any liability by reason of any settlement of
a claim, action, suit or proceeding) or expense (including reasonable
attorney's fees and disbursements) arising out of or connected with (i)(a) any
breach or inaccuracy of any covenant of Executive contained in this Agreement
or in any other document simultaneously delivered pursuant to or in connection
with this Agreement, or (b) any claim, action, allegation, suit or proceeding
asserted or instituted arising out of any matter or thing covered by this
Agreement or any document or agreement simultaneously delivered pursuant to or
in connection with Agreement.
-8-
<PAGE> 9
13. Supersedes Prior Agreement. This Agreement merges and
supersedes any prior or contemporaneous agreements or understandings with
respect to its subject matter and shall not be modified or terminated except by
another agreement in writing executed by the Company and Executive. Failure of
a party to enforce one or more of the provisions of this Agreement or to
require at any time performance of any of the obligations hereof shall not be
construed to be a waiver of such provisions by such party nor to in any way
affect the validity of this Agreement or such party's right thereafter to
enforce any provision of this Agreement, nor to preclude such party from taking
any other action at any time which it would legally be entitled to take.
14. Severability. If any provision of this Agreement is
held to be invalid or unenforceable by any court or tribunal of competent
jurisdiction, the remainder of this Agreement shall not be affected by such
judgment, and such provision shall be carried out as nearly as possible
according to its original terms and intent to eliminate such invalidity or
unenforceability.
15. Successors and Assigns. Neither party shall have the
right to assign this personal Agreement, or any rights or obligations
hereunder, without the consent of the other party; provided, however, that upon
the sale or transfer of all or substantially all of the assets and business of
the Company to another party, or upon the merger or consolidation of the
Company with another Company, this Agreement shall inure to the benefit of, and
be binding upon, both Executive and the party purchasing such assets, business
and goodwill, or surviving such merger or consolidation, as the case may be, in
the same manner and to the same extent as though such other party were the
Company. Subject to the foregoing, this Agreement shall inure to the benefit
of, and bind, the parties thereto and their legal representatives, heirs,
successors and assigns.
16. Communications. All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given at the time when mailed in any United States post office enclosed in a
registered or certified postage-paid envelope and addressed as set forth at the
beginning of this agreement, or to such other address as any party may specify
by notice to the other parties, or delivered by Federal Express or a similar
overnight courier to such address; provided, however, that any notice of change
of address shall be effective only upon receipt.
17. Construction; Counterparts. The headings contained in
this Agreement are for convenience only and shall in no way restrict or
otherwise affect the construction of the provisions hereof. References in this
Agreement to Sections are to the sections of this Agreement. This Agreement may
be executed in multiple counterparts, each of which shall be an original and
all of which together shall constitute one and the same instrument.
18. Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by the laws of the State of California applicable to
agreements made and fully to be performed therein by residents thereof.
Executive hereby consents to the personal jurisdiction of the state and federal
courts located in the State of California in connection with disputes arising
-9-
<PAGE> 10
out of or in connection with this Agreement, and agrees that venue of any
proceeding in connection therewith shall lie exclusively in such courts.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first set forth above.
ULTRA ACQUISITION, INC.
By: /s/ [SIG]
------------------------------------
Name: DONALD DUFFY
Title: CEO
EXECUTIVE
/s/ [SIG]
------------------------------------
Herm Rosenman
-11-
<PAGE> 1
EXHIBIT 10.30
LOAN AGREEMENT
BETWEEN
SIRROM CAPITAL CORPORATION
d/b/a
TANDEM CAPITAL
AND
BIKERS DREAM, INC.
November 17, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. The Loan ............................................................ 1
1.1 The Note ............................................. 1
1.2 Initial Warrant ...................................... 1
1.3 Additional Warrant ................................... 1
1.4 Commitment; Closing Date ............................. 2
1.5 Processing Fee ....................................... 2
2. Representations and Warranties of the Company ....................... 2
2.1 Corporate Status ..................................... 2
2.2 Capitalization ....................................... 3
2.3 Authorization ........................................ 3
2.4 Validity and Binding Effect .......................... 4
2.5 Contracts and Other Commitments ...................... 4
2.6 Litigation ........................................... 4
2.7 Financial Statements ................................. 4
2.8 SEC Reports .......................................... 5
2.9 Absence of Changes ................................... 5
2.10 No Defaults .......................................... 5
2.11 Compliance With Law .................................. 5
2.12 Taxes ................................................ 5
2.13 Certain Transactions ................................. 6
2.14 Title to Property .................................... 6
2.15 Intellectual Property ................................ 6
2.16 Environmental Matters ................................ 7
2.17 Accounting Matters ................................... 8
2.18 Distributions to Company ............................. 8
2.19 Prior Sales .......................................... 8
2.20 Regulatory Compliance ................................ 8
2.21 Margin Regulations ................................... 9
2.22 [Reserved] ........................................... 9
2.23 Limited Offering ..................................... 9
2.24 Registration Obligations ............................. 9
2.25 Insurance ............................................ 9
2.26 Governmental Consents ................................ 9
2.27 Employees ............................................ 9
2.28 ERISA ................................................ 10
2.29 Fees/Commissions ..................................... 10
2.30 Disclosure ........................................... 10
2.31 Survival ............................................. 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
3. Representations and Warranties of Lender .............................. 11
3.1 Corporate Status ................................. 11
3.2 Authorization .................................... 11
3.3 Validity and Binding Effect ...................... 11
3.4 Accredited Investor, Investment Intent ........... 11
3.5 Survival ......................................... 12
4. Conditions Precedent to the Obligations of Lender ..................... 12
4.1 Representations and Warranties ................... 12
4.2 Officer's Certificate ............................ 12
4.3 Satisfactory Proceedings and Secretary's
Certificate .................................. 12
4.4 Legal Opinion .................................... 12
4.5 Authorization Agreement .......................... 12
4.6 Existence and Authority .......................... 13
4.7 Delivery of Loan Documents ....................... 13
4.8 [Reserved] ....................................... 13
4.9 Required Consents ................................ 13
4.10 Waiver of Conditions ............................. 13
5. Covenants of Company .................................................. 14
5.1 Use of Proceeds .................................. 14
5.2 Corporate Existence, Etc. ........................ 14
5.3 Maintenance of Properties, Etc. .................. 14
5.4 Nature of Business ............................... 14
5.5 Insurance ........................................ 14
5.6 Taxes, Claims for Labor and Materials ............ 14
5.7 Compliance with Laws, Agreements, Etc. ........... 15
5.8 ERISA Matters .................................... 15
5.9 Books and Records: Rights of Inspection .......... 15
5.10 Reports .......................................... 15
5.11 Limitations on Debt and Obligations .............. 17
5.12 Guaranties ....................................... 17
5.13 Limitation on Liens .............................. 18
5.14 Restricted Payments .............................. 18
5.15 Investments ...................................... 19
5.16 Mergers, Consolidations and Sales of Assets ...... 19
5.17 Transactions with Affiliates ..................... 21
5.18 Notice ........................................... 21
5.19 Board of Directors; Observer Rights .............. 21
5.20 Annual Plan ...................................... 22
5.21 Further Assurances ............................... 22
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
6. [Reserved] ............................................................ 22
7. [Reserved] ............................................................ 22
8. Restrictions on Transfer; Registration Rights ......................... 22
8.1 Legends; Restrictions on Transfer ................... 22
8.2 Registration Rights ................................. 22
9. Events of Default; Remedies ........................................... 22
9.1 Events of Default ................................... 22
9.2 Remedies Upon Default ............................... 24
9.3 Acceleration of Maturities .......................... 25
10. Amendments, Waivers and Consents ...................................... 25
11. Interpretation of Agreement; Definitions .............................. 25
11.1 Definitions ......................................... 25
11.2 Accounting Principles ............................... 28
11.3 Directly or Indirectly .............................. 29
12. Miscellaneous ......................................................... 29
12.1 Expenses, Stamp Tax Indemnity ....................... 29
12.2 Powers and Rights Not Waived; Remedies Cumulative ... 29
12.3 Notices ............................................. 29
12.4 Assignments ......................................... 30
12.5 Survival of Covenants and Representations ........... 31
12.6 Severability ........................................ 31
12.7 Governing Law and Jurisdiction ...................... 31
12.8 Captions; Counterparts .............................. 31
12.9 Confidentiality ..................................... 31
12.10 Publicity ........................................... 32
</TABLE>
iii
<PAGE> 5
LOAN AGREEMENT
This LOAN AGREEMENT (the "Agreement") entered into the 17th day of
November, 1997, by and between BIKERS DREAM, INC., a California corporation (the
"Company"), and SIRROM CAPITAL CORPORATION d/b/a TANDEM CAPITAL, a Tennessee
corporation (the "Lender").
WITNESSETH:
WHEREAS, the Company has requested that Lender make available to the
Company a term loan in the original principal amount of Two Million Five Hundred
Thousand Dollars ($2,500,000.00) (the "Loan"), and Lender is willing to make the
Loan, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the agreement of Lender to make the
Loan, and in mutual consideration of the premises and the respective
representations, warranties, covenants and agreements contained herein, the
parties agree as follows:
1. The Loan.
1.1 The Note. The Loan shall be evidenced by a Secured Promissory
Note in favor of Lender in the original principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,000.00), to be dated the Closing Date, to bear
interest from such date at the rate of 12.0% per annum, payable quarterly by
automatic debit on the first day of each March, June, September, and December in
each year, commencing December 1, 1997, and at maturity, to mature on November
17, 1998, and to bear such other terms as are set forth in the form attached
hereto as Exhibit A-I. Interest on the Note shall be computed on the basis of a
360-day year of twelve 3O-day months. The Company may prepay the indebtedness
evidenced by the Note in whole or in part at any time and from time to time,
without penalty or premium. Capitalized terms shall have the meanings assigned
by Section 11 unless otherwise defined herein.
1.2 Initial Warrant. At the Closing, the Company shall grant,
issue, and deliver to Lender its Stock Purchase Warrant, dated the Closing Date,
in the form attached hereto as Exhibit A-2 (the "Initial Warrant"), entitling
Lender to purchase 437,500 Shares of the Company's Common Stock at an Exercise
Price of $1.00 per share, at any time and from time to time during the five
year period beginning on November 17, 1997.
1.3 Additional Warrant. On June 1, 1998, the Company shall grant,
issue, and deliver to Lender its Stock Purchase Warrant, dated June 1, 1998, in
the form attached hereto as Exhibit A-3 (the "Additional Warrant"), entitling
Lender to purchase 375,000 Shares of the
<PAGE> 6
Company's Common Stock at an Exercise Price of $1.05 per share, at any time and
from time to time during the five year period beginning on June 1, 1998.
1.4 Commitment; Closing Date. Subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue the Note to Lender, and Lender agrees to make
the Loan to the Company. Delivery of the Note shall be made at the offices of
Tandem Capital, Inc., Nashville, Tennessee, against payment therefor by federal
funds wire transfer in immediately available funds and to the accounts and in
the amounts set forth in the Company's wire instructions in the form of Exhibit
B hereto, at 10:00 A.M., Nashville time, on November 17, 1997, or such later
date as the Company and Lender shall agree (the "Closing Date").
1.5 Processing Fee. The Company shall pay to Lender on or before
the Closing Date a processing fee in an amount equal to $50,000.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Lender as follows:
2.1 Corporate Status.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, and has
the corporate power to own and operate its properties, to carry on its business
as now conducted and to enter into and to perform its obligations under this
Agreement, the Note, the Initial Warrant, the Additional Warrant, the
Registration Rights Agreement, and any other document executed and delivered by
the Company in connection herewith or therewith (collectively, the "Loan
Documents"). The Company is qualified to do business and is in good standing in
each state or other jurisdiction in which such qualification is necessary under
applicable law, except where the failure to so qualify would not have a Material
Adverse Effect on the financial condition or results of operations of the
Company.
(b) Schedule 2.1(b) sets forth a complete list of each
corporation, partnership, joint venture, limited liability company or other
business organization in which the Company owns, directly or indirectly, any
capital stock or other equity interest in excess of $1,000 (the "Subsidiary"
or, collectively, the "Subsidiaries"), or with respect to which the Company or
any Subsidiary, alone or in combination with others, is in a control position,
which list shows the jurisdiction of incorporation or other organization and the
percentage of stock or other equity interest of each Subsidiary owned by the
Company. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of incorporation or other
organization as indicated on Schedule 2.1(b), each has all requisite power and
authority and holds all material licenses, permits and other required
authorizations from government authorities necessary to own its properties and
assets and to conduct its business as now being conducted, and each is qualified
to do business as a foreign corporation (or business organization) and is in
good standing in every jurisdiction in which such qualification is necessary
under applicable law, except where the failure to so qualify
2
<PAGE> 7
would not have a Material Adverse Effect on the financial condition or results
of operations of the Company. All of the outstanding shares of capital stock, or
other equity interest, of each Subsidiary owned, directly or indirectly, by the
Company have been validly issued, are fully paid and nonassessable, and are
owned by the Company free and clear of all liens, charges, security interests,
or encumbrances.
2.2 Capitalization.
(a) The authorized capital stock of the Company consists
of (i) 10,000,000 shares of Preferred Stock, no par value, of which three
shares of Series A Preferred Stock, and 6,481,385 shares of Series B Preferred
Stock are issued and outstanding, and (ii) 25,000,000 shares of Common Stock, no
par value, 10,801,821 of which are issued and outstanding. All shares of
Preferred Stock and Common Stock outstanding have been validly issued and are
fully paid and nonassessable. There are no statutory or contractual preemptive
rights, rights of first refusal, antidilution rights, or any similar rights held
by any party with respect to the issuance of the Note or the Warrants.
(b) The Company has not granted, or agreed to grant or
issue, any options, warrants or rights to purchase or acquire from the Company
any shares of capital stock of the Company; there are no securities outstanding
or committed to be issued by the Company or any Subsidiary which are convertible
into or exchangeable for any shares of capital stock or other securities of the
Company; and there are no contracts, commitments, agreements, understandings,
arrangements or restrictions as to which the Company is a party, or by which it
is bound, relating to any shares of capital stock or other securities of the
Company, whether or not outstanding, except for (i) the Warrants to be issued
pursuant to this Agreement, and (ii) such options, warrants and other rights to
acquire capital stock of the Company set forth on Schedule 2.2(b). Except as set
forth on Schedule 2.2(b), all such shares have been duly reserved for issuance,
have been duly and validly authorized, and upon issuance in accordance with the
terms of the respective instruments and receipt of payment therefor, will be
validly issued, fully paid, and nonassessable.
(c) The Common Stock issuable upon exercise of Warrants
being purchased under this Agreement has been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of this Agreement, will
be duly and validly issued, fully paid, and nonassessable and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement, the other Loan Documents, and applicable state and federal securities
laws.
2.3 Authorization. The Company has full legal right, power and
authority to enter into and perform its obligations under the Loan Documents
without the consent or approval of any other person, firm, governmental agency,
or other legal entity. The execution and delivery of this Agreement, the
issuance of the Note hereunder, the execution and delivery of each other
document in connection herewith or therewith to which the Company is a party,
and the performance by the Company of its obligations hereunder or thereunder,
are within the corporate powers of the Company and have been duly authorized by
all necessary corporate action properly taken, have received all
3
<PAGE> 8
necessary governmental approvals, if any were required, and do not and will not
contravene or conflict with (i) the Articles of Incorporation or Bylaws of the
Company, (ii) any material agreement to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their properties is
bound, or constitute a default thereunder, or result in the creation or
imposition of any lien, charge, security interest, or encumbrance of any nature
upon any of the property or assets of the Company or any of its Subsidiaries
pursuant to the terms of any such agreement or instrument, or (iii) violate any
provision of law or any applicable judgment, ordinance, regulation or order of
any court or governmental agency. The officer executing this Agreement, the
Note, and any other document executed and delivered by the Company in connection
herewith or therewith, is duly authorized to act on behalf of the Company.
2.4 Validity and Binding Effect. Each of the Loan Documents is
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to such limitations on
enforceability as may exist under equitable principles of law or the application
of bankruptcy or insolvency laws.
2.5 Contracts and Other Commitments. Except as disclosed on
Schedule 2.5 and other than as filed by the Company with the Securities and
Exchange Commission ("SEC") as an exhibit pursuant to Item 601(b)(10) of
Regulation S-K under the Securities Act of 1933 (the "Securities Act") (each
such disclosed or filed agreement an "Applicable Contract"), the Company and its
Subsidiaries are not bound by any loans, liens, pledges, security interests,
agreements, indentures, or instruments defining the rights of security holders
under any securities or other financings upon which the Company or any
Subsidiary is obligated or by which the Company is bound.
2.6 Litigation. Except as set forth on Schedule 2.6, there is no
litigation, arbitration, claim, proceeding or investigation pending or
threatened in writing to which the Company or any Subsidiary is a party or of
which any of its respective properties or assets is the subject which, if
determined adversely to the Company or such Subsidiary, would individually or in
the aggregate have a Material Adverse Effect on the financial position, results
of operations, or business of the Company and its Subsidiaries.
2.7 Financial Statements. Except as set forth on Schedule 2.7,
the consolidated financial statements of the Company and its Subsidiaries for
the years ended December 31, 1996 and 1995, and the unaudited consolidated
financial statements as of and for the six months ended June 30, 1997, and the
related notes, copies of which the Company previously has delivered to Lender,
fairly present the financial position, results of operations, cash flows and
changes in stockholders' equity of the Company and its consolidated
Subsidiaries, at the respective dates of and for the periods to which they apply
in such financial statements, and have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout the periods indicated, subject, in the case of interim financial
statements, to normal recurring year-end adjustments (the effect of which will
not, individually or in the aggregate, be materially adverse) and the absence of
notes (that, if presented, would not differ materially from those included in
the
4
<PAGE> 9
most recent audited consolidated financial statements). No financial statements
of any other person are required by GAAP to be included in the consolidated
financial statements of the Company.
2.8 SEC Reports. The Company's Common Stock is listed for trading
on the over-the-counter market and quoted on the National Association of
Securities Dealers Electronic Bulletin Board under the symbol "BIKR," and has
been duly registered with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Since January 1, 1997, the Company has timely
filed all reports, registrations, proxy or information statements, and all other
documents, together with any amendments required to be made thereto, required to
be filed with the SEC under the Securities Act and the Exchange Act
(collectively, the "SEC Reports"). As of their respective dates, the SEC Reports
complied (or will comply, as the case may be) in all material respects with all
rules and regulations promulgated by the SEC and did not (or will not, as the
case may be) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
2.9 Absence of Changes. Except as set forth on Schedule 2.9,
since June 30, 1997, (i) neither the Company nor any of its Subsidiaries have
incurred any liabilities or obligations, direct or contingent, or entered into
any transactions, not in the ordinary course of business, that are material to
the Company or any of its Subsidiaries, (ii) neither the Company nor any of its
Subsidiaries have purchased any of its outstanding capital stock or declared, or
paid any dividend or other distribution or payment in respect of its capital
stock, (iii) there has not been any change in the authorized or issued capital
stock, long-term debt, or short-term debt of the Company, and (iv) there has not
been any material adverse change in or affecting the business, operations,
properties, assets, or condition (financial or otherwise) of the Company or any
Subsidiary.
2.10 No Defaults. Except as set forth on Schedule 2.10 and
except where a default or event of default does not and would not constitute a
Material Adverse Event (as defined in Section (11), no default or event of
default by the Company or any Subsidiary exists under this Agreement or any of
the other Loan Documents, or under any Applicable Contract, or other material
instrument or agreement to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or its respective properties are bound or,
to the knowledge of the Company, affected, and to the knowledge of the Company
no event has occurred and is continuing that with notice or the passage of time
or both would constitute a default or event of default thereunder.
2.11 Compliance With Law. The Company and any Subsidiary are in
compliance with all foreign, federal, state or local laws, regulations, decrees
and orders applicable to them (including but not limited to the Foreign Corrupt
Practices Act, occupational and health standards and controls, antitrust,
monopoly, restraint of trade or unfair competition) to the extent that
noncompliance, in the aggregate, cannot reasonably be expected to cause a
Material Adverse Event.
2.12 Taxes. Except as set forth on Schedule 2.12, the Company and
its Subsidiaries have filed or caused to be filed all federal, state and local
income, excise and franchise
5
<PAGE> 10
tax returns for the 1994, 1995 and 1996 taxable years required to be filed
(except for returns that have been appropriately extended), and have paid, or
provided for the payment of, all taxes shown to be due and payable on said
returns and all other taxes, impositions, assessments, fees or other charges
imposed on it by any governmental authority, agency or instrumentality, prior to
any delinquency with respect thereto (other than taxes, impositions,
assessments, fees and charges currently being contested in good faith by
appropriate proceedings, for which appropriate amounts have been reserved), and
the Company does not know of any proposed assessment for additional taxes or any
basis therefor. No tax liens have been filed against the Company or its
Subsidiaries or any of their properties.
2.13 Certain Transactions. Except as set forth in the filings made
by the Company with the SEC and except as to indebtedness incurred in the
ordinary course of business and approved by the Board of Directors of the
Company, neither the Company nor any Subsidiary is indebted, directly or
indirectly, to any of its officers or directors, or to their respective spouses
or children, or to any affiliate, in excess of an aggregate amount of $60,000,
and none of such officers or directors or any member of their immediate families
or affiliates, is indebted to the Company or any Subsidiary in excess of an
aggregate amount of $60,000, or has any direct or indirect ownership interest in
any firm or corporation with which the Company or any Subsidiary is affiliated
or with which the Company has a business relationship, or any firm or
corporation which competes with the Company or any Subsidiary, except as set
forth on Schedule 2.13. Except as set forth in the proxy statements filed by the
Company with the SEC, no officer or director of the Company or any Subsidiary or
any member of their immediate families is, directly or indirectly, interested in
any material contract with the Company or any Subsidiary that would require
disclosure under Item 404 of Regulation S-K. Neither the Company nor any
Subsidiary is a guarantor or indemnitor of any indebtedness of any other person,
firm or corporation.
2.14 Title to Property. The Company and each Subsidiary has good
and marketable title to all real and personal property owned by it, free and
clear of all liens, security interests, pledges, encumbrances, claims and
restrictions of every kind and nature whatsoever, except as disclosed on
Schedule 2.14. Any real property and buildings held under lease by the Company
or any Subsidiary are held under valid existing and enforceable leases, and to
the best of the Company's knowledge no default has occurred or is continuing
thereunder which might result in any Material Adverse Effect.
2.15 Intellectual Property.
(a) Except as set forth in Schedule 2.15, or for items
that would not constitute a Material Adverse Event, to the Company's knowledge,
the Company is the lawful owner or has a valid right to use the proprietary
information used in its business free and clear of any claim, right, trademark,
patent or copyright protection of any third party; provided, however, that this
paragraph (a) shall not be deemed to include any representation regarding the
absence of infringements or conflicts with the rights of others, which
representation is made only in paragraph (c) hereof. As used herein,
"proprietary information" includes without limitation (i) any computer
6
<PAGE> 11
software and any documentation, inventions, and technical and nontechnical data
related thereto, and (ii) other documentation, inventions and data related to
patterns, plans, methods, techniques, drawings, finances, customer lists,
suppliers, products, special pricing and cost information, designs, processes,
procedures, formulas, research data owned or used by the Company or any
Subsidiary or marketing studies conducted by the Company, all of which the
Company considers to be commercially important and competitively sensitive and
which generally has not been disclosed to third parties other than customers in
the ordinary course of business.
(b) Except as set forth in Schedule 2.15, to the Company's
knowledge, the Company has good and marketable title to or has a valid right to
use all patents, trademarks, trade names, service marks, copy rights or other
intangible property rights, and registrations or applications for registration
thereof, owned by the Company or any Subsidiary or used or required by the
Company or any Subsidiary in the operation of its business as presently being
conducted; provided, however, that this paragraph (b) shall not be deemed to
include any representation regarding the absence of infringements or conflicts
with the rights of others, which representation is made only in paragraph (c)
hereof
(c) Except as set forth in Schedule 2.15, the Company has
no knowledge of any infringements or conflicts with asserted rights of others
with respect to copyrights, patents, trademarks, service marks, trade names,
trade secrets or other intangible property rights or know how which could cause
a Material Adverse Event. Except as set forth in Schedule 2.15, to the Company's
knowledge, no products or processes of the Company infringe or conflict with any
rights of patent or copyright, or any discovery, invention, product or process,
that is the subject of a patent or copyright application or registration known
to the Company. The Company follows such procedures as the Company deems
necessary or appropriate to provide reasonable protection of the Company's trade
secrets and proprietary rights in intellectual property of all kinds. To the
knowledge of the Company, no person employed by or affiliated with the Company
has employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer, and to the knowledge of the
Company, no person employed by or affiliated with the Company has violated any
confidential relationship that such person may have had with any third person,
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of the Company.
2.16 Environmental Matters. The Company has duly complied in all
material respects with, and its business, operations, assets, equipment,
property, leaseholds or other facilities are in compliance in all material
respects with, the provisions of all federal, state and local environmental,
health, and safety laws, codes and ordinances, and all rules and regulations
promulgated thereunder, except to the extent that the violation thereof would
not reasonably be expected to cause a Material Adverse Event. The Company has
been issued and will maintain all required material federal, state and local
permits, licenses, certificates and approvals relating to (i) air emissions;
(ii) discharges to surface water or groundwater; (iii) noise emissions; (iv)
solid or liquid waste disposal; (v) the use, generation, storage, transportation
or disposal of toxic or hazardous substances or wastes (which shall include any
and all such materials listed in any federal,
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state or local law, code or ordinance and all rules and regulations promulgated
thereunder as hazardous or potentially hazardous); or (vi) other environmental,
health or safety matters, except to the extent that the violation thereof would
not reasonably be expected to cause a Material Adverse Event. Except as noted on
Schedule 2.16, the Company has not received notice of and does not know of a
material violation of any federal, state or local environmental, health or
safety laws, codes or ordinances, and any rules or regulations promulgated
thereunder with respect to its businesses, operations, assets, equipment,
property, leaseholds, or other facilities. Except in accordance with a valid
governmental permit, license, certificate or approval, there has been no
emission, spill, release or discharge into or upon (i) the air; (ii) soils, or
any improvements located thereon; (iii) surface water or groundwater; or (iv)
the sewer, septic system or waste treatment, storage or disposal system
servicing the premises, of any toxic or hazardous substances or wastes at or
from the premises, except to the extent that the violation thereof would not
reasonably be expected to cause a Material Adverse Event. The Company does not
have any material indebtedness, obligation or liability (absolute or contingent,
matured or not matured), with respect to the storage, treatment, cleanup or
disposal of any solid wastes, hazardous wastes or other toxic or hazardous
substances (including without limitation any such indebtedness, obligation, or
liability with respect to any current regulation, law or statute regarding such
storage, treatment, cleanup or disposal).
2.17 Accounting Matters. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance, with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain accountability for the assets of the Company and each of
its Subsidiaries; (iii) access to the assets of the Company and each of its
Subsidiaries is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets of the
Company and each of its Subsidiaries are compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
2.18 Distributions to Company. No Subsidiary of the Company is
currently prohibited, directly or indirectly, from paying any dividends to the
Company, from making any other distributions on such Subsidiary's capital stock,
from repaying to the Company any loans or advances to such Subsidiary, or from
transferring any of such Subsidiary's property or assets to the Company or any
other Subsidiary of the Company.
2.19 Prior Sales. All offers and sales of the Company's capital
stock prior to the date hereof were at all relevant times (i) exempt from the
registration requirements of the Securities Act or were duly registered under
the Securities Act, and (ii) were duly registered or were the subject of an
available exemption from the registration requirements of all applicable state
securities or Blue Sky laws.
2.20 Regulatory Compliance. Except as set forth on Schedule 2.20,
the conduct of the business and the ownership of the assets of the Company is
not dependent on any license, permit, approval, waiver or other authorization
of any federal, state or local governmental or
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regulatory body which the Company has not obtained, except to the extent that
the absence thereof would not reasonably be expected to cause a Material Adverse
Event. All material licenses, permits and authorizations held by the Company are
in full force and effect.
2.21 Margin Regulations. The Company is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock. No proceeds received pursuant to this Agreement will be used to purchase
or carry any equity security of a class which is registered pursuant to Section
12 of the Exchange Act.
2.22 [Reserved.]
2.23 Limited Offering. Subject in part to the truth and accuracy
of Lender's representations set forth in this Agreement, the offer, sale and
issuance of the Note and Warrants is exempt from the registration requirements
of the Securities Act, and neither the Company nor any authorized agent acting
on its behalf has taken or will take any action hereafter that would cause the
loss of such exemption.
2.24 Registration Obligations. Except as described in Schedule
2.24, the Company is not under any obligation to register under the Securities
Act or the Trust Indenture Act of 1939, as amended, any of its presently
outstanding securities or any of its securities that are proposed to be
subsequently issued.
2.25 Insurance. The Company has maintained, and has caused each
Subsidiary to maintain, insurance coverage with respect to their respective
properties and business in such forms and amounts and against such risks,
casualties and contingencies as are customary for corporations of comparable
size and condition (financial and otherwise) engaged in the same or a similar
business and owning and operating similar properties.
2.26 Governmental Consents. No consent, approval, qualification,
order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in connection with
the Company's valid execution, delivery, or performance of this Agreement by the
Company, except such filings as have been made prior to the Closing, and except
notices of sale required to be filed with the Securities and Exchange Commission
under Regulation D of the Securities Act or such post-closing filings as may be
required under applicable state securities laws, which will be timely filed
within the applicable periods therefor.
2.27 Employees. To the best of the Company's knowledge, there is
no strike, labor dispute or union organization activity pending or threatened
between the Company and its employees. None of the Company's employees belongs
to any union or collective bargaining unit. The Company has complied in all
material respects with all applicable state and federal equal opportunity and
other laws related to employment. To the best of the Company's knowledge, no
employee of the Company is in violation of any judgment, decree, or order, or
any term of any employment contract, patent disclosure agreement, or other
contract or agreement relating to the
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<PAGE> 14
relationship of any such employee with the Company, or any other party because
of the nature of the business conducted or presently proposed to be conducted by
the Company or to the use by the employee of his best efforts with respect to
such business. Other than as set forth on Schedule 2.27, the Company is not a
party to or bound by any employment contract, deferred compensation agreement,
bonus plan, incentive plan, profit sharing plan, retirement agreement. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees and to existing employment contracts set forth on Schedule 2.27, the
employment of each officer and employee of the Company is terminable at the will
of the Company.
2.28 ERISA. The Company is in compliance in all material respects
with all applicable provisions of Title IV of the Employee Retirement Income
Security Act of 1974, Pub. L. No. 93-406, September 2, 1974, 88 Stat. 829, 29
U.S.C.A. SS 1001 et seq. (1975), as amended from time to time ("ERISA"). Except
as disclosed in Schedule 2.28, neither a reportable event nor a prohibited
transaction (as defined in ERISA) has occurred and is continuing with respect to
any "pension plan" (as such term is defined in ERISA, a "Plan"); no notice of
intent to terminate a Plan has been filed nor has any Plan been terminated; no
circumstances, exist which constitute grounds entitling the Pension Benefit
Guaranty Corporation (together with any entity succeeding to or all of its
functions, the "PBGC") to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings;
neither the Company nor any commonly controlled entity (as defined in ERISA) has
completely or partially withdrawn from a multiemployer plan (as defined in
ERISA). The Company and each commonly controlled entity has met its minimum
funding requirements under ERISA with respect to all of its Plans and the
present fair market value of all Plan property exceeds the present value of all
vested benefits under each Plan, as determined on the most recent valuation date
of the Plan and in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of the Company or any
commonly controlled entity to the PBGC or the Plan under Title IV or ERISA; and
neither the Company nor any commonly controlled entity has incurred any
liability to the PBGC under ERISA.
2.29 Fees/Commissions. Except as set forth on Schedule 2.29, the
Company has not agreed to pay any finder's fee, commission, origination fee, or
other fee or charge to any person or entity with respect to or as a result of
the consummation of the transactions contemplated hereunder, except for (i) the
processing fee due to Lender under Section 1.5, and (ii) reimbursement of
Lender's expenses under Section 12.1.
2.30 Disclosure. No representation or warranty made as of the
date hereof by the Company contained in this Agreement or any Schedule attached
hereto or any statement in any document, certificate or other instrument
furnished or to be furnished to the Purchaser pursuant hereto, taken as a whole,
contains or will (as of the time so furnished) contain any untrue statement of a
material fact, or omits or will (as of the time so furnished) omit to state any
material fact which is necessary in order to make the statements contained
herein or therein not misleading.
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2.31 Survival. The representations and warranties of the Company
contained in this Agreement are made as of the date hereof and shall survive
until this Agreement terminates in accordance with Section 12.5 hereof.
3. Representations and Warranties of Lender. The Lender hereby
represents to the Company as follows:
3.1 Corporate Status. Lender is a corporation duly organized,
validly existing and in good standing under the laws of the State of Tennessee
and has the corporate power to own and operate its properties, to carry on its
business as now conducted and to enter into and to perform its obligations under
this Agreement and any other document executed or delivered by Lender in
connection herewith.
3.2 Authorization. Lender has full legal right, power and
authority to enter into and perform its obligations under this Agreement and any
other document executed and delivered by Lender in connection herewith, without
the consent or approval of any other person, firm, governmental agency or other
legal entity. The execution and delivery of this Agreement and any other
document executed and delivered by Lender in connection herewith, and the
performance by Lender of its obligations hereunder and/or thereunder are within
the corporate powers of Lender, have received all necessary governmental
approvals, if any were required, and do not and will not contravene or conflict
with (i) the Charter or Bylaws of Lender, (ii) any material agreement to which
Lender is a party or by which it or any of its properties is bound, or
constitute a default thereunder, or result in the creation or imposition of any
lien, charge, security interest or encumbrance of any nature upon any of the
property or assets of Lender pursuant to the terms of any such agreement or
instrument, or (iii) violate any provision of law or any applicable judgment,
ordinance, regulation or order of any court or governmental agency. The officer
executing this Agreement and any other document executed and delivered by Lender
in connection herewith, is duly authorized to act on behalf of Lender.
3.3 Validity and Binding Effect. This Agreement and any other
document executed and delivered by Lender in connection herewith have been
authorized by all requisite corporate action, and are the legal, valid and
binding obligations of the Lender, enforceable against it in accordance with
their respective terms, subject to such limitations on enforceability as may
exist under equitable principles of law or the application of bankruptcy or
insolvency laws.
3.4 Accredited Investor, Investment Intent. Lender is a
registered investment company under the Investment Company Act and as such is an
"accredited investor" under Rule 501(a) under the Securities Act. Lender is
acquiring the Note and Warrants for its own account, for investment, and not
with a view to the distribution or resale thereof, in whole or in part, in
violation of the Securities Act or any applicable state securities law, and
Lender has no present intention of selling, negotiating or otherwise disposing
of the Note and Warrants; it being understood that Lender intends to transfer
and assign the Note and Warrants and all Lender's rights and obligations under
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<PAGE> 16
this Agreement to one or more wholly-owned Subsidiaries of Lender, which will
also be accredited investors holding for their own account, for investment, and
not with a view to the distribution or resale thereof. Lender has relied solely
upon an independent investigation made by it and its representatives, if any,
and has, prior to the date hereof, been given access to and the opportunity to
examine all books and records of the Company, and all material contracts and
documents of the Company. In making its investment decision to purchase the Note
and Warrants, Lender is not relying on any oral or written representations or
assurances from the Company or any other person or any representation of the
Company or any other person other than as set forth in this Agreement, or on any
information other than that contained in the Company's Annual Report on Form
1O-K for the year ended December 31, 1996 and (ii) Quarterly Report on Form 1O-Q
for the quarter ended June 30, 1997. Lender has such experience in business and
financial matters that it is capable of evaluating the risk of its investment
and determining the suitability of its investment.
3.5 Survival. The representations and warranties of the Lender
contained in this Agreement shall survive until this Agreement terminates in
accordance with Section 12.5 hereof.
4. Conditions Precedent to the Obligations of Lender. The obligation of
Lender to make the Loan shall be subject to the satisfaction, on or before the
Closing Date, of each of the conditions set forth below. These conditions are
for Lender's sole benefit and may be waived by Lender at any time in its sole
discretion.
4.1 Representations and Warranties. The representations and
warranties of the Company contained in this Agreement and in any Schedule hereto
or any document or instrument delivered to Lender or its representatives
hereunder, shall have been true and correct in all material respects when made
and shall be true and correct in all material respects as of the Closing Date as
if made on such date, except to the extent such representations and warranties
expressly relate to a specific date. The Company shall have duly performed all
of the covenants and agreements to be performed by it hereunder on or prior to
the Closing Date.
4.2 Officer's Certificate. The Company shall have delivered to
Lender a certificate, dated the Closing Date, signed by the President of the
Company, substantially in the form attached hereto as Exhibit C.
4.3 Satisfactory Proceedings and Secretary's Certificate. All
proceedings taken in connection with the transactions contemplated by this
Agreement, and all documents necessary to the consummation thereof, shall be
satisfactory in form and substance to Lender and Lender's counsel, and the
Company shall have delivered to Lender a certificate, dated the Closing Date,
signed by the Secretary of the Company, substantially in the form attached
hereto as Exhibit D.
4.4 Legal Opinion. Lender shall have received the opinion of Day
Campbell & McGill, counsel for the Company, dated the Closing Date, addressed to
Lender, in form and substance satisfactory to Lender's counsel, and covering the
matters set forth in Exhibit E hereto.
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4.5 Authorization Agreement. The Company shall have delivered to
Lender an Authorization Agreement for Pre-Authorized Payments (Debit), dated the
Closing Date, executed by a duly authorized officer of the Company, in the form
attached hereto as Exhibit F.
4.6 Existence and Authority. The Company shall have delivered to
Lender the following certificates of public officials, in each case as of a date
within ten days of the Closing Date:
(a) the certificate or articles of incorporation of the
Company and each of the Subsidiaries, certified by the Secretary of State or
other appropriate official in the jurisdiction by which each such entity is
incorporated; and
(b) a certificate as to the legal existence and good
standing of the Company and each of the Subsidiaries issued by the Secretary of
State or other appropriate official of the jurisdiction by which each such
entity is incorporated.
4.7 Delivery of Loan Documents. The Company shall have delivered
to Lender the following documents, executed by the Company and dated the Closing
Date:
(a) the Note;
(b) the Initial Warrant;
(c) the Security Agreement in the form of Exhibit G;
(d) the Warrant Valuation Letter in the form of Exhibit H;
(e) the Closing Statement in the form of Exhibit I;
(f) the Financing Statements; and
(g) the Registration Rights Agreement between the Company
and the Lender.
4.8 [Reserved].
4.9 Required Consents. Any consents or approvals required to be
obtained from any third party, including any holder of indebtedness or any
outstanding security of the Company, and any amendments of agreements which
shall be necessary to permit the consummation of the transactions contemplated
hereby on the Closing Date, shall have been obtained and all such consents or
amendments shall be satisfactory in form and substance to Lender and Lender's
counsel.
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4.10 Waiver of Conditions. If on the Closing Date the Company
fails to tender to Lender the Note and Warrants to be issued to Lender, or if
the conditions specified in this Section 4 have not been fulfilled, Lender may
thereupon elect to be relieved of all further obligations under this Agreement
and shall (i) retain the processing fee provided by Section 1.5, and (ii) be
paid the expense allowance provided by Section 12.1. Without limiting the
foregoing, if the conditions specified in this Section 4 have not been
fulfilled, Lender may waive compliance by the Company with any such condition to
such extent as Lender, in Lender's sole discretion, may determine. Nothing in
this Section 4.10 shall operate to relieve the Company of any of its
obligations hereunder, or to waive any of Lender's rights against the Company.
5. Covenants of Company. From and after the Closing Date and continuing
so long as any amount remains unpaid on the Note,
5.1 Use of Proceeds. The Company shall use the proceeds of the
Loan for general corporate purposes, including working capital and debt
repayment.
5.2 Corporate Existence, Etc. The Company will preserve and keep
in force and effect, and will cause each Subsidiary to preserve and keep in
force and effect, its corporate existence and good standing in the state of
incorporation thereof, its qualification and good standing as a foreign
corporation in each jurisdiction where such qualification is required by
applicable law except where the failure to so qualify would not have a Material
Adverse Effect on the financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole, and all licenses and permits
necessary to the proper conduct of its business.
5.3 Maintenance of Properties, Etc. The Company will maintain,
preserve and keep, and will cause each Subsidiary to maintain, preserve and
keep, its properties and assets which are used or useful in the conduct of its
business (whether owned in fee or pursuant to a leasehold interest) in good
repair and working order and from time to time will make all necessary repairs,
replacements, renewals and additions required in the opinion of the Company to
maintain the efficiency thereof.
5.4 Nature of Business. Neither the Company nor any Subsidiary
will engage in any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by the Company and
its Subsidiaries would be substantially changed from the general nature of the
business engaged in by the Company and its Subsidiaries on the date of this
Agreement.
5.5 Insurance. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage with respect to their respective
properties and business in such forms and amounts and against such risks,
casualties and contingencies as are customary for corporations of comparable
size and condition (financial and otherwise) engaged in the same or a similar
business and owning and operating similar properties.
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<PAGE> 19
5.6 Taxes, Claims for Labor and Materials. The Company will
promptly pay and discharge, and will cause each Subsidiary promptly to pay and
discharge, (i) all lawful taxes, assessments and governmental charges or levies
imposed upon the property or business of the Company or such Subsidiary,
respectively, (ii) all trade accounts payable in accordance with usual and
customary business terms, and (iii) all claims for work, labor or materials,
which if unpaid might become a lien or charge upon any property of the Company
or such Subsidiary; provided the Company or such Subsidiary shall not be
required to pay any such tax, assessment, charge, levy, account payable or claim
if (i) the validity, applicability or amount thereof is being contested in good
faith by appropriate actions or proceedings which will prevent the forfeiture or
sale of any property of the Company or such Subsidiary or any material
interference with the use thereof by the Company or such Subsidiary, and (ii)
the Company or such Subsidiary shall set aside on its books, reserves deemed by
it to be adequate with respect thereto.
5.7 Compliance with Laws, Agreements, Etc. Except where failure
to do so does not and would not constitute a Material Adverse Event, the Company
shall maintain its business operations and property owned or used in connection
therewith in compliance with (i) all applicable federal, state and local laws,
regulations and ordinances, and such laws, regulations and ordinances of foreign
jurisdictions, governing such business operations and the use and ownership of
such property, and (ii) all agreements, licenses, franchises, indentures and
mortgages to which the Company is a party or by which the Company or any of its
properties is bound.
5.8 ERISA Matters. If the Company has in effect, or hereafter
institutes, a pension plan that is subject to the requirements of Title IV of
ERISA (a "Plan"), then the following covenants shall be applicable during such
period as any such Plan shall be in effect: (i) throughout the existence of the
Plan, the Company's contributions under the Plan will meet the minimum funding
standards required by ERISA and the Company will not institute a distress
termination of the Plan; and (ii) the Company will send to Lender a copy of any
notice of a reportable event (as defined in ERISA) required by ERISA to be filed
with the Labor Department or the PBGC, at the time that such notice is so filed.
5.9 Books and Records: Rights of Inspection. The Company will
keep, and will cause each Subsidiary to keep, proper books of record and account
in which entries will be made of all dealings or transactions of or in relation
to the business and affairs of the Company or such Subsidiary, in accordance
with GAAP consistently maintained. The Company shall permit a representative of
Lender to visit any of its properties and inspect its corporate books and
financial records, and will discuss its accounts, affairs and finances with a
representative of Lender, during reasonable business hours, at all such times as
Lender may reasonably request.
5.10 Reports. The Company will furnish to Lender the following
information, which information shall be subject to confidential treatment by
Lender:
(a) Monthly Statements. Within 20 days after the end of
each month, beginning the month of November, 1997, monthly internal financial
reports which at a minimum
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<PAGE> 20
shall consist of a balance sheet of the Company as of the close of such month
and related statements of income and cash flows for the one-month period then
ended, as well as any additional financial reports for such period routinely
prepared with respect to the Company and the Subsidiaries;
(b) Quarterly Statements. As soon as available and in any
event within 30 days after the end of each quarterly fiscal period (except the
last) of each fiscal year, copies of:
(i) consolidated balance sheets of the Company and
Subsidiaries as of the close of the three-month period then ended,
setting forth in comparative form the consolidated figures at the end of
the preceding fiscal year,
(ii) consolidated statements of income of the Company
and Subsidiaries for the three-month period then ended, setting forth in
comparative form the consolidated figures for the corresponding period
of the preceding fiscal year, and
(iii) consolidated statements of cash flows of the
Company and Subsidiaries for the portion of the fiscal year ending with
such three-month period, setting forth in comparative form the
consolidated figures for the corresponding period of the preceding
fiscal year,
all in reasonable detail and accompanied by a certificate of an authorized
financial officer of the Company that such financial statements fairly present
the financial condition and results of operations and cash flows of the Company
at and for the periods presented, subject to normal year-end adjustment;
(c) Annual Statements. As soon as available and in any
event within 90 days after the close of each fiscal year of the Company, copies
of:
(i) consolidated balance sheets of the Company and
Subsidiaries as of the close of such fiscal year, and
(ii) consolidated statements of income and
consolidated statements of changes in stockholders' equity and cash
flows of the Company and Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated figures for the
preceding fiscal year, all in reasonable detail and accompanied by an
unqualified report thereon of a firm of independent public accountants of
recognized national standing;
(d) Special Audit Reports. Promptly upon receipt thereof,
one copy of each interim or special audit made by independent accountants of the
books of the Company or any Subsidiary;
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<PAGE> 21
(e) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally and of each periodic or
current report, and any registration statement or prospectus filed by the
Company or any Subsidiary with any securities exchange or the SEC or any
successor agency, and copies of any orders in any proceedings to which the
Company or any of its Subsidiaries is a party, issued by any governmental
agency, federal or state, having jurisdiction over the Company or any of its
Subsidiaries. The Company specifically covenants to timely file each such item
required to be filed with the SEC and each state requiring securities laws
filings; and
(f) Requested Information. With reasonable promptness,
such financial data and other information relating to the business of the
Company as Lender may from time to time reasonably request.
5.11 Limitations on Debt and Obligations. Except as to
(i) Indebtedness existing on the date hereof and
reflected on (a) the Company's unaudited balance sheet as of June 30,
1997, and (b) Schedule 5.11, as the same Indebtedness may be extended
or renewed (but not increased);
(ii) the Indebtedness incurred pursuant to the Note;
(iii) accounts payable and other trade payables
incurred in the ordinary course of business;
(iv) purchase money indebtedness incurred by the
Company in the purchase of equipment and other property used by the
Company in the ordinary course of business, such purchase money
indebtedness not to exceed an aggregate amount of principal and accrued
interest thereon of $50,000 at any time outstanding;
(v) obligations of the Company pursuant to
capitalized leases;
(vi) Indebtedness that refinances secured
Indebtedness under clause (i) above, provided that the collateral for
such new Indebtedness is the collateral for the refinanced secured
Indebtedness and the aggregate principal amount of such Indebtedness
does not exceed the principal amount outstanding under the refinanced
Indebtedness; and
(vii) Indebtedness incurred in connection with the
acquisition of a business (including the assets of a business), provided
such Indebtedness is secured solely by the assets of the business so
acquired;
the Company and its Subsidiaries shall not, on a consolidated basis, incur
additional indebtedness which is senior to or pari passu with the Note, without
the prior written consent of Lender.
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5.12 Guaranties. Without the prior written consent of Lender, the
Company will not, and will not permit any Subsidiary to, become or be liable in
respect of any Guaranty except Guaranties by the Company which are limited in
maximum financial exposure to the amounts set forth in, and are incurred in
compliance with, the provisions of Section 5.11 of this Agreement.
5.13 Limitation on Liens. Without the prior written consent of
Lender, the Company will not, and will not permit any Subsidiary to, create or
incur, or suffer to be incurred or to exist, any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind (collectively, "Liens") on its
or their property or assets, whether now owned or hereafter acquired, or upon
any income or profits therefrom, or transfer any property for the purpose of
subjecting the same, to the payment of obligations in priority to the payment of
its or their general creditors, or acquire or agree to acquire, or permit any
Subsidiary to acquire, any property or assets upon conditional sales agreement
or other title retention devices, except those Liens which exist as of the date
hereof as set forth on Schedule 2.14, and except:
(a) purchase money liens on and security interests in
equipment hereafter acquired securing Indebtedness permitted by Section 5.11(iv)
of this Agreement, provided that such liens and security interests attach only
to the equipment so acquired and do not encumber any other property of the
Company or any Subsidiary;
(b) liens for taxes (excluding federal and state income
taxes) not yet payable or being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided on the books of
the Company or a Subsidiary;
(c) mechanics', materialmen's, warehousemen's, carriers'
or other like liens arising in the ordinary course of business of the Company or
any Subsidiary, if any, arising with respect to obligations which are not
overdue for a period longer than 90 days or which are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
provided on the books of the Company or a Subsidiary;
(d) deposits or pledges to secure the performance of bids,
tenders, contracts, leases, public or statutory obligations, surety or appeal
bonds or other deposits or pledges for purposes of a like general nature or
given in the ordinary course of business by the Company or any Subsidiary; and
(e) other encumbrances consisting of zoning restrictions,
easements, restrictions on the use of real property or minor irregularities in
the title thereto, which do not arise in connection with the borrowing of, or
any obligation for the payment of, money and which, in the aggregate, do not
materially detract from the value of the premises or the business, properties or
assets of the Company or any Subsidiary.
5.14 Restricted Payments. The Company will not, without the prior
written consent of Lender,
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<PAGE> 23
(a) declare or pay any dividends, either in cash or
property, on any shares of its capital stock of any class except dividends or
other distributions payable solely in shares of Common Stock of the Company; or
(b) directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of its capital stock of any class or any
warrants, rights or options to purchase or acquire any shares of its capital
stock (other than in exchange for or out of the net proceeds to the Company from
the substantially concurrent issue or sale of other shares of capital stock of
the Company or warrants, rights or options to purchase or acquire any shares of
its capital stock); or
(c) make any other payment or distribution, either
directly or through any Subsidiary, in respect of its capital stock, provided,
that distributions from a Subsidiary to the Company, or from a Subsidiary to
another Subsidiary, shall be permitted.
5.15 Investments. The Company will not, and will not permit any
Subsidiary to, make any Investments outside the ordinary course of business of
the Company or any Subsidiary, without the prior written consent of Lender,
except:
(a) Investments in direct obligations of the United States
of America, or any agency or instrumentality of the United States of America,
the payment or guaranty of which constitutes a full faith and credit obligation
of the United States of America, in either case maturing in twelve months or
less from the date of acquisition thereof;
(b) Investments in certificates of deposit maturing within
one year from the date of origin, issued by a bank or trust company organized
under the laws of the United States or any state thereof, having capital,
surplus and undivided profits aggregating at least $100,000,000 and whose
long-term certificates of deposit are, at the time of acquisition thereof by
Company or a Subsidiary, rated AA or better by Standard & Poor's Corporation or
AA or better by Moody's Investors Service, Inc.;
(c) Investments in commercial paper maturing in 270 days
or less from the date of issuance which, at the time of acquisition by the
Company or any Subsidiary, is accorded the highest rating by Standard & Poor's
Corporation, Moody's Investors Service, Inc. or another nationally recognized
credit rating agency of similar standing;
(d) loans or advances in the usual and ordinary course of
business to officers, directors and employees for expenses (including moving
expenses related to a transfer) incidental to carrying on the business of the
Company or any Subsidiary;
(e) receivables arising from the sale of goods and
services in the ordinary course of business of the Company and its Subsidiaries;
and
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(f) acquisitions, mergers, and consolidations permissible
under Section 5.16(a)(ii).
5.16 Mergers, Consolidations and Sales of Assets.
(a) Without the prior written consent of Lender, the
Company will not, and will not permit any Subsidiary to (i) consolidate with or
be a party to a merger or share exchange with any other corporation, or (ii)
sell, lease or otherwise dispose of all or any substantial part (as defined in
paragraph (d) of this Section 5.16) of the assets of Company and its
Subsidiaries; provided, however, that:
(i) any Subsidiary may merge or consolidate with or
into the Company or any wholly-owned Subsidiary so long as in any merger
or consolidation involving the Company, the Company shall be the
surviving or continuing corporation; and
(ii) any Subsidiary may sell, lease or otherwise
dispose of all or any substantial part of its assets to the Company or
any other Wholly-owned Subsidiary.
(b) Without the prior written consent of Lender, the
Company will not permit any Subsidiary to issue or sell any shares of stock of
any class (including as "stock" for the purposes of this Section 5.16, any
warrants, rights or options to purchase or otherwise acquire stock or other
securities exchangeable for or convertible into stock) of such Subsidiary to any
person other than the Company or a Wholly-owned Subsidiary, except for the
purpose of qualifying directors, or except in satisfaction of the validly
preexisting preemptive rights of minority shareholders in connection with the
simultaneous issuance of stock to the Company and/or a Subsidiary whereby the
Company and/or such Subsidiary maintain their same proportionate interest in
such Subsidiary.
(c) Without the prior written consent of Lender, the
Company will not sell, transfer or otherwise dispose of any shares of stock in
any Subsidiary (except to qualify directors) or any indebtedness of any
Subsidiary, and will not permit any Subsidiary to sell, transfer or otherwise
dispose of (except to the Company or a Wholly-owned Subsidiary) any shares of
stock or any indebtedness of any other Subsidiary, unless all of the following
conditions are met:
(i) simultaneously with such sale, transfer or
disposition, all shares of stock and all indebtedness of such Subsidiary
at the time owned by the Company and by every other Subsidiary shall be
sold, transferred or disposed of as an entirety;
(ii) the Board of Directors of the Company shall have
determined, as evidenced by a resolution thereof, that the retention of
such stock and indebtedness is no longer in the best interests of the
Company;
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<PAGE> 25
(iii) such stock and indebtedness is sold,
transferred or otherwise disposed of to a person, for a cash
consideration and on terms reasonably deemed by the Board of Directors
to be adequate and satisfactory;
(iv) the Subsidiary being disposed of shall not have
any continuing investment in the Company or any other Subsidiary not
being simultaneously disposed of; and
(v) such sale or other disposition does not involve a
substantial part (as hereinafter defined) of the assets of the Company
and its Subsidiaries taken as a whole.
(d) As used in this Section 5.16, a sale, lease or other
disposition of assets shall be deemed to be a "substantial part" of the assets
of the Company and its Subsidiaries only if the book value of such assets, when
added to the book value of all other assets sold, leased or otherwise disposed
of by the Company and its Subsidiaries (other than in the ordinary course of
business) during the twelve month period ending on the date of such sale, lease
or other disposition, exceeds 25 percent of the consolidated net tangible assets
of the Company and its Subsidiaries determined as of the end of the immediately
preceding fiscal year.
5.17 Transactions with Affiliates. Except as set forth on
Schedule 5.17, without the prior written consent of Lender, the Company will
not, and will not permit any Subsidiary to, enter into or be a party to any
transaction or arrangement with any officer, director or Affiliate (including,
without limitation, the purchase from, sale to, or exchange of property with, or
the rendering of any service by or for, any Affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than could be obtained in an arm's-length
transaction with a person other than an Affiliate, in each case as determined in
good faith by a majority of the disinterested directors of the Company.
5.18 Notice. The Company shall promptly upon the discovery
thereof give written notice to Lender of (i) the occurrence of any Default or
Event of Default under this Agreement, (ii) the occurrence of any material
default or material event of default under any other agreement providing for
Indebtedness of the Company or any Subsidiary or under a capitalized lease
obligation, (iii) any material actions, suits or proceedings instituted by any
person against the Company or a Subsidiary or affecting any of the assets of the
Company or any Subsidiary, or (iv) any investigation initiated by, or any
dispute between and any governmental regulatory body, on the one hand, and the
Company or any Subsidiary, on the other hand, which dispute might interfere with
the normal operations of the Company or any Subsidiary; provided, however, that
Lender shall not be required by this Agreement to disclose any such information
provided in (iii) or (iv) above to any third party other than Lender's counsel
and except to the extent compelled by law or otherwise authorized by the
Company.
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5.19 Board of Directors; Observer Rights. Until the Note is paid
in full, the Company shall invite one representative of Lender to attend, at the
Company's expense, all meetings of the Company's Board of Directors and all
committees of the Company's Board of Directors in a nonvoting observer capacity
and, in this respect, shall provide such representative copies of all notices
and meeting agenda in advance of such meetings and shall permit such
representative to review all documents and other materials provided to directors
at such meetings. The Company shall also provide Lender, in advance, with copies
of all actions proposed to be taken by the Board of Directors in lieu of
meeting.
5.20 Annual Plan. The Board of Directors shall adopt no later
than the thirtieth day of each fiscal year, a financial plan for the Company,
which shall include at least a projection of income and expenses (including
capital expenditures) and a projected cash flows statement for each month in
such fiscal year, and a projected balance sheet as of the end of each month in
such fiscal year (the "Annual Plan"). The Annual Plan may only be amended or
revised, in any material manner, with the approval of the Board of Directors.
5.21 Further Assurances. The Company will take all actions
reasonably requested by Lender to effect the transactions contemplated by this
Agreement and the other Loan Documents.
6. [Reserved].
7. [Reserved].
8. Restrictions on Transfer; Registration Rights.
8.1 Legends; Restrictions on Transfer. Neither the Note nor the
shares of Common Stock issuable upon exercise of Warrants have been registered
under the Securities Act or any state securities laws. The Note and each stock
certificate issued upon exercise of Warrants shall bear a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED IN
THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 AND SUCH APPLICABLE STATE SECURITIES LAWS,
OR (II) AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
8.2 Registration Rights.
The Lender shall be entitled to register Common Stock issuable upon
exercise of Warrants as provided in the Registration Rights Agreement.
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<PAGE> 27
9. Events of Default; Remedies.
9.1 Events of Default. The occurrence of any one of the following
shall constitute an "Event of Default" under this Agreement:
(a) Default shall occur in the payment of interest on the
Note when the same shall have become due, provided, that any such default shall
be curable within two business days if the failure to make such payment when due
was caused by a financial institution's error in effecting an automatic debit
transaction against an account containing sufficient funds; or
(b) Default shall occur in the making of any payment of
the principal of the Note at the expressed or any accelerated maturity date or
at any date fixed by the Company for prepayment, provided, that any such default
shall be curable within two business days if the failure to make such payment
when due was caused by a financial institution's error in effecting an automatic
debit transaction against an account containing sufficient funds; or
(c) Default shall be made in the payment of the principal
of or interest on any material Indebtedness (other than the Note) of the Company
or any Subsidiary and such default shall continue beyond the period of grace, if
any, allowed with respect thereto; or
(d) Default or the happening of any event shall occur
under any contract, agreement, lease, indenture or other instrument under which
any material Indebtedness (other than the Note) of the Company or any Subsidiary
may be issued and such default or event shall continue for a period of time
sufficient to permit the acceleration of the maturity of any such Indebtedness
of the Company or any Subsidiary outstanding thereunder; or
(e) Default shall occur in the observance or performance
of any covenant or agreement contained in Sections 5.11 through 5.20 hereof
which is not remedied within 30 days; or
(f) Default shall occur in the observance or performance
of any other provision of this Agreement or the other Loan Documents which is
not remedied within 30 days after the earlier of (i) the date on which the
Company first obtains knowledge of such default, or (ii) the date on which
written notice thereof is given to the Company by the Lender; or
(g) Any representation or warranty made by the Company
herein, or made by the Company in any statement or certificate furnished by the
Company in connection with the consummation of the issuance and delivery of the
Note or furnished by the Company pursuant hereto, is untrue in any material
respect as of the date of the issuance or making thereof and would have a
Material Adverse Effect, subject to the limitations on survival of Section 12.5;
or
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<PAGE> 28
(h) Final judgments for the payment of money aggregating
in excess of $ 100,000, are outstanding against the Company or any Subsidiary or
against any property or assets of either and any one of such judgments has
remained unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a
period of 30 days from the date of its entry; or
(i) The Company or any Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes an
assignment for the benefit of creditors, or the Company or any Subsidiary
applies for or consents to the appointment of a custodian, trustee, liquidator,
or receiver for the Company or such Subsidiary or for the major part of the
property of either; or
(j) A custodian, trustee, liquidator, or receiver is
appointed for the Company or any Subsidiary or for the major part of the
property of either and is not discharged within 60 days after such appointment;
or
(k) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar law
for the relief of debtors, are instituted by or against the Company or any
Subsidiary and, if instituted against the Company or any Subsidiary, are
consented to or are not dismissed within 60 days after such institution; or
(1) Herm Rosenman shall resign or be terminated, other
than for cause, as President and Chief Executive Officer of the Company.
9.2 Remedies Upon Default. If an Event of Default shall occur,
and for so long as such Event of Default continues,
(a) The interest rate on the Note shall increase by 7% per
annum, that is, to 19% per annum, until such Event of Default is cured, as
provided by the Note.
(b) Lender shall be immediately entitled to exercise any
and all rights and remedies possessed by Lender pursuant to the terms of the
Note and all of the other Loan Documents.
(c) Any or all proceeds resulting from the exercise of any
or all of the foregoing remedies shall be applied as set forth in the Loan
Documents providing the remedy or remedies exercised; if none is specified, or
if the remedy is provided by this Agreement, then as follows: first, to the
costs and expenses, including without limitation reasonable attorney's fees,
incurred by Lender in connection with the exercise of its remedies; second, to
the expenses of curing the default that has occurred, in the event that Lender
elects, in its sole discretion, to cure the default that has occurred; third, to
the payment of the obligations of Company under the Loan Documents (the
"Obligations"), including but not limited to the payment of the principal of and
interest on the indebtedness evidenced by the Note, in such order of priority as
Lender shall determine in its sole
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<PAGE> 29
discretion; and fourth, the remainder, if any, to Company or to any other person
lawfully thereunto entitled.
(d) If Company shall default in the payment, performance
or observance of any covenant, term or condition of this Agreement, which
default is not cured within the applicable cure period, then Lender may, at its
option, pay, perform or observe the same, and all payments made or costs or
expenses incurred by Lender in connection therewith (including but not limited
to reasonable attorney's fees), with interest thereon at the highest default
rate provided in the Note (if none, then at the maximum rate from time to time
allowed by applicable law), shall be immediately repaid to Lender by Company and
shall constitute a part of the 0bligations. Lender shall be the sole judge of
the necessity for any such actions and of the amounts to be paid.
(e) Lender shall be entitled to appoint an additional
representative to attend, at the Company's expense, all meetings of the
Company's Board of Directors and all committees of the Company's Board of
Directors in a nonvoting observer capacity and, in this respect, shall provide
such representative copies of all notices and meeting agenda in advance of such
meetings and shall permit such representative to review all documents and other
materials provided to directors at such meetings.
9.3 Acceleration of Maturities. When any Event of Default
described in paragraph (a) through (i), inclusive, and (1) of Section 9.1 has
occurred and is continuing, Lender may, by notice to the Company, declare the
entire principal and all interest accrued on the Note to be, and the Note shall
thereupon become, forthwith due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived.
When any Event of Default described in paragraph (j) or (k) of Section 9.1 has
occurred, then the Note shall immediately become due and payable without
presentment, demand or notice of any kind, all of which are hereby expressly
waived. Upon the Note becoming due and payable as a result of any Event of
Default as aforesaid, the Company will forthwith pay to the holder of the Note
the entire principal and interest accrued on the Note. No course of dealing on
the part of Lender nor any delay or failure on the part of Lender to exercise
any right shall operate as a waiver of such right or otherwise prejudice such
holder's rights, powers and remedies. The Company further agrees, to the fullest
extent permitted by law, to pay to the holder of the Note all costs and
expenses, including reasonable attorneys' fees, incurred by them in the
collection of the Note upon any default hereunder or thereon.
10. Amendments, Waivers and Consents. Any term, covenant, agreement or
condition of this Agreement may, by agreement of the Company and Lender, be
amended or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), provided that no
such amendment or waiver shall be effective unless in writing. No such amendment
or waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right consequent thereon.
11. Interpretation of Agreement; Definitions.
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<PAGE> 30
11.1 Definitions. As used herein,
"Affiliate" means any person (i) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under common
control with, the Company, (ii) which beneficially owns or holds 10% or more of
any class of the Voting Stock of the Company or (iii) 10% or more of the Voting
Stock (or in the case of a person which is not a corporation, 10% or more of the
equity interest) of which is beneficially owned or held by the Company or a
Subsidiary.
"Business Day" means any day other than a Saturday, Sunday, or other day
on which banks in Tennessee are authorized to close.
"Change in Control" means when any person or entity, including a "group"
as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, other than the Company or a wholly-owned subsidiary thereof or any
employee benefit plan of the Company or any of its subsidiaries, becomes the
beneficial owner of the Company's securities having 50% or more of the combined
voting power of the then outstanding securities of the Company that may be cast
for the election of directors of the Company (other than as a result of an
issuance of securities initiated by the Company in the ordinary course of
business).
The term "control" (including the terms "controlling," "controlled by"
and "under common control") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of Voting Stock, by contract, or
otherwise.
"Default" means any event or condition, the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default as defined in Section 9.1.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer any successor sections.
"Fair Market Value" per share of Common Stock means (i) in the case of a
security listed or admitted to trading on any securities exchange, the last
reported sale price, regular way (as determined in accordance with the practices
of such exchange), on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day (and in the case of a
security traded on more than one national securities exchange, at such price or
such average, upon the exchange on which the volume of trading during the last
calendar year was the greatest), (ii) in the case of a security not then listed
or admitted to trading on any securities exchange, the last reported sale price
on such day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, as reported by a reputable quotation service
designated by the Company, (iii) in the case of a security not then listed or
admitted to trading on any securities
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exchange and as to which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked prices on such
day, as reported by a reputable quotation service, or the Wall Street Journal,
or if there are no bids and asked prices on such day, the average of the high
bid and low asked prices, as so reported, on the most recent day (not more than
3 0 days prior to the date in question) for which prices have been so reported,
and (iv) in the case of a security determined by the Company's Board of
Directors as not having an active quoted market or in the case of other
property, such fair market value as shall in good faith be determined by the
Board of Directors.
"Financing Statements" means any and all Uniform Commercial Code
financing statements, in form and substance satisfactory to the Lender,
executed and delivered by the Company to the Lender, naming the Lender as
secured party and the Company as debtor, in connection with this Agreement, for
filing with the California Secretary of State and the Texas Secretary of State.
"Guaranties" by any person means all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (A) for the purchase or payment of such Indebtedness or obligation, (B) to
maintain working capital or other balance sheet condition, or (C) otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, or (iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability, or dividend.
"Hazardous Substance" means any hazardous or toxic material, substance
or waste, pollutant or contaminant which is regulated under any statute, law,
ordinance, rule or regulation of any local, state, regional or Federal authority
having jurisdiction over the property of the Company and its Subsidiaries or its
use, including but not limited to any material, substance or waste which is: (i)
defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. SS 1317.1) as amended; (ii) regulated as a
hazardous waste under Section 1004 or Section 3001 of the Federal Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act (42
U.S.C. SS 6901 et seq.) as amended; (iii) defined as a hazardous substance under
Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act (42
27
<PAGE> 32
U.S.C. SS 9601 et seq.) as amended; or (iv) defined or regulated as a hazardous
substance or hazardous waste under any rules or regulations promulgated under
any of the foregoing statutes.
"Indebtedness" of any person means and includes all obligations of such
person which in accordance with GAAP shall be classified upon a balance sheet of
such person as liabilities of such person, and in any event shall include all
(i) obligations of such person for borrowed money or which have been incurred in
connection with the acquisition of property or assets, (ii) obligations secured
by any lien or other charge upon property or assets owned by such person, even
though such person has not assured or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the case of default are limited to
repossession or sale or property, (iv) capitalized rentals, and (v) Guaranties
of obligations of others of the character referred to in this definition.
"Investments" means all investments in cash or by delivery of property,
made directly or indirectly in any person, whether by acquisition of shares of
capital stock, indebtedness or other obligations or securities or by loan,
advance, capital contribution or otherwise; provided, however that "Investments"
shall not mean or include routine investments in property to be used or consumed
in the ordinary course of business.
"Material Adverse Event" means any event or circumstance, or set of
events or circumstances, individually or collectively, that reasonably could be
expected to result in any (i) material adverse effect upon the validity or
enforceability of any of the Loan Documents, or (ii) material and adverse effect
on the financial condition or results of operations of the Company (a "Material
Adverse Effect"), or (iii) material default or potential material default under
any of the Loan Documents.
"Person" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, and a government or
agency or political subdivision thereof
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Registration Rights Agreement" means the Registration Rights Agreement
between the Company and the Lender of even date herewith.
"Security" shall have the same meaning as in Section 2(l) of the
Securities Act of 1933, as amended.
The term "subsidiary" means, as to any particular parent corporation,
any corporation of which more than 50% (by number of votes) of the Voting Stock
is owned by such parent corporation
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and/or one or more corporations which are themselves subsidiaries of such parent
corporation. The term "Subsidiary" means a subsidiary of the Company.
"Voting Stock" means securities of any class or classes the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or persons performing similar functions).
"Wholly-owned Subsidiary" means a Subsidiary of which all of the issued
and outstanding shares of stock (except directors' qualifying shares) are owned
by the Company and/or one or more of its Subsidiaries.
11.2 Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
11.3 Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any person, or which such person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such person.
12. Miscellaneous.
12.1 Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
to Lender (i) Lender's reasonable, documented out-of-pocket expenses in
connection with the entering into of this Agreement and the consummation of the
transactions contemplated hereby, including but not limited to the reasonable
fees, expenses and disbursements of Lender's counsel, and (ii) all such expenses
relating to any amendment, waiver or consent pursuant to the provisions hereof
(whether or not the same are actually executed and delivered), including,
without limitation, any amendments, waivers, or consents resulting from any
work-out, restructuring or similar proceedings relating to the performance by
the Company of its obligations under this Agreement and the Note. The Company
agrees to pay all reasonable costs and expenses incurred by Lender in connection
with the making of the Loan, including but not limited to filing fees, recording
taxes and reasonable attorneys' fees, promptly upon demand of Lender. Company
further agrees to pay all of the out-of-pocket costs and expenses incurred by
Lender in connection with the collection of the Loan, any amendment to the Loan
Documents, or prepayment of the Loan, including but not limited to reasonable
attorneys' fees, promptly upon demand of Lender. The Company also agrees that it
will pay and hold Lender harmless against any and all liability with respect to
stamp and other taxes, if any, which may be payable in connection with the
execution and delivery of this Agreement or the Note. The Company shall protect
and indemnify Lender against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any person as a result of any
actions of the Company or its agents in connection with the transactions
contemplated by this Agreement.
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12.2 Powers and Rights Not Waived, Remedies Cumulative. No delay
or failure on the part of the Lender in the exercise of any power or right shall
operate as a waiver thereof, nor shall any single or partial exercise of the
same preclude any other or further exercise thereof, or the exercise of any
other power or right. The rights and remedies of the Lender are cumulative to
and are not exclusive of any rights or remedies any such holder would otherwise
have, and no waiver or consent, given or extended hereunder, shall extend to or
affect any obligation or right not expressly waived or consented to. Time is of
the essence with respect to each and every covenant, agreement and obligation of
Company hereunder and under all of the other Loan Documents.
12.3 Notices. All communications provided for hereunder shall be
in writing and shall be delivered personally, or mailed by registered mail, or
by prepaid overnight air courier, or by facsimile communication, in each case
addressed:
If to Lender: Tandem Capital, Inc.
500 Church Street, Suite 200
Nashville, Tennessee 37219
Attention: Craig Macnab
Facsimile No.: 615-726-1208
with a copy to: C. Christopher Trower, Esq.
3159 Rilman Road, N.W.
Atlanta, Georgia 30327-1503
Facsimile No.: 404-816-6854
If to the Company: Bikers Dream, Inc.
1420 Village Way
Santa Ana, California 92705
Attention: Herm Rosenman, President
Facsimile No.: 909-343-1610
with a copy to: Day Campbell & McGill
3070 Bristol Street - Suite 650
Costa Mesa, California 92626
Attention: Leonard J. McGill
Facsimile No.: 714-429-2901
or such other address as Lender or the subsequent holder of the Note may
designate to the Company in writing, or such other address as the Company may in
writing designate to Lender or to a subsequent holder of the Note, provided,
however, that a notice sent by overnight air courier shall only be effective if
delivered at a street address designated for such purpose by such person and a
notice sent by facsimile communication shall only be effective if made by
confirmed transmission
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at a telephone number designated for such purpose by such person or, in either
case, as Lender or a subsequent holder of the Note may designate to the Company
in writing or at a telephone number herein set forth.
12.4 Assignments. This Agreement, the Note, the Warrants, and the
other Loan Documents may be endorsed, assigned and/or transferred in whole or in
part by Lender, and any such holder and/or assignee of the same shall succeed to
and be possessed of the rights and powers of Lender under all of the same to the
extent transferred and assigned. Lender may grant participations in all or any
portion of its interest in the indebtedness evidenced by the Note, and in such
event Company shall continue to make payments due under the Loan Documents to
Lender and Lender shall have the sole responsibility of allocating and
forwarding such payments in the appropriate manner and amounts. The Company
shall not assign any of its rights nor delegate any of its duties under this
Agreement or any of the other Loan Documents by operation of law or otherwise
without the prior express written consent of Lender, which may be withheld in
Lender's sole and unfettered discretion, and if the Company obtains such
consent, this Agreement and the other Loan Documents shall be binding upon such
assignee.
12.5 Survival of Covenants and Representations. All
representations and warranties made by the Company and the Lender herein and in
any instruments or certificates delivered pursuant hereto shall survive for a
period of thirteen months following the Closing Date, except the representations
and warranties made in Sections 2.1, 2.2, 2.3, and 2.4 by the Company, and in
Sections 3.1, 3.2, 3.3, and 3.4 by Lender, which shall survive until payment in
full of the principal amount of, all accrued but unpaid interest under, and all
expenses and other costs required to be paid by the Company under, the Note. All
covenants made by the Company and the Lender herein and in any instruments or
certificates delivered pursuant hereto shall survive the closing and the
delivery of this Agreement and the Note, until the termination of this
Agreement, which shall terminate and be of no further force or effect upon the
payment in full of the principal amount of, all accrued but unpaid interest
under, and all expenses and other costs required to be paid by the Company
under, the Note.
12.6 Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity of any remaining portion, which remaining portion shall remain in force
and effect as if this Agreement had been executed with the invalid or
unenforceable portion thereof eliminated, and it is hereby declared the
intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may for any reason, be hereafter declared invalid or
unenforceable.
12.7 Governing Law and Jurisdiction. This Agreement and the Note
issued and sold hereunder shall be governed by and construed in accordance with
California law, without regard to its conflicts of law rules. The Company hereby
consents to the jurisdiction of the courts of the State of Tennessee and the
United States District Court for the Middle District of Tennessee, as well
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as to the jurisdiction of all courts from which an appeal may be taken from such
courts, for the purpose of any suit, action or other proceeding arising out of
any of its obligations arising under this Agreement or any other Loan Documents
or with respect to the transactions contemplated hereby, and expressly waives
any and all objections the Company may have as to personal jurisdiction, service
of process, and venue in any of such courts.
12.8 Captions, Counterparts. The descriptive headings of the
various Sections or parts of this Agreement are for convenience only and shall
not affect the meaning or construction of any of the provisions hereof. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
12.9 Confidentiality. Each party hereto agrees that, except with
the prior written permission of the other party hereto, it shall at all times
keep confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other party to which such party has been or
shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of the Note and Warrants purchased hereunder, except as such
disclosure may be required by law.
12.10 Publicity. The Company and Lender shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby. Neither party shall issue any
press release or otherwise make any public statement without the prior written
consent of the other, which consent shall not be unreasonably withheld or
delayed.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be executed and delivered by their duly authorized officers as of the date
first written above.
BIKERS DREAM, INC.
By: [SIG]
-------------------------------
Title: CEO
----------------------------
SIRROM CAPITAL CORPORATION
d/b/a TANDEM CAPITAL
By:
-------------------------------
Title:
----------------------------
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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be executed and delivered by their duly authorized officers as of the date first
written above.
BIKERS DREAM, INC.
By:
-------------------------------
Title:
----------------------------
SIRROM CAPITAL CORPORATION
d/b/a TANDEM CAPITAL
By: [SIG]
-------------------------------
Title: Vice-President
----------------------------
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